SAS and HPE: Bridging the IoT Perception Gap

Bridging The IoT Perception Gap:

INFORMATION VS OPERATIONAL TECHNOLOGY The relationship between Information Technology and Operational Technology for IoT Initiatives.

FEBRUARY 2018

In partnership with

DANIEL NEWMAN

FRED MCCLIMANS

Principal Analyst

Analyst

Published: 02/2018

TABLE OF CONTENTS

3

Introduction

4

Demographics

5

Findings

6

The Six IoT Perception Gaps

7

The Value Gap

10

The Impact Gap

11

The Leadership Gap

13

The Success Gap

14

The Challenge Gap

17

The Budget Gap

19

Conclusion: Mind The Gaps

20

Recommendations

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INTRODUCTION The Internet of Things (IoT) is rapidly emerging as a core transformational technology of the digital era. The ability to gather data from sensors embedded throughout an enterprise can drive insights and operational efficiencies from the supply chain to the customer. But implementing IoT, or even Industrial IoT (IIoT) often requires close collaboration of both information technology (IT) and operational technology (OT).

IT manages the infrastructure that collects and analyzes data, including networking, computing, security, cloud, and data storage systems. While IT focuses on data collection and processing, OT focuses on the operational technologies that generate the data, such as the production-oriented machinery, tools, fleets, and control systems.

Data collected from IoT implementations by IT or OT groups has value, but more value can be created when this data is utilized collaboratively amongst these two groups to derive overall business insights.

The promise of IoT implementations come together at this intersection, and require the blending of talent from both groups in the design, implementation, and operation of IoT systems.

These two groups, however, often have different goals, performance metrics, and perspectives on both the collaboration and the outcome. To gain a better understanding of the relationship, either real or perceived, between these two groups, Futurum Research surveyed the state of the relationship between IT and OT teams as it pertains to the design, implementation, and creation of value through IoT technologies.

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Demographics

The survey consisted of 15 questions and was administered during August and September of 2017 to 500 respondents. To be eligible, the respondents had to have at least a moderate level of IoT planning, configuration, management, and or oversight responsibility within either IT or OT. More than two-thirds of the respondents self-identified as having either high or primary decision maker

status. Approximately 90 percent of respondents indicated they had dual IT and OT responsibilities, with 60 percent stating they were more involved in the IT organization than the OT organization.

Throughout the report, IT and/or IT dominant respondents are referred to as ‘IT focused’ while OT and/or OT dominant responses are referred to as ‘OT focused.’

• Approximately 91 percent of respondents represented businesses located primarily in North America, with the balance from Europe, Asia Pacific, Middle East and Africa, and Latin America.

• Forty percent of respondents represented businesses with a minimum of 5,000 global employees, with 12.6 percent representing businesses with in excess of 50,000 global employees.

• The largest industry demographic was

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

from the Media & Technology sector (41.8 percent), while the smallest was from the Public Sector (5.2 percent). Other sectors represented in the survey included Products, including manufacturing, distribution, retail, and logistics (16 percent); Banking & Financial Services (15.2 percent); Healthcare & Pharma (8.4 percent); and Resources, including energy, utilities and transportation (5.8 percent). The balance of respondents self-selected as Other or Not Listed.

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FINDINGS Highly collaborative organizations require focused coordination between business units, teams, and individuals to efficiently support overall business goals. A collaborative working relationship is critical for the implementation of new technologies, such as IoT, particularly when those technologies promise transformation with the ability to create new revenue streams or modernize strategic business processes.

How important is IoT to transformation? As businesses shift into the digital realm, IoT sensors collect and provide access to the operational data required to optimize businesses and deliver new products and services that are more aligned to everdemanding consumer needs. When implemented properly, IoT can digitally link the beginning of the

supply chain to the customer use and experience, offering the ability to improve everything from product quality and sourcing to predictive maintenance and logistics. When implemented poorly, however, organizations may not realize positive returns or efficiency gains, and may even disrupt the supply chain, customer experience, business processes, and employee satisfaction.

Collaboration between IT and OT is one key success factors to implementing successful IoT projects.

Our survey results confirmed a very close operational relationship between information and operational groups. However, the results also highlighted six areas where perception and reality between IT and OT as well as between mid-level and executive management, may not match.

