IoT Signals

EDITION 3 OCTOBER 2021

aka.ms/IoTsignals
Table of Contents

03 Background

04 Methodology

05 Things To Know About IoT in 2021

06 Who We Talked To – May 2021

07 State of IoT: Overall Research Learnings

25 Emerging Technologies Spotlight

(Artificial Intelligence, Edge Computing, Digital Twins)

42 Industry Spotlights
(Smart Places, Manufacturing, Mobility, Energy)

56 Final Thoughts

57 Detailed Research Objectives & Audience Recruit

 3

Background

The Internet of Things (IoT) is rapidly changing the

world around us, transforming a huge range of
physical objects through digital intelligence.
Beyond our ubiquitous smart personal devices, IoT
is revolutionizing the way companies do business –
helping them become faster, smarter, safer, and
more efficient.

Microsoft continues to be an IoT innovator as IoT

adoption rises steadily worldwide. The IoT Signals
series was created to give a holistic view of the IoT
ecosystem – providing insight into adoption rates
as well as benefits, challenges, and emerging
trends.

In 2019, Microsoft and Hypothesis embarked on an

IoT Thought Leadership initiative, annually
producing reports in the IoT Signals series. The goal
of these reports is to better serve our partners and
customers, help business leaders develop their own
IoT strategies, and provide the most up-to-date
research on IoT use across countries and industries.

Previous reports focused on three pieces of

research – an initial round conducted in February
2019, which focused on IoT across industries, a
follow-up in October 2019 that took a deeper look
into four key industries (energy, manufacturing,
healthcare, and retail), and a 2020 update of both
the original and the follow-up.

In 2021, this current paper again builds off the

success of the prior Signals papers, with new
research uncovering fresh learnings and insights
around the current and future state of IoT.

IoT Signals aka.ms/IoTsignals

 4

Methodology

Microsoft commissioned Hypothesis Group, an

insights, design, and strategy agency, to execute
the IoT Signals research.

Two waves of the Signals research occurred in

February 2019 and April/May 2020, when a 20-
minute online survey was conducted with over
3,000 survey participants including business
decision makers (BDMs), IT decision makers
(ITDMs), and developers at enterprise companies
from a range of industries across the US, UK,
Germany, France, China, and Japan. In addition,
nine in-depth interviews were conducted online in
June 2020 among ITDMs from the US, UK, and
Germany in a range of key industries.

In May 2021, a third wave was conducted across

the same countries and new ones including: Spain,
Italy, The Netherlands, Belgium, and Australia
across a similar group of decision makers and
developers. A similar survey was conducted with a
five-minute deep drive into key industries (energy,
manufacturing, smart places, & mobility). In
addition to the online survey, 4 in-depth interviews
were conducted online in April 2021 among ITDMs
from the US in a range of key industries.

IoT Signals aka.ms/IoTsignals

 5

Things To Know About IoT in 2021

01 IoT continues to drive organizations towards a more productive future

Among the IoT decision-makers we spoke to from industries across the globe, 90% have
adopted IoT (compared to 91% in 2020). IoT continues to be adopted for a range of uses
leading to improved efficiency and productivity, and 66% plan to implement IoT more in the
coming years. Those who use IoT for cloud security, supply chain management, and
sustainability more strongly believe that IoT is critical to their organization’s success, which
could keep them on the cutting edge.

02 COVID-19 has accelerated IoT strategies and fueled business growth

COVID-19 has resulted in many unexpected benefits for organizations and their IoT strategies, as
44% expect to increase their investment in IoT as a result of the pandemic (vs. 31% in 2020). Those
intending to maintain or strengthen their investment tend to already be utilizing IoT for more varied
use cases, and the pandemic has enticed many to use IoT to gain a competitive edge.

03 AI, Edge Computing, and Digital Twins are essential to advance IoT strategies
The majority of organizations are implementing strategies for Artificial Intelligence, Edge
Computing, and Digital Twins, and around 8-in-10 are working to integrate the technologies as
part of their IoT solution. Despite the pervasiveness of these technologies, many projects are
stuck in Trial/PoC due to a lack of infrastructure and the complexity of scaling and managing
systems. Looking ahead, organizations will need specialized help as implementation level varies
by industry on certain technologies (e.g., Smart Places is advanced in AI, Energy is advanced in
Edge Computing, and Manufacturing is advanced in Digital Twins).

04 Although IoT projects are maturing, technological complexity persists

Business challenges are typically more surmountable than technical challenges (especially for
those who outsource part of their IoT implementation). As IoT solutions are scaled and become
more deeply embedded within organizations, navigating the technical complexity is even more
difficult. Organizations seek more internal investment to acquire the technology and staff they
need to manage complex data and emerging technologies.

05 Organizations are keeping a close eye on data security

Securing IT infrastructure and assets is top of mind in 2021, and nearly a third are concerned
about the security risk of IoT, with specific concern around ensuring data privacy and network-
level security. To keep IoT projects secure, the primary focus is on preventing and detecting
data breaches, though no single best practice is widely adopted. Those who outsource at least
part of their IoT implementation tend to feel more secure overall.

IoT Signals aka.ms/IoTsignals

 6

Who We Talked To

BDMs, Developers,
and ITDMs
who work at
enterprise-size companies
(1000+ employees)

71%
Familiar with IoT
Self-stated, pass
a knowledge test

95%
Have influence/
decision-making
power on IoT
strategies
NOT IN
IoT ADOPTION
10%
90%
in IoT
Adoption

IoT Signals aka.ms/IoTsignals

 7

State of IoT:
Overall Research
Learnings

IoT Signals
IoT Signals
aka.ms/IoTsignals
https://aka.ms/IoTsignals
STATE OF IoT: OVERALL RESEARCH LEARNINGS 8

IoT: The Big Picture

This year, IoT continues to be widely adopted. 90% of organizations surveyed

are IoT adopters, on par with 91% in 2020. (See Exhibit 1) Organizations also
continue to place a high value on IoT: 90% consider the technology critical to
overall success – the same percentage that placed high importance on IoT in
2020. In addition, satisfaction has grown since last year, with 96% saying they
are very or somewhat satisfied with IoT in their organization, compared to
94% in 2020.

IoT projects can be categorized into four stages: learn, trial/proof of concept,
purchase, and use. Of the 90% of organizations who identify as IoT adopters,
82% have at least one project in the use stage, similar to 83% last year. The
percentages of projects in each phase also remain high. In 2021, 29% of IoT
projects are in the Learn stage – the same percentage as in 2020. The
percentage of projects in the Trial/PoC stage also stay the same – 25% in 2020
and 2021. Projects in the Purchase phase are up by 1%, going from 21% in
2020 to 22% in 2021. Projects in the Use phase stay at a steady 25% in 2020
and 2021. (See Exhibit 2)

EXHIBIT 1 EXHIBIT 2
% IoT ADOPTERS % IoT PROJECTS IN 4 STAGES

90 %
91% in 2020
82% of total have at
least one project that
Learn

Trial/PoC
29% 29% in 2020

25% 25%
PLANNING

reached “use” stage

(83% in 2020)
Purchase 22% 21%
7% not using
but have in past

2% not using, Use 25% 25%

haven’t in past

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 9

IoT is widely adopted globally, with Australia, Italy, and the US leading the way.

When it comes to percentage of projects in the use phase, the US leads the pack,
with 27% as compared to countries like Spain (22%) and Australia (18%). The US
is also ahead of the global game in terms of increasing IoT use as well: 78% of US
organizations plan to use IoT more in the next two years. In contrast, only 53% of
the German companies surveyed planned to increase use by 2023, and 51% of
organizations in Japan. This may be because German and Japanese markets
could be more cautious in their approach to the technology.

