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PCIC Middle East 2018 Paper - Are You Building in Obsolescence To Mission Crtical Infrastructure

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PCIC Middle East 2018 Paper - Are You Building in Obsolescence To Mission Crtical Infrastructure

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ARE YOU BUILDING IN OBSOLESCENCE TO MISSION CRITICAL

INFRASTRUCTURE?
PCIC Middle East - Abu Dhabi 2018
Paper No.ME18_11
Ross Kennedy
QHi Group Ltd- Exertherm
9-10 Allied Business Centre
Coldharbour Lane
Harpenden, Herts AL5 4UT
United Kingdom

Abstract - A seismic global shift is occurring which will performance, a 30 to 50 percent reduction in total
affect every industry and particularly large-scale machine downtime is achievable”.
organizations with 24x7 operations and / or high downtime
costs; it’s called the Industrial Internet of Things (IIOT).
Where critical mechanical machinery and electrical Index Terms – Artificial Intelligence (AI), Thermal
infrastructure will all be connected via the internet. Monitoring, Asset Integrity, Internet of Things (IOT),
This will enable the collection of “Big Data”, e.g. vast Industrial Internet of Things (IIOT), reliability, condition
amounts of data being collected from a multitude of monitoring, Big Data, cloud computing, remote
equipment globally. This data will then be analyzed via
monitoring.
Artificial Intelligence (AI), to recognize early symptoms of
malfunction and thus predict what remedial action is
required to avoid the failure and resultant downtime. It will I. INTRODUCTION
also enable huge cost savings from the more efficient use
/ increased uptime that can be derived from continuous A. Definitions.
monitoring. The first task in understanding the global shift which is
Sound far-fetched? It’s already happening. Billions of occurring, and the ramifications which will result, is to define
dollars are being invested by the giants of the internet the various components which are combining to make such
world in both A.I. and in cloud platforms. Cisco is a huge impact.
predicting that cloud traffic will quadruple in just 3 years (1)“Big Data”:
from now. Global OEM’s are also recognizing the new This can be defined as data which in volume and /or
subscription revenue opportunities this will create, and are complexity is so vast that current / traditional computing
also racing to position themselves to be ready for this next software and capacity cannot process it. This creates some
chapter in the “Data Revolution”, where Data centers are specific challenges in capturing, storing, and analyzing such
the factories of the 21st century. huge volumes of data.
The essential first step is to embed sensors in the Data is only useful when it can be utilized in a way which
equipment which will “create” the data. No sensors = no results in a beneficial outcome. If there is an inability to
data. An example of this is continuous thermal monitoring capture, store or analyze then “Big Data” is in itself pretty
technology to detect and predict compromised joints / useless
terminations in critical electrical infrastructure. (2)“The Cloud”:
From an OEM perspective, the ability to access data Put simply the cloud is in effect a type of computing which
from a global installed base opens up new revenue relies on the sharing of computer resources via the internet,
opportunities. This paper will examine the similarities where the term “The Cloud” is a metaphor for the internet.
between the switchgear market and the automotive market Thus it is a type of internet based computing where different
and look at possible new revenue services which will services are delivered to an organization or personal
become available. computers or internet connected devices via the internet.
From an end user perspective, the key question today As a result complex problems and high volume data can
when specifying new build electrical switchgear, which will be processed by using capacity on many computers in a
have a nominal life of 25-35 years, is how to best avoid network, which could not be achieved on any stand-alone
building in obsolescence to such equipment, given the computer.
accelerating rate of technology changes. The answer (3)”Artificial Intelligence (AI)”:
clearly is embedded sensors, since without sensors data This can be described as the capability of a machine to
cannot be collected. imitate intelligent human behavior. That, of course, then
This paper will discuss the experience of a local major requires a definition of what such behavior is comprised of.
Middle East oil and gas organization, who recognized that The ability to learn can take several forms; at it simplest
the increase in Capex, will be hugely offset by the dividend by trial and error, where several solutions may be attempted
of reduced lifetime maintenance costs and increased before one that works is found. This can be retained in
uptime. Fabrice Jadot, CTO- Industry, Schneider Electric memory, and when the same conditions exist the solution
is quoted that “It can be shown that by managing asset can be recalled. This method is known as rote learning.