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The Six IoT Perception Gaps

These six areas, or gaps, are highlighted as follows: 1. Value Gap. Both IT and OT teams may be under-valuing the strategic benefits of IoT projects and initiatives.

4. Success Gap. When it comes to successful collaboration, IT and OT have very different perspectives on how well they work together.

2. Impact Gap. The impact of an IoT project, measured by its failure, is judged differently between IT and OT, and the customer may be the biggest loser of all.

5. Challenge Gap. Barriers to a successful IoT implementation are viewed differently, though successful IT/OT collaboration and coordination is the largest issue.

3. Leadership Gap. IT and OT have different perspectives when it comes to who is actually driving IoT initiatives forward.

6. Budget Gap. When it comes to budgets, IT and OT have different expectations moving forward.

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The Value Gap IT and OT may value the strategic benefits of IoT differently, creating the Value Gap.

To the digital enterprise, IoT brings a number of key, strategic values. It is the primary data collection mechanism for physical infrastructure responsible for capturing device, sensor, and status data. This includes not just physical performance data but geo-location data and environmental data.

• Where is this device located?

• How is it performing?

• Has it experienced changes in its environment (physical force, heat, cold, etc.)?

The ability to know the status of every asset in real time is critical. Device data forms the foundation of the digital infrastructure, and can be leveraged throughout the supply chain, within manufacturing and distribution processes, and informs how and where a customer is using an asset. Customer usage data will become increasingly important as more assets are offered to customers with postsale services or even as an asset-as-a-service.

And yet, companies may not value IoT properly.

When asked to rate the importance of IoT projects, only 27.2 percent of respondents indicated IoT was Critically Important to their business priorities.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

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Individually, IT and OT perceive the business importance of IoT slightly differently, with OT focused respondents having both a greater

percent of Critically Important (29 percent) and Not Very Important (12.2% percent) responses than IT focused respondents.

Source: Futurum Research, IoT Survey, September, 2017 Source: Futurum Research, BridgingIT/OT the IoT for Perception Gap, Survey of 500 IT/OT Professionals

By industry, Media & Technology rated IoT Critically Import the highest (33.3 percent), while Public Sector rated it the lowest (23 percent).

While the value of IoT is well understood in the Media & Technology, Banking & Financial

Services, and Healthcare/Pharma sectors, we believe the importance to the Public Sector – particularly in areas such as smart cities and public safety – is very high and underestimated by survey respondents.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals INFORMATION VS OPERATIONAL TECHNOLOGY 8 COPYRIGHT © 2018 FUTURUM RESEARCH

Value Gap - Bottom Line IoT has the potential to bring vast amounts of operational and customer data to the table, yielding valuable and actionable insights in nearreal time. Yet, while a majority of organizations surveyed rate IoT as a Very or Critically Important driver of achieving business priorities, a third of respondents do not. There could be several factors at work here. It is possible that enterprises are still experimenting with IoT, and those initiatives are still in the test phase. However IoT, and in particular Industrial IoT, has been a core operational requirement for years in many

industries, such as manufacturing, energy and utilities, and transportation. In this case, it may be that IoT initiatives are not correctly understood or categorized (ex: measurement and sensors as distinct from IoT). It may also be that IoT isn’t valued for the foundational role it can play in the capturing of data. If this is the case, the value of data, from the supply chain to the customer and the connection between IoT and business value must be more clearly understood and articulated—particularly within the operational side of a business.

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The Impact Gap The perceived risk of failed IoT projects is not viewed equally between IT and OT.

The value of IoT can clearly be identified for internal operations, particularly when it comes to optimizing for efficiency and cost controls. The value of IoT also extends an organization’s ability to better serve the customer, utilizing supplier, internal, and customer data. Time to market, quality control of products, and improved maintenance (including the availability of replacement parts) all benefit the customer and help drive both satisfaction and revenue. As more products include IoT sensors, the ability to gather data from actual use also increases, as improved service and support can be realized. IoT sensors in customer products can also be used to connect the supply chain to the customer, and better inform parts providers of issues in real time. But how do organizations perceive the value of IoT against possible risks?

One way to understand the value (and risk) of IoT is to look at the impact of failed initiatives. Like any technology or business initiative, the impact of failure can be viewed from two perspectives: internally (operations and costs), and marketfacing (customer operations and sales).

Survey respondents were asked to assess the impact of failed IoT initiatives both internally and to customers. Overall, just over half of all respondents agreed that failed IoT initiatives would impact both internal and customer groups.