Time to use also varies across organizations. Italy is in the lead, taking an average
of 10 months to reach a project’s use phase. The US and Spain both take 11
months. while the Asia-Pacific region lags behind, with Japan taking 12 months,
and China and Australia both taking 16. Projects in the Asia-Pacific region likely
take longer because more education and knowledge about IoT is needed to get
to use. Organizations in APAC are also more often challenged by not having the
resources to implement and manage IoT solutions. (See Exhibit 3)

EXHIBIT 3
IoT ADOPTION AND VALUE BY COUNTRY

Global US UK FR DE SP IT BNLX CH JP AUS

% IoT Adopters 90% 94% 91% 91% 88% 89% 95% 91% 85% 88% 96%

% Projects in
25% 27% 25% 23% 25% 22% 26% 25% 25% 23% 18%
Use phase

Time to Use stage

12 11 13 12 14 11 10 12 16 12 16
(months)

Plan to use IoT

66% 78% 69% 67% 53% 76% 69% 59% 65% 51% 56%
more in 2 years

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 10

IoT adoption remains strong across industries. We surveyed decision-makers in a

range of industries, with particular focus in the fields of manufacturing and
energy (which we also surveyed in 2020) and added two industries of focus in
2021 – automotive/transportation/logistics (also known as mobility), and smart
places. The latter industry focuses on how people occupy spaces, and includes
physical infrastructure in areas such as government, real estate, and construction.

The overwhelming majority of companies we surveyed in all four fields identify as

IoT adopters. The percentage of projects in the use stage is consistent across
industries, with roughly a quarter of projects in this phase, and projects in all
industries take a similar amount of time to get to this phase – around 13 months.
Future dedication to IoT is also consistent across fields. Around two-thirds of
companies in each field plan to use IoT more in the next two years.

While all four industries have similar levels of IoT adoption, the energy industry
lags behind slightly. 85% of energy companies say they are IoT adopters,
compared to the other three fields we surveyed, whose percentages of IoT
adoption are in the 90s. Energy organizations have 22% of projects in use – the
lowest percentage of the four industries. Finally, energy projects take an average
of 15 months to get to the use phase – a full two months more than the
manufacturing and smart places industries. (See Exhibit 4)

EXHIBIT 4
IoT ADOPTION AND VALUE BY INDUSTRY

Total Manufacturing Energy Mobility Smart Places

% IoT Adopters 90% 91% 85% 91% 94%

% Projects in Use phase 25% 26% 22% 23% 24%

Time to Use stage (months) 12 13 15 14 13

Plan to use IoT more in 2 years 66% 68% 61% 61% 69%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 11

Why Adopt IoT?

The top reasons that companies adopt IoT are consistent with last year’s
reasons: organizations use IoT to maintain quality, secure technology, and
optimize resources. This year, several use cases are emerging that move the
needle on how IoT is perceived to influence organizational success.
Organizations that adopt IoT for cloud security, supply chain management,
and sustainability see IoT as even more critical. (See Exhibit 5) A decision
maker in the energy industry explains how their organization uses IoT to
gather valuable information about power quality and usage: “IoT gives us
feedback on how the power quality is for the end customer. We can extend
that innovation beyond adjusting the level of quality of power, but also to
know how much electricity is generated, how much power is consumed at the
household level, and how solar panels factor into the equation.”

EXHIBIT 5
TOP REASONS Quality assurance 43%
FOR IoT ADOPTION
Cloud security 42%

Device/asset security 40%

Operations optimization 40%

Employee productivity 35%

Worker and workplace safety 33%

Condition-based maintenance 33%

Supply chain management 32%

Securing the physical environment 32%

Sales enablement 32%

Energy optimization 32%

Sustainability uses 28%

Contact tracing 26%

Asset tracking 25%

Personal comfort 24%

This icon highlights organizations that use IoT Space optimization 24%
for these use cases and believe IoT is 12%+
more critical to organizational success.

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 12

One in three organizations use IoT for improving products and services for
customers, and those that do benefit from a stronger bottom line. 50% of
companies using IoT for this purpose report increased revenue, compared to
39% who don’t utilize the technology in this way. Although these organizations
enjoy increased earnings, they also face a slightly more complex business
transformation. 30% of those who use IoT to improve products and services
grapple with this complexity, compared to 27% of those who are not using IoT
for this purpose. (See Exhibit 6)

EXHIBIT 6
IMPROVING PRODUCTS/SERVICES FOR CUSTOMERS DEEP DIVE

Use IoT to improve Using IoT, but NOT

products and services to improve products and
for customers (i.e., sales services for customers (i.e.,
enablement) sales enablement)

% Projects in Use phase 26% 24%

Overall Satisfaction 97% 95%

Critical to success of company 93% 88%

Increases customer satisfaction 60% 45%

Increases revenue 50% 39%

Enables new types

50% 38%
of customer offerings

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 13

In all five fields surveyed, organizations primarily use IoT for automation and
efficiency, with a secondary focus on workplace and employee safety. Almost half of
manufacturing companies cite industrial automation as a key use of IoT, with a
similar number of power & utilities companies using IoT for smart grid automation.
40% of automotive/transportation/logistics organizations leverage IoT for
manufacturing operations efficiency, while 47% of companies in the smart places
field say IoT helps them with productivity enablement.

IoT is also used to enhance workplace safety across industries. A little more than one
in three manufacturing organizations utilize the technology for plant safety. The
energy industry also focuses its IoT use on workplace safety, with 37% of power &
utilities organizations and 45% of oil & gas companies using IoT for this purpose.
42% of smart places businesses adopt IoT for building safety. In the mobility field,
IoT is not only used for safety, but also for surveillance. (See Exhibit 7)

One decision maker in the manufacturing industry explains how IoT facilitates both
automation and safety. “We break IoT down into monitoring and control. For
monitoring, this means tracking the temperature in food containers to make sure it’s
safe through the supply chain and ready when a bus load of kids comes in. For
control, we can take information out and automatically take action to drive
commands into pieces of equipment and respond to what’s going on in the
environment.”

A smart places organization relies on IoT for crucial safety procedures. “We create
fire safety systems, and to get any kind of information out of the system, a person
had to be standing in front of it. We use IoT for condition-based decision-making, so
the systems can instead act on what’s happening in the environment and bring the
business closer to the action so we can make faster decisions.”

EXHIBIT 7
TOP REASONS FOR IoT ADOPTION BY INDUSTRY

Manufacturing Power & Utilities Oil & Gas Mobility Smart Places
Quality and Smart grid Inventory Productivity
compliance 47% automation 44% Workplace safety 45% tracking and 48% enablement/ 47%
warehousing workplace analytics

Grid asset Manufacturing

Industrial automation 45% maintenance 43% Employee safety 43% operations 40% Building safety 42%
efficiency

Production flow Remote infrastructure Remote infrastructure Surveillance and safety 34% Predictive maintenance 41%
monitoring 43% maintenance 40% maintenance 39%

Production planning Smart metering Emissions monitoring Remote commands Regulations and
and scheduling 38% 37% and reduction 35% 34% compliance mgmt 36%

Supply chain Asset and predictive Space

and logistics 38% Workplace safety 37% maintenance 35% Fleet management 32% mgmt and 34%
optimization

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 14

Organizations are reaping the benefits of focusing their IoT use on safety and
efficiency. Companies say that the top three advantages of IoT adoption are
increased efficiency of operations (55%), improved safety conditions (51%), and
increased employee productivity (50%). The least often cited benefits of IoT
adoption include increased revenue, as well as the ability to create new revenue
streams and customer offerings, but these are more indirect benefits, as it takes
longer for organizations to realize them. (See Exhibit 8)