1
The ability to apply past experience to similar new The social effects were significant in creating
situations is much more challenging. An example would be unemployment in rural areas, which resulted in the
the learning of a rule and then applying that rule to a new emergence of cottage industries i.e. households
situation not previously encountered. This ability to manufacturing finished goods by hand or with minimal hand
generalize is referred to as “generalization” held tools, such as textile garments, leather goods, shoes,
Reasoning is a further metric by which intelligence can be etc.
measured. This ability can be classified as “deductive” or There remained a high dependence on the land to
“inductive. The former reasoning is based on the truth of a provide either the crops or animals to be converted into
premise guaranteeing the truth of the conclusion e.g. an food, or to provide the raw materials from which households
article must be in either room A or room B. It is not in room could manufacture finished goods e.g. woolen or leather
A, therefore it must be in room B. Inductive reasoning is garments.
based on the truth of the premise supports a conclusion, but By 1800 there had begun a new revolution, now known
without guaranteeing it. This requires a level of reasoning as the first “Industrial Revolution”. This involved the
relevant to the solution of a particular situation e.g. Joe invention and manufacture of water and steam powered
prefers donuts to cupcakes, therefore he will eat the donut. machinery to mechanize the manufacture of finished goods.
This may be true but if the cupcake is a flavor he like he This revolution more than any previous “technical”
may eat the cupcake. revolution also created fundamental changes to the fabric
Problem solving is a search through a number of of society. The creation of factories meant there was an
possibilities in order to arrive at an objective e.g. finding the increased demand for labor to be in close proximity to the
winning moves required to win a board game. factory, which created a population shift from rural to urban
Perception via the use of optical sensors combined with locations in towns and cities.
memory is an area where AI is quite advanced. An early Whereas in previous generations how a person lived was
example was “FREDDY” a robot with moving television eye very similar to the way their parents lived, this now began
and a pincer hand could recognize various objects and to change as a result of the introduction of steam and water
assemble simple items such as a toy car from a random powered machinery. There was an increased demand for
heap of components. For a more modern application think people who could both operate machinery and also
of driverless cars. maintain, and repair it. The need for education of the
Thus it can be seen that AI requires a combination of population began to increase. For the first time the offspring
learning, reasoning, problem solving, and perception. This could have greater knowledge than their elders.
remains cutting edge technology, but remains a vital Various inventions including the Spinning Jenny (1764),
component if Big Data is to be utilized beneficially. steam engine with gears (1774), power loom 1785, internal
(4)”Industrial Internet of Things” combustion engine (1876), fundamentally changed both
The final key component is not so much a component, what could be converted into mass produced finished goods
more a concept of how the other components can be e.g. iron, steel, as well as textiles, household goods etc.
combined and beneficially utilized. This effectively took away much of the livelihood on which
The concept can be described as a universe in which the cottage industries relied, accelerating the population
products with built in intelligence communicate and move from rural to urban centers.
“connect” with other intelligent products via the internet to Britain was at the center of this “revolution” because it
create or access data, upon which actions can be taken. was in a unique position due to its historical naval
IOT is mainly linked to describing the “connectivity of smart superiority, which had allowed to colonize overseas
products for consumer use, e.g. cars, refrigerators, lighting countries which it discovered conquered, creating the
systems, HVAC etc. “British Empire”. The phrase “the sun never sets on the
The Industrial Internet of Things (IIOT), is the internet British Empire” was based on the global reach of its empire
connected universe of machines and industrial equipment, both East & West.
utilizing embedded sensors to capture data for analysis As a result Britain was in a unique position of having
and/or subsequent action. It is this latter IIOT which we shall unparalleled access to raw materials such as cotton, & iron
discuss further in this Paper, and specifically the advent of ore, which fueled the manufacture of finished goods which
IIOT in electrical infrastructure, and how it is, and will further could be sold to the rest of the world. By the end of the 1st
change the landscape of the manufacture, purchasing, industrial revolution at the end of the 19 th century and the
operation, and maintenance of it. beginning of the 20th century, it had made Britain a
manufacturing superpower, with the biggest economy in the
world. However, that position was to be short lived,
B. Previous revolutions which changed society. following two world wars which drained Britain
There have been a number of global revolutions, each economically, and was further eroded as it’s colonies
had the effect of dramatically changing the way we live, and demanded independence e.g. America 1776.