But in a head-to-head comparison, over a quarter of respondents felt that internal teams would be impacted more than their customers if an IoT initiative failed.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

Impact Gap - Bottom Line When it comes to the impact of failed IoT initiatives, half of all respondents understand that failed IoT initiatives impact both internal costs and customer revenue. The larger issue is that over a quarter of all

respondents believe that failed IoT initiatives impact their jobs more than the customer, overlooking the reality that customer success is driven directly by the operational efficiencies.

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The Leadership Gap IT and OT have different perspectives on who is responsible for driving IoT initiatives, creating a Leadership Gap that may impact the efficiency and success of IT/OT collaboration.

When it comes to IoT implementations, the existence, and importance, of collaboration between IT and OT teams is evident. But the question exists, who is driving these initiatives? Given the importance of IoT to operational performance, it is imperative that OT is highly involved in this process, and the survey data bears this out. Overall, close to 80 percent of all respondents either Agree or Strongly Agree that both IT and OT are driving strategic IoT initiatives. However, there is a perception that IT plays a stronger strategic leadership role for IoT initiatives: the Leadership Gap. We asked survey respondents to evaluate how strongly they perceived IT and OT to be driving IoT Strategy Initiatives. In a balanced organization, it would be reasonable to have IT and OT collaborating, and leading, equally, and our overall data generally bears this out:

• 30.2 percent of all respondents indicated they Strongly Agreed with the statement “IT is driving IoT Strategy Initiatives within your organization” and

• 27.2 percent of all respondents indicated they Strongly Agree with the statement “OT is driving IoT Strategy Initiatives within your organization” However, when the data is broken out into IT-focused and OT-focused responses, we see the perception gap emerge.

In a head-to-head comparison, IT focused respondents perceive that leadership is roughly equal between IT and OT, with OT holding a slight edge (33.1 percent to 31.9 percent). However, only 19.5 percent of OT respondents Strongly Agree that they are driv-

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

ing IoT Strategy Initiatives, leading to an interesting disconnect. Given the importance of IoT to business operations, it would be expected that OT, where the value of IoT begins, would view itself as being in a stronger, or more equal, leadership position.

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Leadership Gap - Bottom Line IoT, like most technologies, delivers the best value when the teams that are most likely to benefit from the value drive initiatives. Remember that while IT is focused on the communications and computing systems to gather and process IoT data (for the benefit of all business units), OT is the group that manages the sensor-based ma-

chinery, tools, fleets, and control systems, and will be interpreting and leveraging the data to make day-to-day operational decisions based on the data). If OT perceives itself as less of a strategic driver of IoT initiatives, the chance exists for IoT to become more technology and communications-driven and less operational-value driven.

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The Success Gap When it comes to successful collaboration, IT and OT have different perspectives on how well they work together. These differences in how IT and OT perceive their respective roles in supporting and driving IoT initiatives create the Success Gap. The Success Gap was verified when we asked respondents to evaluate the success of IT and OT collaborations. The good news is that 78 percent of

respondents believe that the working relationship between IT and OT is either Good or Very Good.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

Where is the best coordination? Media and Technology, where 88 percent of respondents cited a Good or Very Good working relationship (68 percent cited a Very Good relationship). But in Healthcare/Pharma and Public Sector roughly only a third of respondents believe they have a very good working relationship.

When IT and OT responses are compared, however, a perception gap emerges. While 56.6 percent of IT respondents believe that IT/OT coordination of IoT initiatives is very good, that number drops to only 43.9 percent for OT respondents. Even worse, almost a quarter of OT respondents feel that the collaborative relationship either Adequate or Barely Adequate.

Success Gap - Bottom Line The success of any project can only be a strong as the collaboration and cooperation of the teams planning and implementing the project. For IoT to drive true business value, collaboration needs to be consistent and strong. The gap seen here, where IT has a much better perception of the collaborative

process, invites dissatisfaction within operational teams. When combined with the leadership gap, where IT is seen to be a more dominant driver of IoT initiatives, a pattern emerges—OT may be underrepresented at the IoT table.

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The Challenge Gap Differences in the perceived challenges to successful IoT implementations can defocus collaboration and planning initiatives, creating the Challenge Gap.