EXHIBIT 8
BENEFITS OF IoT

Efficiency Increases the efficiency of operations 55%

Safety Improves safety conditions 51%

Efficiency Allows employees to be more productive 50%

Unplanned Downtime Allows for better optimization of tools/equipment 49%

Quality Reduces chance for human error 49%

Quality Increases customer satisfaction 48%

Yield Increases production capacity 48%

Efficiency Helps me be better informed and make better business decisions 47%

Quality Increases my organization's competitive advantage 47%

Yield Provides my business with cost savings 45%

Unplanned Downtime Improves the traceability of goods 44%

Yield Reduces business expenses 43%

Regulatory Compliance Helps to ensure compliance 43%

Yield Increases revenue 42%

Yield Enables new types of customer offerings 41%

Yield Enables new revenue streams 38%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 15

Measuring Success in IoT

The decision makers and developers we surveyed measure success in IoT slightly
differently from 2020 to 2021. Last year, cost cutting was more important to
organizations; this year, more than a third of companies say they gauge
successful IoT implementation through the lenses of quality and cybersecurity. In
particular, Smart Places organizations tend to view issues like a decrease in
malware attacks as measures of success. (See Exhibit 9)

EXHIBIT 9
MEASURES OF SUCCESS IN IoT

More common measures of success Less common measures of success

Quality 40% More informed

27%
decision-making

Security 37% Direct impact on

23%
increased revenue

Production efficiency 35%

Sustainability 21%

Reliability 34% % of projects

17%
deployed using IoT

Cost efficiency 34%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 16

Challenges of IoT Adoption

Several challenges continue to face IoT adopters in 2021. 30% of organizations

are still implementing current solutions, preventing them from utilizing IoT
more than they currently do. Businesses also struggle with the complexity of
IoT implementation: almost a third of organizations want to work out existing
challenges before adding or using more IoT solutions. In most markets,
difficulty in implementing due to the technical complexity is a greater barrier
than the business transformation needed. However, in Germany and Japan,
where IoT adoption is lower, organizations see the business transformation as
more of a challenge than the technical transformation.

While organizations use cybersecurity as a measure of successful IoT

implementation, they also face challenges involving security issues created by
adopting IoT: 29% feel that the risk isn’t worth it. (See Exhibit 10)

EXHIBIT 10
CHALLENGES TO USING IoT MORE

Still in Progress Still implementing our current solutions 30%

Security Security risk isn’t worth it 29%
Complexity/Technical Want to work out existing/future challenges before adding/using IoT more 29%
Complexity/Technical Too complex to implement because of technology demands 28%
Complexity/Technical Too complex to implement because of business transformation needed 27%
Lack of Budget/Staff Don't have human resources to implement & manage 26%
Lack of Budget/Staff Don't have budget 26%
Security Concerned about consumer privacy 26%
Complexity/Technical Too long to implement 25%
Compliance Too many compliance/regulatory challenges 25%
Lack of Knowledge Lack technical knowledge 24%
Lack of Knowledge Not enough training/guidance on how to deploy 23%
Lack of Knowledge Don't know enough 22%
Leadership/Team Challenges No buy-in from senior leadership 22%

Security Unwilling to store data in public cloud 21%

Haven’t Found Right Solution No solution that meets our needs 20%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 17

IoT adoption can challenge a company’s business model and bring projects to a
halt. A manufacturing decision maker says of business issues, “Many of our
customers, who are other manufacturers, don’t understand the value that IoT can
bring from the onset. We invest time to help them identify what the value is,
which would often change their business model. If this means increasing costs
and getting more involved with the end customer, many of our customers will
have to stop their Proof of Concept to re-evaluate.”

For almost the same amount of companies, technological challenges prevent

further IoT adoption.

With IoT we ask ourselves what to do with the data,

and how much data we should bring on-premise to our
data center. That’s when the cloud becomes much more
attractive, because data is being generated constantly
and we can't just keep buying more hard drives. But we
need the right technical skills to operationalize projects
at scale, including data engineers, data analysts,
and data scientists.”

ITDM in Power & Utilities

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 18

The number of IoT projects that fail in the proof-of-concept phase has risen in
the past year. Currently, 35% of IoT projects experience failure during Trial/PoC,
up from 30% in 2020. The most often-cited reason for failure is the high cost of
scaling, which 32% of organizations say has inhibited their IoT trials. 26% say they
lack the necessary technology to bring a project to fruition, and 25% report that
the projects did not have a clear business value or ROI. (See Exhibit 11)

EXHIBIT 11
REASONS FOR PoC FAILURE

Scaling High cost of scaling 32%

Technology Lack of necessary technology 26%

Business Pilots demonstrate unclear business value/ROI 25%

Complexity Too many platforms to test 24%

Complexity Pilot takes too long to deploy 23%

Scaling Lack of resources/knowledge to scale 23%

Business Hard to justify business case w/o short-term impact 23%

Complexity Too many use cases to prove out 23%

Business Lack of leadership support and attention 21%

Business No clear strategy 21%

Scaling Lack of trust in scalability platforms 20%

Business Didn't anticipate necessary business changes 19%

Vendors Vendors not willing to subsidize pilots 16%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 19

While business transformation is a top challenge to adopting IoT overall, it is less

of a challenge at the PoC phase of a project. This is because organizations may
not fully realize the extent of business transformation needed until they are
further along. An automotive decision maker describes this issue: “IoT is terrible
when it comes to scope creep. We considered designing a pet detection sensor
based upon the temperature inside the vehicle and micro movements. We put
the PoC together and created a huge AI database of two million dog images with
99.9% accuracy. Inevitably, somebody asked for more vision capabilities, and the
programmers see it as a simple recoding exercise. But they don’t realize I've got
to go to a third party to see how much data bandwidth we have, which drives
costs and could turn the whole business model upside down.”

70% of organizations report that business challenges are the reason for a
project’s failure at the PoC stage. Businesses that struggle with scaling cost more
often have trouble planning a long-term IoT strategy, especially because senior
stakeholders are not fully bought in.

Organizations that grapple with the high cost of scaling IoT projects are particularly
challenged by the complexities of integrating across layers (e.g., devices, edge
connectivity, compatibility across applications), with 40% of adopters experiencing
this issue. 37% of these adopters also have difficulty structuring data.

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 20

91% of organizations we surveyed have security concerns about implementing

IoT. Adopters are especially concerned about how to handle security issues that
arise during the early stages of a project. Nearly half of IoT adopters worry about
ensuring data privacy, while 40% are concerned with network-level security, and
39% want to implement security endpoints for each IoT device. (See Exhibit 12)

EXHIBIT 12
TYPES OF IoT SECURITY CONCERNS

Ensuring data privacy 46%

Ensuring network-level security 40%

Security endpoints for each IoT device 39%

Tracking and managing each IoT device 36%

Making sure all existing software is updated 35%

Updating firmware and other software on devices 34%

Performing hardware/software tests and device evaluation 34%

Updating encryption protocols 34%

Conducting comprehensive training programs

33%
for employees involved in IoT environment

Securely provisioning devices 33%

Shifting from device-level to identity-level control 29%

Changing default passwords/credentials 29%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 21

While security is a major consideration in terms of implementing IoT,

organizations are not adopting a common best practice. While one of the top
best practices involves designing security measures that assume breaches at
every level of the project, less than half of adopters are using it. Companies
are also analyzing dataflows for anomalies and to detect security breaches,
but only 42% of them employ this as a best practice. (See Exhibit 13)

For one decision maker in the smart places field, security is always a top-of-
mind issue. “We are constantly thinking about data privacy and risk. What
data are we going to store? How are we going to use that data? How do we
make sure that if a breach occurs, it doesn't become national news on TV? It’s
a big challenge we try to stay ahead of.”