the very fabric of society. The Agricultural revolution during Note how the duration between technical revolutions had
the period 1700 > 1800 involved the introduction of the already begun to shorten. Until now the duration between
enclosure of fields, crop rotation, use of fertilizers, and the discoveries, inventions, and their widespread use had taken
introduction of mechanical aids such as the seed drill , water hundreds of years (sometimes thousands). This was partly
mills irrigation etc. This significantly improved the efficiency due to communication being largely physical e.g. the only
of crop growing and reduced the levels of manpower way to communicate was to be face to face or to have
required for agricultural produce. someone deliver a message by hand.

2
By the end of the 19th century the Telegraph had been URL (Uniform resource locator) - the last part of the
invented (1844) allowing messages to be transmitted along puzzle required to allow the web to work is a URL. This is
wires over long distance, however, it was slow in being the address which indicates where any given document
universally adopted and took until the early 20 th century to lives on the web.
reach a peak deployment. It would be quickly overtaken by These two linked developments have been responsible
the invention of the telephone (1876), which enabled for spawning vast new industries in telecommunications
speech to be transmitted over cables. These two inventions equipment and the infrastructure required to operate it,
were a cataclysmic change in the way knowledge could be together with fundamentally changing both business and
transmitted and transferred quickly. social communications e.g. social media, email, skype etc.
By the beginning of the 20th century we began to enter the Once again it can be seen that the pace of change is
2nd industrial revolution. Inventions such as electricity, light continuing to accelerate, now down to one or two decades,
bulbs, were perhaps among the most fundamental in in some instances even within a decade.
changing the course of industry and indeed society. The We now stand on the threshold of the next phase – the
speed with which these new inventions were deployed also Digital phase of the 4th industrial revolution. This has been
shortened. Now the timespan between the 1st and second described as:
industrial revolution had shortened to a single century.
The use of electricity led to the growth of the assembly “The possibilities of billions of people connected by mobile
line (Henry Ford), and mass production techniques, using devices, with unprecedented processing power, storage
conveyor systems, and the division of labor. The ability to capacity, and access to knowledge, are unlimited. And
have artificial light enabled efficient product to continue for these possibilities will be multiplied by emerging
longer periods during darkness, further increasing
productivity and economic growth. technology breakthroughs in fields such as artificial
The 3rd industrial revolution resulted from the invention intelligence, robotics, the Internet of Thing, autonomous
and introduction of the automation of production processes. vehicles, 3-D printing, nanotechnology, biotechnology,
The first PLC was the Modicon in 1969. From the 1980’s materials science, energy storage, and quantum
computers had begun to emerge, although slow, expensive computing.” (1)
and limited memory in comparison to current product.
The calculations required by NASA for John Glen to orbit However, for the purposes of the Paper we should
the earth in 1962 were done by hand (see the film “Hidden distinguish between the Internet of Things (IOT), which is
Figures!). people being connected to each other and to domestic
The growth of automation increased exponentially goods (including vehicles, refrigerators, lighting, heating
through the 1950’s and 60’s, but would pale in comparison and security systems etc.), and the Industrial Internet of
to the subsequent growth in the computerization of industry, Things (IIOT), which is industrial machinery and equipment
via software designed to do tasks in seconds which would being connected to each other and to businesses who will
take humans hours if not days. receive, analyze, and utilize big data and even operate
Note now how the duration is again shortening to equipment remotely in the most cost efficient manner,
decades between global seismic shifts in industry and maximizing uptime.
society. The pace of change was accelerating and with it
the resultant changes in society.