To better understand the state of IT and OT collaboration, it is important to understand the reasons why so many IoT initiatives are considered less than successful. Survey respondents were asked to identify

the most significant barrier to successful IoT projects. Lack of IT/OT Coordination was cited by fewer than 20 percent of all respondents as the lead barrier, although no one category dominated the results.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

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When IT and OT responses are compared, however, the story becomes a bit less balanced.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

Notable differences between IT and OT responses highlight IT’s increased concern with OT collaboration; OT’s lack of budget; and IT’s concern for a lack (or immaturity) of technology. Of these, the budget and technology issues stand out. Budgets are always a concern, particularly within operational functions where cost controls have long been a priority. Further, as discussed below, flat

or declining OT budgets may be the driver here.

Regarding technology, the gap between IT and OT may be as simple as an issue of maturity—OT has been involved with sensor-based industrial IoT technology for years, while IT is often dealing with more commercial IoT technologies that are still early on in the development cycle.

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Challenge Gap - Bottom Line Differences in the barriers to success faced by IT and OT teams can hinder successful project collaboration and impact the success IoT initiatives. This is particularly true if the challenges are not well un-

derstood by both groups. To overcome these gaps, IT and OT need to partner not just on projects but also on collaboratively addressing these barriers, including shared risk and reward frameworks.

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The Budget Gap When it comes to funding future IoT projects, IT and OT have different expectations, creating the Budget Gap.

To understand how budgetary issues might impact IT and OT plans, we asked survey respondents to assess their expectations for budget cycles over the coming 12 to 24 months. While two thirds of respondents expect budgets to either remain steady or increase slightly over this time period, slightly over a quarter expect to see dramatic increases in budget. The primary beneficiaries of this

budget surplus are within the Media & Technology sector, with 34 percent of respondents expecting budgets to increase dramatically. Banking/Financial Services and Healthcare/Pharma are also expected to fare well. Those within the Public Sector and Products industries, however, are more likely to experience budgets that remain steady or only increase slightly.

Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

While over two thirds of overall respondents expect increased budgets over the coming months, this optimism is not shared equally by IT and OT respondents. Over a quarter of IT respondents ex-

pect IoT budgets to increase dramatically over the coming 12 to 24 months, whereas only 2.4 percent of OT respondents expect to see budgets dramatically increase.

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Source: Futurum Research, Bridging the IoT Perception Gap, Survey of 500 IT/OT Professionals

From a plus/minus perspective, the picture is even bleaker. While over 70 percent of IT respondents expect their IT budgets to increase, over

68 percent of OT respondents expect their IoT budgets to either remain steady or decrease over the same period.

Budget Gap - Bottom Line An organization can only execute against its available resources, and it appears that OT budgets are in the decline. While this may be part of a larger shift toward increased IT spending, and a shift to control operational costs, this budget gap is a concern. As businesses begin to leverage IoT beyond traditional operational sensors, and realize the value

of an IoT-connected supply chain/customer feedback network, costs will be incurred. Overcoming this gap may require not only closer budgetary collaboration between IT and OT groups, but a more customer- and outcome-driven perspective on the role of IoT in driving business value through increased leverage of operational and customer data.

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CONCLUSION: MIND THE GAPS When it comes to IT and OT, IoT is not a competition. As the data shows, IT and OT are working to collaborate and drive overall business value.

But the data also reveals imbalances and gaps between these two groups—gaps that may be serving as hidden barriers to the success of IoT initiatives in many organizations. Overcoming these gaps is an important step in realizing the potential of IoT from both operational and customer-focused perspectives.

1. The Value Gap: The strategic importance of IoT is perceived differently by IT and OT focused teams, as well as between individual industries.

IoT holds the promise of creating an informed supply chain, bringing together both operational and customer data to drive operational insights and resource efficiency, and increase overall business value. It also holds the promise of better serving both internal and external customers, helping to uncover and leverage data that can be used to develop innovative products, services, and support programs that are focused on customer experiences and outcomes. But to get there, IT and OT must move beyond traditional silos of responsibility and functions and collaborate closer than ever before.

3. The Leadership Gap: OT perceives itself as being in less of an IoT leadership position than IT, potentially leading to an environment where OT initiatives become more IT-focused and less operationally driven.