EXHIBIT 13
BEST PRACTICES USED TO SECURE IoT PROJECTS

Designing security measures assuming breaches at every level of the IoT project 43%

Analyzing dataflows for anomalies and to detect breaches 42%

Defining trust boundaries between compartments of IoT projects 37%

Implementing least privileged access for both devices and cloud 37%

Common Vulnerabilities and Exposures monitoring for 3rd party dependencies 37%

Information sharing with other security organizations 34%

Penetration testing (including Red Team exercises) 32%

Static analysis of code (including Coverity and other tools) 30%

Threat modeling 28%

Fuzz testing 15%

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 22

IoT Implementation Strategies

Two in three organizations outsource at least a part of IoT implementation – only

38% of decision makers and developers we surveyed say they build and
implement solutions internally.

Those who choose to outsource IoT implementation reap greater benefits from
the technology. More outsourcers see increased efficiency compared to those
who don’t outsource. Companies who outsource also report a reduced chance of
human error and improved safety conditions. (See Exhibit 14)

In addition, those who outsource IoT implementation have fewer business-

related challenges. Almost a third of companies find it too complex to implement
IoT in-house because of the business transformation that’s needed to do so.
Other in-house IoT implementers don’t have buy-in from senior leadership.
(See Exhibit 15)

Companies who outsource IoT implementation prefer to collaborate closely with

the organizations they work with, customizing the implementation process to
their needs. “We like working with vendors that take a partnership approach
where they have skin in the game as well,” says a decision maker in the power &
utilities industry. “IoT typically requires a long-term sales cycle, so many small
vendors do not survive. They sell to so many different industries to remain
successful but end up creating a horizontal product. When they try to make the
same product work for different types of customers, they become profit-driven
and lose focus on our needs.”

EXHIBIT 14 EXHIBIT 15
BENEFITS OF IoT CHALLENGES OF USING IoT MORE
Outsource
Do not outsource Outsource
Do not outsource
+8 +5 +10

-5 -6
-5

Increases Improves safety Reduces chances Too complex to Too long to No buy-in from
implement because of
efficiency of conditions for human error business transformation
implement senior leadership
operations needed

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 23

Sustainability in IoT

34% of the organizations surveyed say they’re prioritizing sustainability goals as

part of their progress in the next year. Among adopters who focus on
sustainability, half expect to reach carbon net zero by 2025, whereas the other
half see it as a longer-term goal. (See Exhibit 16)

Organizations who have near-term carbon net zero goals are more motivated
by compliance than those with longer-term goals – 41% as opposed to 36%. It’s
also easier to implement sustainability now, which translates to extra motivation
for companies focused on meeting zero-emission goals in the next few years:
37% of those organizations say it’s a major impetus, compared to 29% of orgs
with long-term goals.

Sustainability is often a side benefit of IoT adoption: when organizations adopt

the technology for other reasons, such as to reduce costs or increase efficiency,
they often find that they use fewer natural resources.

73% of adopters with near-term sustainability goals view IoT implementation as

very important for progress toward sustainability goals, but only 43% are
adopting it to achieve those goals – which aligns with sustainability as a side
benefit of IoT adoption, rather than a main motivation.

EXHIBIT 16
TIMELINE TO CARBON NET ZERO
ro
t ze
ne
be
0 to
2 5 0 03 ans
202 202 203 r 2
pl
B y B y B y A fte N o

14% 33% 34% 15% 4%

47% Near Term 49% Long Term

IoT Signals aka.ms/IoTsignals

STATE OF IoT: OVERALL RESEARCH LEARNINGS 24

Impact of Covid-19 on IoT

When it comes to investment in IoT, the COVID-19 pandemic in 2021 has

accelerated organizations’ investment even more than in 2020. In 2021, nearly
half of organizations (44%) say they will invest in IoT more, compared to 31% in
2020. The US and China, whose GDP growth was least impacted during the
pandemic among the markets we surveyed, are more likely to invest further in
IoT due to COVID-19. (See Exhibit 17)

Those who expect to invest the same or more in IoT because of COVID-19 are
seeing more benefits already. More of these organizations are using IoT for use
cases such as sales enablement and sustainability, and close to half cite increased
revenue as a benefit of the technology. A majority of these companies are also
incorporating more technology as a core or secondary component of IoT, with
81% using edge computing, and 82% utilizing digital twins.

COVID-19 has pushed some organizations to utilize IoT more as a way of staying
ahead of the competition during an uncertain time. An automotive IoT adopter
stated: “With COVID, everybody got on the fleet bandwagon for delivery and last
mile logistics. Before that, it was all about rental cars and Uber and Lyft. But now all
the rental car companies are on the brink of death at this point, as well as Lyft and
Uber being a shadow of their former selves. Lyft always swore they would only
deliver people, but now they’re trying to deliver packages. They've had to do a
radical business change, but fleet management assessment is mainstream now.
COVID has accelerated our focus on last mile logistics, driver management, dispatch,
and driver behavior to remain competitive.”

EXHIBIT 17
COVID IMPACT ON IoT INVESTMENT

Too Early to Tell

12% in 2020 4%
7%
Less
16% in 2020
44%
More
We will invest 31% in 2020

in IoT…

Same 44%
41% in 2020

IoT Signals aka.ms/IoTsignals

 25

Emerging
Technologies
Spotlight

IoT Signals
IoT Signals
aka.ms/IoTsignals
https://aka.ms/IoTsignals
EMERGING TECHNOLOGIES 26

The State of Emerging Technologies

Research shows that the majority of IoT-adopting organizations are also

using and exploring emerging technologies like artificial intelligence, edge
computing, and digital twins. The majority of businesses using these
technologies have integrated them into their IoT solutions and are finding
that they enhance the ways IoT can be used.

However, organizations are finding that projects involving emerging

technology can be hard to implement, due to barriers like the complexity
of scaling and lack of infrastructure. About half of the decision-makers and
developers we surveyed say that most of their emerging technology
projects are in the trial/PoC stage. These barriers prevent companies from
going further in their adoption of these technologies.

Different industries are also at different places when it comes to

strategizing around emerging technologies. Of the industries we surveyed,
smart places organizations are in the lead with regard to implementing AI,
energy companies are ahead in edge computing, and manufacturing
businesses implement digital twins technology more often. Mobility
organizations are generally the slowest overall adopters of emerging
technologies, but they tend to utilize AI much more often than edge
computing or digital twins.

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 27

Artificial Intelligence Deep Dive

Artificial intelligence is defined as the ability of a computer system to deal with

ambiguity, by making predictions using previously gathered data, and learning
from errors in those predictions in order to generate newer, more accurate
predictions about how to behave in the future.

Since last year, knowledge of artificial intelligence has grown among IoT
adopters: 64% of companies surveyed say they know it well, as opposed to 59%
in 2020. 84% of IoT-adopting organizations report that they have an AI strategy
in place. Of those organizations, one in three are currently implementing their
strategy (See Exhibit 18)

Businesses with AI strategies often struggle to bring projects to the use phase,
with 46% saying most of their projects are stuck in the PoC stage.

EXHIBIT 18
AI IMPLEMENTATION PROGRESS

84
Have a strategy
%
83% in 2020

31% Implementing 34% in 2020

26% Developed but not implemented 27% in 2020

26% Developing 22% in 2020

AI strategy
16%
Do not have a strategy
17% in 2020

11% Want to develop 10% in 2020

5% No plans 7% in 2020

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 28

Most businesses are successfully integrating AI with IoT – 79% report that AI is
a core or secondary component of their IoT solutions. (See Exhibit 19)

A decision maker in the power & utilities field explains how their organization
integrates AI with IoT. “We deploy drones with sensors to capture the weather
and take photos for regular inspections of thousands of miles of transmission
lines. Our team then uses machine learning to sift through the data and detect
specific patterns over which they can build and run AI models to generate
insights. Having all the systems digitized rather than on paper has drastically
improved the quality of our data and ability to make decisions.”