By 2000, we began to enter the initial phase of the 4 th C. The Digital Revolution Phase.
industrial revolution. Like all pervious revolutions it was not As we have described above, like all previous technical
a single invention or discovery, but rather series of revolutions, the 4th Industrial Revolution is not a single
interdependent or linked ones, each leading to further ones. invention or discovery, but a series of often linked events,
Probably the most globally changing technologies in this often one following on from another. An example is the
first phase has been telecommunications and the growth of internet led to the World Wide Web, which in turn spawned
the wireless mobile phone, (although perhaps mobile online commerce.
computer would be more accurate). We have already entered the digital phase, largely in the
This linked with the internet (1983) which was the linking field of consumer / domestic applications. You can already
together of networks using TCP/IP, saw the increased control, lighting, heating, cooking, security systems etc.
power of multiple computers rather than the limitation of from your mobile phone. We are fast approaching a point
one. In 1990 Tim Berners-Lee developed the World Wide where all new houses will come pre-equipped with
Web, which is in essence a language using protocols to hardware which can be connected to and operated remotely
communicate over the internet. The most frequent and by the householder.
recognizable are: On-line commerce is now accounting for US$1.86 TN and
HTML (Hypertext mark-up language) - The language that is projected to increase to US$4.48 TN by 2021; that’s
we write our web pages in; growth of 240% over a 5 year period.(2)
HTTP (Hypertext Transfer Protocol) - this is the most This has created monoliths such as Amazon who now
common protocol. It was developed specifically for the account for 16% of global retail e-commerce, and Alibaba
World Wide Web and favoured for its simplicity and speed. who own Taobao & TMall which jointly account for 27%
This protocol requests the 'HTML' document from the server share.(3) This reflects the exponential growth of e-
and serves it to the browser; commerce in China, and India, Indonesia, Malaysia, where
their share of global e-commerce is increasing, while USA’s

3
share is decreasing ,22% in 2015 reducing to 16% by life expectancy of a Fortune 500 Company in 1955 was 75
2021.(4) years. In 2015 it is 15 years. (5)
Perhaps a pointer to how IIOT will benefit manufacturers,
(and if there is no financial benefit then history shows that II. OWNERSHIP AND ACCESS TO DATA IS KEY
without this key driver inventions and developments will not
progress), is to examine the automobile industry and how it A. OEM or End User.
was an early adopter of the principle of IIOT, even before The creation of vast amounts of data obviously requires
the ability to remotely connect existed. sensors being placed within very large quantities of
There are some interesting parallels between the equipment. The OEM’s will be ideally positioned to install
automobile industry and the electrical switchgear industry. the sensors during the manufacturing process. However,
Both make product which is suffering from over capacity, because the market for electrical infrastructure is highly
resulting in relatively low margins on the hardware product. competitive and price sensitive, we remain in a phase
As a result the OEM’s look to add value with lucrative where despite the major OEM’s recognizing the potential
additional features. One of the areas where continuing advantages of installing sensors, they remain nervous of
revenue and margin could be obtained is via the servicing increasing prices as a result of including condition
and maintenance of the product. However, while this was monitoring sensors, and risking losing orders to competitors
easy to retain during the product warranty period, once who offer lower prices without including sensors.
beyond that period the majority of this lucrative area was The result is that currently OEM’s are including condition
lost to third party contractors who could undercut the pricing monitoring sensors where it is specified by the customer.
levels of the OEM’s because they operated without the Consequently they are risking losing ownership of the data
huge overheads. being created. However, there is an increasing recognition
The automobile industry set about a program to combat by the 5 main global OEM’s,that they must start to prepare
this situation and recover and retain the lucrative servicing for the inevitable growth of IIOT. As a result they have
and maintenance work. They did so by introducing begun the process of designing condition monitoring
diagnostic computer chips into the product, but these were sensors into their product, but remain hesitant in offering it
coded so that the data they produced could only be other than as an optional extra. This is the current situation
accessed by authorized people. This simple step enabled which exists for large scale customers of the major OEM’s
the vehicle manufacturers to recover and retain a significant who capture the majority of large scale projects globally.