How important is collaboration? Successful IoT implementations require the balancing of the OT operational systems that generate the data and the IT infrastructure necessary to gather and process the data. It is a partnership, one that should be designed to not only improve operational efficiencies but to connect the customer to the supplier and enable the collection of data that leads to insights, improved customer experience and core business value. When one team has a real or perceived edge over the other, the result is an imbalance that limits success. And we see such an imbalance in the survey results.

This leads to the 6 critical gaps that Futurum Research identified in this study.

2. The Impact Gap: Over a third of IT respondents believe that the failure of IoT initiatives impacts their internal success, rather than that of the customer.

4. The Success Gap: Over half of IT respondents believe that IT/OT coordination of IoT initiatives is Very Good while over half of OT respondents disagree.

5. The Challenge Gap: Despite feeling optimistic about IT/OT coordination, the two teams perceive IoT challenges differently, as IT respondents are more likely to list a lack of IT/OT coordination as a leading barrier to IoT success, while OT respondents are crippled by budgetary issues.

6. The Budget Gap: While IT overwhelmingly expects IoT-related budgets to increase slightly or dramatically over the coming 12 to 24 months, OT overwhelmingly anticipates steady or slightly declining budgets.

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Recommendations

There is no easy fix to address the gaps identified in this survey and improve the effectiveness of collaboration between IT and OT for IoT-related initiatives. However, several actions can balance the perspective between these two complementary teams. Before any successful technology investment should be made, it is critical that companies understand the purpose of such an investment and align it to strategic goals. As men-

• Critical Infrastructure Investments: Having a robust data management strategy with a system that allows ubiquitous access to all relevant customer and system data across databases is key to realizing successful outcomes of IoT projects. Furthermore, access to analytics in real-time will gain in importance, as organizations want to respond and make decisions faster. This requires analytics tools and hardware infrastructure at the edge that can handle high-density workloads with the software capacity to extract critical insights that IT and OT can act upon rapidly to maximize items such as system uptime and customer requirements.

• Shared Goals: Traditionally, IT is focused on enabling infrastructure, OT is focused on operational performance, and Line of Business organizations are focused upon customers. These teams must share a common set of business goals that place the customer first, while implementing a programmatic and scalable infrastructure.

tioned throughout this paper, companies must continue to think about customer experience and operational success at each step of their IoT deployment. With these two critical factors in mind, there are a set of key recommendations that we believe organizations should adhere to in order to maximize their IoT Investments and realize the greatest collaboration between all parties involved in IoT projects.

• Sharing Risks and Rewards: By sharing in both the risks and rewards of IoT initiatives, both teams will have an incentive to improve collaboration and ultimately drive innovation and business value for the entire organization. This includes ensuring that both teams recognize the end goal is not their individual performance, but that of the entire business.

• Linking IoT to Business Outcomes: Both IT and OT must overcome the traditional silo’d approach to the deployment of technology and the ultimate value it drives.

From a budget perspective, this requires funding for IoT initiatives to be broken out of individual silos and linked directly to the business outcomes it can enable, whether that involves operational efficiencies and cost reductions or increased customer adoption and revenue.

• Increasing the Customer-first Perspective: In the end, executive management must cultivate a customerfirst and collaborative mindset within their organizations, asking the question, “How can we improve to better serve the customers?”

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Learn more about the SAS and HPE partnership: SAS and Hewlett Packard Enterprise (HPE) have partnered for over 32 years to help mutual customers solve their most difficult business problems. Both companies were early entrants of their respective IoT partner ecosystems. They enjoy a close R&D relationship, and HPE engineering works closely with SAS to conduct rigorous benchmarking and performance briefs.

SAS and HPE have collaborated to develop robust solutions to address critical industry-specific challenges, helping organizations apply analytics, based on volume, velocity and latency requirements. SAS®

Event Stream Processing combines with HPE Edgeline Converged Edge Systems to provide real-time analytics where the data is being generated. Additionally, HPE infrastructure integrates compute, storage and networking, to support a complete and optimized platform for SAS® solutions. HPE provides significant expertise in IT management to ensure software availability and performance of the architecture, as well as enterprise services management and IT outsourcing. Together, SAS and HPE have over 10,000 joint customers running decision support systems.

For more information, visit http://www.sas.com/iotsolutions and http://hpe.com/IoT

CONTACT INFORMATION Futurum Research, LLC futurumresearch.com 817-480-3038 info@futurumresearch.com Twitter: @futurumxyz

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