EXHIBIT 19
USE AND IMPACT OF AI IN IoT SOLUTION

79
Core component
%
44%

Core component/
Secondary component
Secondary component 35% 79% in 2020

Considering, not yet adopted 20%

Not considering 1%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 29

Organizations primarily adopt AI within IoT for maintenance – predictive

maintenance is the top reason for AI and IoT integration, with two-thirds of
companies saying they use the technologies for this purpose, while the number-
two reason is prescriptive maintenance. 56% of organizations use AI and IoT to
enhance user experience, and those who do more often report that it helps their
companies achieve success. Close to half of organizations say they’re utilizing AI
within IoT to develop vision and speech applications. (See Exhibit 20)

EXHIBIT 20
REASONS FOR AI IN IoT ADOPTION | Ranked Top 3 Most Important

Predictive maintenance 67%

Prescriptive maintenance 65%

User experience 56%

Visual image recognition and interpretation 45%

Natural language
42%
recognition and processing

This icon highlights organizations that use IoT

for these use cases and believe IoT is 7%+
more critical to organizational success.

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 30

A significant amount of companies call attention to the complexity involved in AI

implementation. Scaling issues are the main barrier to implementation – 43% cite
them as a challenge – and lack of infrastructure comes in a close second, with
40% saying it’s a barrier. (See Exhibit 21)

EXHIBIT 21
BARRIERS TO USING AI MORE WITHIN IoT | Ranked Top 3 Most Challenging

Too complex to scale 43%

Lack of infrastructure 40%

Lack of technical knowledge 36%

Implementing AI would be too complex 35%

Lack of trained personnel 34%

No solution available that meets our needs 27%

Don’t know how to get started 22%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 31

Across industries, more than 80% of companies have an AI strategy in place.

When it comes to implementing AI strategy, businesses in the mobility and smart
places fields lead the charge, with 36% and 39% respectively saying they are
actively employing the technology. However, smart places organizations lag
behind other industries with regard to integrating AI into IoT: 75% of those we
surveyed are doing so, compared to 83% in manufacturing, 89% in energy, and
85% for mobility organizations. (See Exhibit 22)

EXHIBIT 22
AI ADOPTION AND VALUE

Total Manufacturing Energy Mobility Smart Places

Have an AI strategy 84% 84% 90% 81% 88%

Implementing 31% 31% 26% 36% 39%

Implementation
progress against Developed 26% 23% 28% 25% 28%
AI strategy
Developing 26% 30% 36% 20% 21%

Use AI in IoT solution 79% 83% 89% 85% 75%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 32

Edge Computing Deep Dive

Edge computing enables artificial intelligence, cloud analytics, and business logic
to be moved to edge devices. This ensures devices spend less time communicating
with the cloud, react more quickly to local changes, and operate reliably even in
extended offline periods.

Knowledge of edge computing has grown in the past year. In 2021, 52% of survey
participants say they know the technology well, compared to 42% in 2020.

Of the organizations that are familiar with edge computing, more than three
quarters have a strategy in place for utilizing the technology, and 29% are
implementing that strategy. (See Exhibit 23)

Similar to AI, around half of organizations with an edge computing strategy report
that most of their edge computing projects are stuck in the trial/PoC stage.

EXHIBIT 23
EDGE COMPUTING IMPLEMENTATION PROGRESS

79 %
Have a strategy
29% Implementing
26% Developed but not implemented

24% Developing

Edge Computing
strategy
21%
Do not have a strategy
15% Want to develop
6% No plans

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 33

Organizations are increasingly using edge computing and IoT together: 81% of
those who have an edge computing strategy are using the technology as a key
element of their IoT solution, up from 73% in 2020. (See Exhibit 24)

As organizations utilize edge computing more, they are refining their strategies
to meet their needs. “There’s a balance between the cost of the edge hardware
versus how much computing power we really need,” a manufacturing decision
maker told us. “We started purchasing edge devices with a tremendous amount
of compute power, but they were really expensive. The overall cost led us to
parse it down to understand what’s beneficial and what's not. We learned that
the data transfer protocol that we use to pull data from legacy systems drives a
significant cost and presents a significant security risk. We had to ask ourselves
if the edge technology is really worth it.”

EXHIBIT 24
USE AND IMPACT OF
EDGE COMPUTING IN IoT SOLUTION

81
Core component 42%
%
Core component/
Secondary component
Secondary component 39% 73% in 2020

Considering, not yet adopted 18%

Not considering 1%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 34

Security is a key reason why organizations integrate edge computing with IoT.
Close to half of survey participants use the technologies for cloud security, while
more than a third employ them for device and asset security. Those who
integrate edge computing with IoT for these reasons more often believe that IoT
is critical to their organization’s success. Quality assurance is also an often-cited
use, with 35% saying they use edge computing within IoT for this purpose. Less
common uses for these two technologies include contact tracing (23%), personal
comfort (17%), and space optimization (17%). (See Exhibit 25)

Organizations enjoy many benefits of using edge computing, and report that the
technology helps them improve automation and productivity. For more than
three quarters of companies surveyed, edge computing enables connectivity of
old and new devices because of protocol translation. 72% say that utilizing edge
computing improves privacy, with 72% also benefiting from improved operations.

EXHIBIT 25
REASONS FOR EDGE COMPUTING IN IoT ADOPTION | Ranked Top 5 Most Important

Cloud security 40%

Device/asset security 36%
Quality assurance 35%
Securing the physical environment 31%
Operations optimization 29%
Employee productivity 27%
Condition-based maintenance 27%
Worker and workplace safety 27%
Sales enablement 25%
Energy optimization 24%
Sustainability uses 24%
Supply chain management 23%
Contact tracing 23%
Asset tracking 22%
Personal comfort 17%
This icon highlights organizations
that use IoT for these use cases and Space optimization 17%
believe IoT is 7%+ more critical
to organizational success.

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 35

Companies who want to further utilize edge computing with IoT face a wide array
of challenges. Nearly 1 in 2 companies report a lack of architectural guidance.
43% say they don’t have enough trained personnel, and another 43% don’t have
adequate infrastructure. Almost the same amount have difficulty managing
security, and 40% aren’t well enough informed about edge hardware choices.
(See Exhibit 26)

The 42% of organizations with edge computing-related security concerns cite

several specific challenges. Close to half say application security is a top concern,
with similar numbers reporting that they’re concerned about threat detection
and perimeter security.

EXHIBIT 26
BARRIERS TO USING AI MORE WITHIN IoT | Ranked Top 3 Most Challenging

Lack of architectural guidance 44%

Lack of trained personnel 43%

Lack of infrastructure 43%

Difficulty managing security 42%

Lack of clarity on edge hardware choices 40%

Don’t have a business need for edge computing 30%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 36

While 81% of the verticals we surveyed use edge computing as part of their IoT
solution, manufacturing organizations lag behind other fields, with 77%
combining the technologies, as compared to 88% in mobility, 85% in energy, and
83% in smart places. However, manufacturing companies are implementing edge
computing strategies at a higher rate than almost all other verticals, with only
energy scoring higher. (See Exhibit 27)

EXHIBIT 27
EDGE COMPUTING ADOPTION AND VALUE

Total Manufacturing Energy Mobility Smart Places

Have Edge Computing strategy 79% 83% 85% 85% 85%

Implementation
Implementing 29% 37% 38% 18% 29%
progress against
Edge Computing
Developed 26% 28% 25% 30% 26%
strategy
Developing 24% 18% 23% 37% 30%

Use Edge Computing

81% 77% 85% 88% 83%
in IoT solution

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 37

Digital Twins Deep Dive

Digital twins is a digital replica of physical environments that allows modeling of

relationships and interactions between things, places, business processes and
people. It provides the ability to create reusable, highly scalable detailed digital
models of comprehensive environments that fuse data across the physical and
digital world to track both past and present events, simulate possibilities, and
help predict future events for those environments.

Almost all the organizations surveyed are aware of digital twins, and that number
has grown since last year: 39% say they know the technology well, compared to
33% in 2020.