increase in servicing and maintenance beyond the warranty The situation for the huge number of smaller scale
period. In particular this applied to the premium end of the regional / national OEM’s and their customers, who make
market, but also led to OEM’s offering increased periods of up the bulk of the total global market, remains one where
warranty, and incentives such as free roadside assistance the OEM’s operate in a market where price dominates the
provided, only they service or carry out repairs to the purchasing decisions of their customers, who are also
vehicle. generally of a much smaller scale than those of the global
What can be seen more recently with the advances in OEM’s. Consequently, the vast majority of these smaller
internet connectivity is that the vehicle can be connected to, scale OEM’s remain some considerable way behind the
and even controlled by the OEM. Diagnostic chips provide global majors in adopting policies to adapt their products to
an on-going stream of data, which can predict faults at an include condition monitoring sensors.
early stage of development, advise when fluid levels need As indicated above, the global OEM’s are in a position
replenishing, and when servicing is required. currently, where they risk losing ownership of data, because
The advent of Big Data + A.I. now enable the OEM’s to they are installing sensors only when it is specified by their
obtain vast amounts of data from every vehicle they customer. It is the customer who then obtains the data that
manufacture and from the resulting analysis, will be able to is created from the sensors and it is the end user customer
refine and improve their product, identify which components who will then utilize the data to obtain the potential benefits
have the best performance, and increase their profitability which arise from that analysis.
by reducing warranty claims resulting from faults, together This situation will change as the exponential growth of A.I.
with driving the procurement process to maximize efficiency advances the realistic opportunity to reap the available
and cost savings. benefits that come from ownership of the data. However,
A similar set of circumstances exist in the electrical this change will not come about without some considerable
switchgear market. There is global over capacity, margins levels of conflict between OEM and end user customer
on hardware are low, and maintenance is often lost beyond regarding who owns the data, or even who has access to
the warranty period, which like the previous set of the data.
circumstances in the automobile industry is set at a “norm”
of one year. B. The Cyber security threat.
The advent of IIOT is about to change things. It will affect An example of this could be the data center industry,
every industry, it will be global, and it will be seismic in the where any remote access to IT networks is often prohibited,
way it will change the procurement, operations, and as a security risk. As cyber-crime and state sponsored
maintenance of electrical infrastructure. The pace of espionage / sabotage is increasing, so too do the risks
change will also continue to accelerate. Consider that since associated with allowing remote access to IT networks. We
2000, 52% of Fortune 500 Companies have disappeared, are already observing that major end users in the oil and
(some being attributable to mergers and acquisitions). The gas industry are also now becoming aware of the potential
risks to mission critical infrastructure that could occur if

4
remote access to IT networks is allowed, and thus While not a magic panacea, condition monitoring sensors
prohibiting such remote access from their operations which can detect the tell- tale symptoms of a potential failure
around the world. at an early stage of development, and thus provide a
Clearly cyber security risks will be a major issue. If these warning in advance of the failure, can assist in reducing
risks cannot be minimized to an acceptable level it will mean outages, thereby combining increased operational uptime,
that the cloud based platforms on which Big Data will reside and the associated levels of safety.
will be considered too great a risk to the operational security Arc flash and faults related to bad joint connections are
of major industries. It remains to be seen if this security one of the most common causes of power outages and are
issue can be resolved. However, the assumption appears likely to increase as electrical infrastructure ages. They thus
to be that sufficient levels of secure data transmission will provide an example of how thermal monitoring sensors can
be achieved, thus allowing the potential benefits of IIOT to be installed to detect, and identify the location of potential
be obtained. faults of this type in advance, allowing remedial work to be
undertaken via planned maintenance “as required”, as
III. THE OPPORTUNITY opposed to periodic inspections / maintenance.
OEM service departments compete in the contractor
A. Market Size. segment of the market. We have discussed above how the
It is important this is broken down into the new build per OEM’s can retain on-going maintenance of their products
year and the existing level of infrastructure available for via the introduction of “smart” product, where access to the
retro-fit. Also in realistic terms it will be the segment of the data is limited to them. This retro-fit market provides a
market which services high downtime cost industries such further huge opportunity for them to fit condition monitoring
as oil & gas, data centers, utilities, automotive, and other sensors (e.g. thermal sensors), which will give them the
large scale industries. opportunity to provide 24x7 cover remotely, via monitoring
The new build market for LV & MV switchgear is estimated centers staffed by engineers (or in the future by A.I.
to be worth $2.3bn p.a. by 2019 (6). This equipment has a computers), who can interpret the data rather than the need
nominal life of 25 years so a conservative estimate would to be physically present on a permanent or periodic basis.
be a factor of 15 to provide an installed base worth $34.5bn. This gives the OEM the benefit of cost reduction combined
However, if we assume only 25% of the market would be an with increased levels of service coverage to the customer
applicable market for high downtime mission critical which combine to provide higher profit margins for the OEM.
applications it still provides a market for new build worth There are predictions that the services element will be the
circa $600m p.a. and retro-fit of $8.6bn major contributor of profits to OEM’s rather than the
Similarly, the market size for MCC product equates to hardware product element, where margins are under
circa 15m “devices” (e.g. drawers / buckets), of new build continual pressure.
equipment p.a.(7) While the opportunity for the major OEM’s is significant,
Using the same criteria as for switchgear this would the opportunity for contractors is considerably larger, since
provide an installed base of circa 225m devices. Again, on the number of smaller organizations who require contractor
the assumption only 25% is in applications which are high services is the major portion of the global market. As the
downtime then this still provides 3.75m devices p.a. and OEM’s fight to retain the on-going maintenance revenues
56m devices available for retro-fit. on their product via the control of access to the data created
The above figures are deliberately conservative, but still from their sensors, so the contractors will focus on retro-
indicate a huge market potential not just for sensor fitting condition monitoring sensors to existing infrastructure
hardware, but also for the associated services of turning and offering remote 24x7 monitoring to their customers in a
data into commercial information which can be used to similar way to that of the OEM’s. Obtaining access to the
obtain the benefits available from IIOT. data will be a key battleground.

B. Contractor v OEM Services. IV. RELIABILITY – A FUNDAMENTAL ISSUE


As indicated above the growth of IIOT provides OEM’s
with a new opportunity to increase profit margins by adding A. Sensor technology and reliability.
value via the inclusion of condition monitoring sensors The installation of permanently installed sensors is
embedded in the electrical infrastructure products. As can essential for the ability to create the required data – no
be seen from the above figures relating to market size, while sensors = no data. The electrical infrastructure into which
the new build market is big, the retro-fit market is, by sensor will be installed has a nominal operational life
comparison, vast. This presents a further huge opportunity expectancy of 25 years, which in reality can be extended to
to retro-fit condition monitoring sensors into existing circa 40 years.
equipment. Thus in selecting the sensors to be installed it is of
Global economic conditions have resulted in a paramount importance to select sensors which can provide
requirement in many end user organizations in the oil & gas the desired level of proven accuracy and reliability e.g. they
segment, (which suffered the collapse of oil prices), to make will last the lifetime of the infrastructure into which they are
existing infrastructure last longer, rather than replace it with installed.
new equipment. A direct consequence of this is an increase Having made the decision to invest in installing condition
in the frequency of failures, and linked to this is an increase monitoring sensors, the worst subsequent decision will be
in the safety risk. to install sensors which will require subsequent

5
maintenance themselves or even replacement of the sensor standardized, resulting in more efficient production, cost
or any component part, since they will generally be installed savings
within enclosed panels which require de-energizing (and This would be possible if the benefits which can be
thus the associated downtime costs), in order to gain derived from IIOT where obtained by the OEM. It would
access to the sensors. provide them long term guaranteed increased revenues,
As the IIOT market grows, so too will the introduction of since leasing of capital goods is a well-established sector of
sensors which employ “smoke and mirrors” marketing the financial services industry.
techniques to exaggerate the quality and reliability of the From the perspective of the end user organizations, this
sensors. It will thus be important for both OEM’s, end user would provide them a level of increased reliability, which in
organizations, and contractors to be diligent in ensuring turn would create maximization of uptime and increased
they only install sensors which will not result in requiring levels of safety.