Among those aware of digital twins, more than three in four have a strategy
incorporating the technology, and a quarter are implementing their strategy.
(See Exhibit 28)

EXHIBIT 28
DIGITAL TWINS IMPLEMENTATION PROGRESS

77
Have a strategy
%
73% in 2020

24% Implementing 27% in 2020

29% Developed but not implemented 28% in 2020

24% Developing 18% in 2020

Digital Twins
strategy 23%
Do not have a strategy
27% in 2020

14% Want to develop 12% in 2020

9% No plans 15% in 2020

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 38

As is the case with AI and edge computing, a significant number of

organizations report that their digital twins projects are stuck in the trial phase:
51% say they are facing this challenge, compared to 23% in the learn stage,
12% in the purchase stage, and 13% who have reached the use phase.

81% of those with a digital twins strategy are incorporating it into their IoT
solution, leaving only 18% of IoT adopters who are considering integrating
digital twins but haven’t yet done so, and 1% who are not considering
integration. (See Exhibit 29)

EXHIBIT 29
USE AND IMPACT OF DIGITAL TWINS IN IoT SOLUTION

81
41%
Core component
%
Core component/
Secondary component
Secondary component 40% 82% in 2020

Considering, not yet adopted 18%

Not considering 1%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 39

The benefits of digital twins projects include improved quality, which nearly three
quarters of organizations report; increased revenue (63% of companies cite this
as a benefit); and reduced operations costs (59%). (See Exhibit 30)

A smart places ITDM describes how their organization utilizes digital twins to
monitor building changes. “A new digital twin of the building is created each
time someone wants to put up electrical contractor bidding, or create a permit,
or test the fire protection system. Each of those digital twins fits into a puzzle
that leads us to create the best replica that we possibly can. As a result, the final
digital twin can guide the user to which part of the building changed in the past
year. That’s critical for us because not all of these systems are used daily, so we
know where the fixes are needed.“

EXHIBIT 30
BENEFITS TO USING DIGITAL TWINS WITHIN IoT | Ranked Top 3 Benefits Gained

Improve overall quality 72%

Increase revenue 63%

Reduce operations costs 59%

Enhance warranty cost and services 46%

Reduce time to market (for a new product) 46%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 40

As with edge computing, in order to use digital twins more, organizations need
help with an array of challenges. For adopters of digital twins technology, these
challenges are specifically data- and people-related. Close to 1 in 3 organizations
have trouble managing the volume of data collected, while the same number find
that the systems needed to handle digital twins are very complex. 29% come up
against integration challenges.

People-related challenges include a lack of trained personnel, as well as difficulty

proving the value of the technology to stakeholders. (See Exhibit 31)

EXHIBIT 31
BARRIERS TO USING DIGITAL TWINS MORE WITHIN IoT | Ranked Top 3 Most Challenging

Challenges managing
30%
the volume of data collected
Complexity of systems needed
30%
to handle digital twins

Integration challenges 29%

Lack of trained personnel 27%

Challenges modeling the environment 27%

Cost of building solution 27%

Proving the value/ROI of

26%
digital twins to stakeholders

Difficult to build digital twins fast enough 25%

Lack of tooling 23%

Difficult to scale simulations 20%

IoT Signals aka.ms/IoTsignals

EMERGING TECHNOLOGIES 41

In contrast to their level of edge computing implementation, the manufacturing

industry is ahead when it comes to digital twins: 31% are implementing against a
digital twins strategy. The mobility field lags behind the others in key areas, with
77% using a digital twins solution as compared to 86% in manufacturing. In
addition, only 15% of mobility organizations are implementing against a digital
twins strategy. (See Exhibit 32)

EXHIBIT 32
DIGITAL TWINS ADOPTION AND VALUE

Total Manufacturing Energy Mobility Smart Places

Have a Digital Twins strategy 77% 79% 79% 76% 82%

Implementing 24% 31% 26% 15% 27%

Implementation
progress against
Digital Twins
Developed 29% 25% 29% 39% 35%
strategy
Developing 24% 23% 24% 23% 20%

Use Digital Twins in IoT solution 81% 86% 82% 77% 85%

IoT Signals aka.ms/IoTsignals

 42

Industry
Spotlights

IoT Signals
IoT Signals
aka.ms/IoTsignals
https://aka.ms/IoTsignals
 SMART PLACES 43

Smart Places Deep Dive

94% of smart places organizations we surveyed are IoT adopters. They benefit
from the technology in numerous ways, with top benefits including increased
operational efficiency, improved safety, and better optimization of tools and
equipment. (See Exhibit 33)

EXHIBIT 33
SMART PLACES IoT SUMMARY

IoT Projects in 4 Stages

94 % Learn 27% 25% 25% 24%

PLANNING
IoT Adopters Trial/PoC 27% 25% 25% 24%

90% of total have at

least one project that Purchase 27% 25% 25% 24%
reached “use” stage

5% not using but have in past Use 27% 25% 25% 24%
2% not using, hasn’t in past

Top Benefits of IoT

#1 #2 #3
Increases the efficiency Improves safety Allows for
of operations conditions better optimization of
tools/equipment

IoT Signals aka.ms/IoTsignals

 SMART PLACES 44

Likewise, top applications of IoT in smart places organizations also involve

productivity and safety – over half of smart places businesses use IoT to enable
productivity and workplace analytics, 46% use it for building safety, and 44%
employ it in predictive maintenance. For smart places organizations, those who
use IoT for space management and optimization, as well as stock and supply
monitoring, more strongly believe that IoT is critical to their success.
(See Exhibit 34)

IoT opens up new use cases for smart places organizations that were not possible
before. “We spent millions of dollars to try and save seconds in response time,
but we waste minutes communicating with firefighters when transcribing from
phone to phone and typing things up,” a smart places decision maker explains.
“IoT allows us to collapse that process and get data immediately, which makes it
a much safer outcome.“

EXHIBIT 34
REASONS FOR IoT ADOPTION Productivity enablement/
51%
workplace analytics

Building safety 46%

Predictive maintenance 44%

Space management and optimization 37%

Regulations and compliance management 35%

Stock/Supply monitoring 34%

Energy/Water/Air/Pollution management 33%

Connected traffic/streetlights and urban infrastructure 32%

Public safety 31%

Fleet and asset management 28%

This icon highlights organizations Parking management 26%

that use IoT for these use cases and
believe IoT is 12%+ more critical
to organizational success.

IoT Signals aka.ms/IoTsignals

 SMART PLACES 45

Smart places organizations face many of the same barriers encountered by other
industries when implementing IoT. 32% are still implementing their current
solution, and 31% worry that the security risk of employing IoT isn’t worth it. 30%
feel that the level of business transformation needed makes it too complex to
implement; the same percentage say that technology demands increase
complexity too much.

Problems involving lack of knowledge are lesser barriers to implementation. A

quarter of companies say they don’t have enough training or guidance on how to
deploy IoT. Around the same amount cite lack of technical knowledge or say they
simply don’t know enough about IoT to implement it. (See Exhibit 35)

EXHIBIT 35
CHALLENGES TO USING IoT MORE

Still in Progress Still implementing our current solutions 32%

Security Security risk isn’t worth it 31%
Complexity/Technical Too complex to implement because of business transformation needed 30%
Complexity/Technical Want to work out existing/future challenges before adding/using IoT more 30%
Complexity/Technical Too complex to implement because of technology demands 30%
Security Concerned about consumer privacy 29%
Complexity/Technical Too long to implement 29%
Lack of Budget/Staff Don’t have human resources to implement & manage 26%
Lack of Budget/Staff Don’t have budget 26%
Leadership/Team Challenges No buy-in from senior leadership 25%
Compliance Too many compliance/regulatory challenges 25%
Lack of Knowledge Not enough training/guidance on how to deploy 25%
Security Unwilling to store data in public cloud 25%
Lack of Knowledge Lack technical knowledge 24%
Lack of Knowledge Don’t know enough 23%
Haven’t Found Right Solution No solution that meets our needs 19%

IoT Signals aka.ms/IoTsignals

 MANUFACTURING 46

Manufacturing Deep Dive

As in the smart places field, the majority of manufacturing organizations we

surveyed are IoT adopters and the top benefit they’re realizing is increased
operational efficiency. Businesses also say IoT increases production capacity and
reduces human error. (See Exhibit 36)

EXHIBIT 36
MANUFACTURING IoT SUMMARY

IoT Projects in 4 Stages

91 % Learn 27% 25% 25% 24%

PLANNING
IoT Adopters Trial/PoC 27% 26% 21% 26%
83% of total have
at least one project
that reached Purchase 27% 26% 21% 26%
“use” stage

7% not using but have in past Use 27% 26% 21% 26%
1% not using, hasn’t in past

Top Benefits of IoT

#1 #2 #3
Increases the efficiency Increases production Reduces chance for
of operations capacity human error

IoT Signals aka.ms/IoTsignals

 MANUFACTURING 47

The top application of IoT in the manufacturing field focuses more on quality and
compliance, with 48% of organizations citing that as their main reason for
adopting IoT. The second most common application is industrial automation.
Manufacturing organizations who use IoT for product-as-a-service
implementations and “connected product” engineering more strongly believe
that the technology is key to their success. (See Exhibit 37)

EXHIBIT 37
REASONS FOR IoT ADOPTION
Quality and compliance 48%

Industrial automation 46%

Production flow monitoring 43% DISCRETE ONLY

Production planning and scheduling 40%

Supply chain and logistics 38%

Plant safety 38%

Product-as-a-service 36% PROCESS ONLY

Connected field service/New business models 36%

Condition-based monitoring and service 35%

Worker safety 35%

'Connected product' engineering 34% PROCESS ONLY

Condition-based predictive maintenance 33%

Process optimization 33% DISCRETE ONLY

This icon highlights organizations Overall equipment effectiveness 27%

that use IoT for these use cases and
believe IoT is 11%+ more critical
to organizational success.

IoT Signals aka.ms/IoTsignals

 MANUFACTURING 48

Challenges to implementing IoT in the manufacturing industry are much the

same as the ones that smart places companies face. 29% are still implementing
their current solution; 27% say the technological demands prohibit
implementation; and another 27% feel the security risk isn’t worth it. For process
manufacturing organizations, lack of human resources and lack of budget are
stronger barriers than they are for discrete manufacturing organizations.
(See Exhibit 38)

Technological challenges abound for some manufacturing organizations. “There

are so many technological limitations that constrain us, and no standards in
place. We have to think about whether we can extract data from a legacy device,
how we’ll work with partners to extract the data, which mechanisms we’ll use to
transport the data. But this space moves so quickly – what we read about as the
latest thing today will be different tomorrow. It’s a battle to avoid “technology
orphanage” as we make the purchase decision and gauge whether the
technology will be relevant three years from now.”

EXHIBIT 38
CHALLENGES TO USING IoT MORE

Still in Progress Still implementing our current solutions 29%

Complexity/Technical Too complex to implement because of technology demands 27%
Security Security risk isn’t worth it 27%
Complexity/Technical Want to work out challenges before adding/using IoT more 26%
Lack of Budget/Staff Don't have human resources to implement & manage 25%
Complexity/Technical Too complex to implement because of business transformation needed 24%
Lack of Budget/Staff Don't have budget 23%
Lack of Knowledge Not enough training/guidance on how to deploy 22%
Security Concerned about consumer privacy 22%
Compliance Too many compliance/regulatory challenges 21%
Lack of Knowledge Lack technical knowledge 21%
Complexity/Technical Too long to implement 20%
Lack of Knowledge Don't know enough 20%
Leadership/Team Challenges No buy-in from senior leadership 19%
Security Unwilling to store data on public cloud 18%
Haven’t Found Right Solution No solution that meets our needs 17%

IoT Signals aka.ms/IoTsignals

 MOBILITY 49

Mobility Deep Dive

91% of the mobility organizations we surveyed are IoT adopters – a similar

percentage to manufacturing and smart places. As is the case with those two
industries, mobility orgs also say operational efficiency is the top benefit of using
IoT. As with smart places companies, safety and production capacity are also top
benefits in mobility. Employee productivity is another high-ranking benefit.
(See Exhibit 39)

EXHIBIT 39
MOBILITY IoT SUMMARY

IoT Projects in 4 Stages

91 % Learn 30% 26% 21% 23%

PLANNING
IoT Adopters Trial/PoC 30% 26% 21% 23%
79% of total have
at least one project
that reached Purchase 30% 26% 21% 23%
“use” stage

7% not using but have in past Use 30% 26% 21% 23%
2% not using, hasn’t in past

Top Benefits of IoT

#3
#1 #2 Improves
Increases the efficiency Allows employees to safety conditions
of operations be more productive
Increases
production capacity

IoT Signals aka.ms/IoTsignals

 MOBILITY 50

As well as being a top benefit, operational efficiency is also a primary reason that
mobility organizations adopt IoT. These companies also adopt the technology to
track inventory and manage warehousing. Those who use IoT for facilitating
vehicle health telematics and for emergency services more often believe that the
technology is critical to their organization’s success. Automotive and
transportation businesses more often use IoT for remote commands. Emerging
use cases for IoT in mobility include vehicle reprovisioning and drone-based
delivery. (See Exhibit 40)

EXHIBIT 40
REASONS FOR IoT ADOPTION

Inventory tracking and warehousing 49%

Manufacturing operations efficiency 40%

Surveillance and safety 35%

Remote commands 35%

Fleet management 32%

Vehicle health telematics 31%

Driver assistance 29%

Predictive maintenance 29%

Vehicle reprovisioning 27%

Emergency services 25%

Drone-based delivery 22%

This icon highlights organizations
that use IoT for these use cases and
believe IoT is 12%+ more critical
to organizational success.

IoT Signals aka.ms/IoTsignals

 MOBILITY 51

Like smart places and manufacturing, one of the mobility industry’s top barriers
to IoT adoption is that they’re still implementing current solutions. In addition,
nearly one in three companies want to work out existing challenges before
embarking on something new. As with smart places orgs, mobility companies
grapple with technological complexity, but business complexity is less of a
challenge. (See Exhibit 41)

For one automotive organization, the struggle to work out existing challenges
has brought projects to an abrupt halt. “A lot of times, the PoCs change scope
midway through, and they don't deliver on what the original production intent
was. Even if a PoC delivers on everything asked of us, I've got somebody on my
team who has been asleep at the wheel and doesn't understand it's a PoC, so
they expect it to operate like a beta prototype. Then they’ll just dismiss the whole
thing, because they don't have a proper understanding of the context.”