maintenance or replacement for the entire life of the In discussion with two of the global OEM’s they have
equipment into which they are installed, indeed they should confirmed that they are already advanced in discussing
only select sensors which offer a lifetime warranty and zero internally the possibility of offering product on a lease basis.
maintenance guarantee. We will have to await what this type of offer comprises and
This issue of sensor reliability is also important in terms of how quickly it emerges in the market.
the potential reputational damage if sensors are installed by
an OEM or contractor, which subsequently require V. WHAT’S IN IT FOR ME?
downtime to perform maintenance / replacement, as this will
incur operational downtime costs by the customer, who A. Advantages IIOT can bring for the OEM.
quite rightly, will question why he has to incur such costs. IIOT is all about scale, the larger the organization the
more potential benefits can be derived. For the global OEM
B. Reliability via market structure change. who have a vast estate of product installed globally there
Currently the electrical infrastructure market structure are operational / production benefits which they can obtain
operates in a similar way to many capital goods industry which include:
segments. An end user customer has a requirement for new  Standardization of design
equipment, a specification is produced, this will often go out  Identification of components with best cost benefit
to tender, offers are received, a manufacturer is selected, performance
and a PO issued. The goods are then paid for on  Improved efficiency on production line
satisfactory project completion. The OEM will provide  Improved efficiency of component procurement
maintenance during the warranty period, which will then  Increased levels of product performance and
often be lost to third party contractors for the remainder of reliability
the product operational life.  Reduced warranty claims
With the introduction of IIOT the OEM is now best placed In addition as identified above, IIOT also provides the
to install condition monitoring sensors at the point of opportunity to retain ownership of data in installed
manufacture, and to gain exclusive access to the data equipment, and thus offer new avenues of profitable
which is created. This then provides the opportunity to revenue streams via retention of maintenance.
retain maintenance for the life of the product by providing It also provides further new revenue streams from retro-
24x 7 remote condition monitoring services to the client. It fitting condition monitoring sensors into the huge market of
becomes much more difficult for a contractor to take this existing equipment, while reducing operational costs of
business away from the OEM, (remember the analogy of providing maintenance which can be obtained by reducing
the automotive market). the need for the physical on-site presence to conduct
However, there is the potential for the OEM’s to further inspections and or periodic maintenance, which would now
entrench their dominant position by changing the structure be carried out on the more efficient “as required” basis.
of the market from one where they sell the infrastructure to
one where they lease it. B. Advantages IIOT can bring to the Contractor.
The core business of the OEM customers is not electrical The current business model for contracting businesses
infrastructure. In the oil and gas industry it is about the is to supply physical periodic inspection and maintenance
extraction, refining, processing, and transportation of oil and either on a time basis e.g. inspect or maintain annually, or
gas. The electrical infrastructure is merely the provider of every six months etc., irrespective of equipment condition,
the electrical power that is required for the operational or maintain/ repair in event of equipment malfunction /
requirements. failure. Competition in this sector is fierce, with the resultant
If the OEM took the stance that if the customer can pressure on profit margins. Often maintenance contracts
provide them with a sufficient understanding of the power are for relatively short durations, typically 3years, with new
requirements, then the OEM will undertake to design, tenders being issued, inviting quotes from which a
construct, supply and maintain the equipment on a lease contractor will be selected; often on the promise of reduced
basis. The lease would be for a defined period, and the cost. This pressure on lower costs often results in lower
OEM would undertake to provide a reliability guarantee, on performance resulting from corner cutting at every available
the basis only the OEM can maintain the equipment. opportunity, be it quality of staff, to cursory inspections etc.
The design of equipment would become more efficient as , than was anticipated. Ultimately this lack of quality at the
A.I. would enable identification of component weaknesses inspection / maintenance level results in a reduced level of
which were the cause of problems. Designs could be more

6
efficiency in maximizing uptime resulting from increased that investment in the first part was necessary, albeit they
levels of equipment failures of the end user customer. did not yet know or fully understand how it would be
IIOT will be a highly disruptive force in this segment of integrated and utilized with other data to maximize
the market. Contractors who have the resources and who efficiencies in their operation. However, what they
move quickly to adopt policies which enable them to adapt recognized was that it was not important to know that at
to the new opportunities will be best placed to reap the this stage, since the pace of development in A.I. meant
rewards available. However, this will involve them in a that it would increase and change at an accelerating level.