EXHIBIT 41
CHALLENGES TO USING IoT MORE

Complexity/Technical Want to work out challenges before adding/using IoT more 30%
Complexity/Technical Too complex to implement because of technology demands 29%
Still in Progress Still implementing our current solutions 28%
Security Security risk isn’t worth it 27%
Complexity/Technical Too complex to implement because of business transformation needed 27%
Lack of Budget/Staff Don’t have human resources to implement & manage 26%
Lack of Knowledge Don’t know enough 25%
Leadership/Team Challenges No buy-in from senior leadership 25%
Lack of Knowledge Lack technical knowledge 24%
Compliance Too many compliance/regulatory challenges 24%
Lack of Budget/Staff Don’t have budget 24%
Haven’t Found Right Solution No solution that meets our needs 23%
Complexity/Technical Too long to implement 21%
Security Concerned about consumer privacy 20%
Lack of Knowledge Not enough training/guidance on how to deploy 19%
Security Unwilling to store data in public cloud 18%

IoT Signals aka.ms/IoTsignals

 ENERGY 52

Energy Deep Dive:

Power & Utilities and Oil & Gas

80% of the power & utilities organizations we surveyed say they are IoT adopters.
In contrast, a much higher number of oil & gas companies – 94% – are adopting
IoT. (See Exhibit 42)

EXHIBIT 42
IoT SUMMARY

Power & Utilities

IoT Projects in 4 Stages

80 %
75% of total have
Learn 28% 2… 2… 2…

PLANNING
at least one project
that reached Trial/PoC 2… 26% 2… 2…
IoT Adopters “use” stage

Purchase 2… 2… 23% 2…
10% not using but have in past
10% not using, hasn’t in past Use 2… 2… 2… 23%

Oil & Gas

IoT Projects in 4 Stages

94 % Learn 28% 2… 2… 2…
PLANNING

IoT Adopters Trial/PoC 2… 27% 2… 2…

83% of total have
at least one project
that reached Purchase 2… 2… 24% 2…
“use” stage

4% not using but have in past Use 2… 2… 2… 20%

2% not using, hasn’t in past

IoT Signals aka.ms/IoTsignals

 ENERGY 53

The top three benefits of IoT for power & utilities organizations are operations
efficiency, production capacity, and employee productivity. Like power & utilities
orgs, oil & gas orgs cite operations efficiency and production capacity as top
benefits, but also say their use of IoT has increased customer satisfaction and
improved business decision-making. (See Exhibit 43)

EXHIBIT 43
TOP BENEFITS OF IoT

Power & Utilities

#1 #2 #3
Increases the efficiency Increases production Allows employees to be
of operations capacity more productive

Oil & Gas

#3
#1 #2 Increases
Increases customer Improves business production capacity
satisfaction decision-making
Increases the efficiency
of operations

IoT Signals aka.ms/IoTsignals

 ENERGY 54

For power & utilities organizations, the most common reasons for IoT adoption
are efficiency-oriented: 44% employ the technology for smart grid automation,
and 43% use it for grid asset maintenance. For both the power & utilities field
and the oil & gas industry, IoT is less often adopted for electric vehicle-related
projects; however, increased attention from the US government means these use
cases may be on the rise in the future.

Conversely, oil & gas companies tend to adopt IoT for safety-oriented use cases,
with workplace safety and personal safety heading up the list of reasons for IoT
adoption. (See Exhibit 44)

EXHIBIT 44
REASONS FOR IoT ADOPTION

Power & Utilities Smart grid automation 44%

Grid asset maintenance 43%
Remote infrastructure maintenance 40%
Smart metering 37%
Workplace safety 37%
Generation optimization and load balancing 37%
Distributed Energy Resources (DER) management 37%
Employee safety 33%
Emissions monitoring and reduction 31%
Predictive load forecasting 27%
Home or building energy management 24%
Digital twin of energy infrastructure 21%
E mobility (Electric Vehicle) charging optimization and vehicle-to-grid 20%
New business opportunity through E mobility (electric vehicle) 17%

Oil & Gas Workplace safety 45%

Employee safety 43%
Remote infrastructure maintenance 39%
Emissions monitoring and reduction 35%
Asset and predictive maintenance 35%
Production optimization and load balancing 35%
Digital twin of energy infrastructure 33%
Home or building energy management 29%
New business opportunity through E mobility (electric vehicle) 20%

IoT Signals aka.ms/IoTsignals

 ENERGY 55

In the power & utilities field, technological complexity is the main barrier to IoT
adoption, with close to a third of companies citing it as a challenge. As with
other industries, a significant percentage of power & utilities organizations say
the security risk of IoT adoption isn’t worth it. Lack of human resources is
another top challenge.

An executive in the power & utilities industry describes the technological

complexities that their company faces when adopting IoT. “IoT requires a lot of
internal transformation. We need the big data skills. To build data pipelines, we
need all new skill sets to operationalize IoT at scale, including engineers,
analysts, and data scientists. At the pilot level, we can always hire a contractor,
but they will acquire the skills and go away to the next gig. We need to sustain
that knowledge internally, which has been a huge challenge.”

As in power & utilities, complexity is a top barrier to IoT adoption in oil & gas,
but for these organizations, this complexity more often comes from the level
of business transformation needed to employ IoT. The top two challenges for
the oil & gas field are knowledge-related: a third of businesses say they lack
technical knowledge, while 31% say they simply don’t know enough about IoT.
(See Exhibit 45)

EXHIBIT 45
TOP CHALLENGES TO USING IoT MORE

Complexity/Technical Too complex to implement because of technology demands 30%

Power Security Security risk isn’t worth it 29%

& Utilities
Lack of Budget/Staff Don’t have human resources to implement & manage 29%

Lack of Knowledge Lack technical knowledge 33%

Lack of Knowledge Don’t know enough 31%

Oil & Gas
Complexity/Technical Too complex to implement
29%
because of business transformation needed

IoT Signals aka.ms/IoTsignals

 56

Final Thoughts

IoT continues to be widely adopted across industries and around the globe, with
adoption rates staying steady since 2020. Organizations in all the fields surveyed
are adopting IoT for a broad range of reasons, including operations optimization,
cloud and device/asset security, and quality assurance, and they are seeing
improved efficiency and productivity. The vast majority of organizations say IoT is
key to their continued success, and two in three say they’ll implement the
technology more in the years to come. In addition, COVID-19 has had an even
stronger accelerating impact for organizations and their IoT strategies than last
year, with more companies saying they’ll maintain or increase their investment in
IoT as a result of the pandemic.

Almost all organizations are implementing strategies for Artificial Intelligence,

Edge Computing, and Digital Twins, and the majority are integrating these
technologies into their IoT solution. To maximize the benefits of combining these
technologies with IoT, companies will need to focus on building infrastructure
and overcoming scaling issues.

Many organizations are outsourcing at least part of their IoT implementation,

which helps them manage complex technical and business challenges. Those who
outsource also feel more confident when it comes to security, which is top of
mind in 2021. To keep IoT projects secure, organizations focus on ensuring data
privacy – especially while working with vendors – and network-level security.
Indeed, improved security is a top measure of success for IoT projects.
Organizations that invest in IoT and overcome their challenges in implementing
the technology are better able to capitalize on the benefits of IoT.

IoT Signals aka.ms/IoTsignals

 57

Detailed Research Objectives

& Audience Recruit
THE OBJECTIVES OF THE RESEARCH INCLUDED
1. Understand the current state of IoT
2. Uncover benefits and challenges of adopting IoT
3. Analyze adoption and uses of IoT
4. Explore emerging technologies use within IoT, and dive into specific industry learnings

TO MEET THE SCREENING CRITERIA, IoT PROFESSIONALS NEEDED TO BE:

A business decision maker, IT decision maker, or developer at their company
Employed full-time at an enterprise-level company (1,000 employees or more)
Ages 18-65
Familiar with IoT
Involved in decision making for IoT

OF THE 3,000+ IoT PROFESSIONALS INTERVIEWED FOR THE RESEARCH WAVE

BETWEEN APRIL AND MAY 2021
In the US, over 850 security decision makers were interviewed
In China, Japan, the UK, France, and Germany, over 350 security decision makers were interviewed
In Spain, Italy, Benelux (The Netherlands + Belgium), and Australia, over 150 security decision makers were
interviewed in each country
In the Energy Deep Dive, 142 IoT Professionals were interviewed across all countries
In the Manufacturing Deep Dive, 596 IoT Professionals were interviewed across all countries
In the Smart Places Deep Dive, 266 IoT Professionals were interviewed across all countries
In the Mobility Deep Dive, 199 IoT Professionals were interviewed across all countries

© Hypothesis Group 2021. © Microsoft 2021. All rights reserved. 06/21

IoT Signals aka.ms/IoTsignals