significant change in how they provide services to It was though vital that they install the sensors into all the
customers. new build electrical infrastructure now, since it was the
If they are prepared to share with the customer the most cost efficient time to do so, and without sensors
investment in retro-fitting condition monitoring sensors to there would be no data and the available benefits of IIOT
equipment, or absorb all the cost (excluding the customer would become unavailable, unless they subsequently
downtime costs), this will provide a new opportunity to installed sensors, which would incur huge costs resulting
have exclusive access to the data. This can then be used from additional production downtime etc. Hence the
to provide 24x 7 remote monitoring of equipment, which decision to install the sensors at the manufacturing point,
in turn results in significant cost savings from reduced which is the lowest cost point.
levels of physical on-site presence to perform time based The benefits which will be available to end user
inspections and maintenance, being replaced by a single organizations will be:
remote monitoring center where various customer  Standardization of upstream and downstream
equipment on various sites can be monitored 24 x 7. facilities design , leading to lower design costs
This provides an improved level of continuous  Identification of equipment with best
monitoring to the customer, while significantly reducing performance profiles leading to reduced levels of
operational costs of the contractor. An additional benefit equipment failure
is that this level of monitoring combined with A.I. will result  Uniformity of data from sensors rather than via
in an ability to predict faults in advance, leading to humans, enabling best use of A.I. analytics
improved efficiency, so it is a win /win situation.  Increased safety resulting from reduced failures
Once again, ownership of data will become a key factor. and physical inspections / maintenance.
For contractors who pay for or share the cost of installing  Reduced Opex spend in on-site staffing levels
IIOT equipment into the customers infrastructure and  Increased efficiencies in the procurement
machinery it will mean it cements their relationship with process
the customer, resulting in longer contractual partnerships,  Increased bottom line performance driven by
since it will become much harder for competitors to increased efficiency across all operational
dislodge them purely on a price basis, unless they are sectors of the business
also willing to buy out the investment in IIOT equipment. The importance of this has already been recognized by a
major end user organization in the UAE. They have installed
C. Advantages IIOT can bring to the End User over 1,500 infrared thermal sensors in their 11Kv and 3.3Kv
The end users in the oil and gas industry, because of MV switchgear. It has already paid dividends by detecting
the scale of investment required in both the upstream and faults which would have resulted in outages, and they are
downstream elements, spread over a global estate of now including this in their new build specifications for both
sites both onshore and offshore, are well placed to benefit MV & LV switchgear. This forward thinking approach has
from the advantages available from IIOT. also enabled the foundations to be in place for further
The collapse of the oil prices led to an urgent need to expansion and integration of data and it’s analysis as part
maximize and improve the level of efficiency in upstream of the policy of preparing for IIOT and maximizing its
and downstream processes. This coupled with significant advantages.
cost cutting has led to a more efficient industry, who are
now able to be profitable at much lower levels of global oil VI. CONCLUSION
pricing.
This also drove the recognition that the adoption of IIOT IIOT is not a sophisticated sales pitch to sell product, it is
was the way forward. This was illustrated in a major a global seismic change which has already commenced; is
Greenfield project, where the oil Company was asked why growing at a significant rate; and will affect every major
they were designing so many condition monitoring industry globally. It is estimated by Gartner that there were
sensors into their electrical infrastructure. The answer 6.4 billion IIOT “things” connected to the internet in 2016,
was they did not want to incur any downtime which would and this is set to increase to 20.8 billion by 2020(8) – that is
be required by the need for physical inspections. When now just two years away.
asked how they would utilize the data being created, the Predictive maintenance is estimated to save up to 12%
answer was even more revealing. compared to time based scheduled maintenance, reducing
It was that IIOT would be in two parts, the first would be overall maintenance costs by up to 30% and eliminating
the investment in the installation of sensors which would equipment failures by up to 70%.
create uniform data, which could be transmitted to remote Cisco predict that the growth in cloud based data will grow
monitoring centers. The second part would be the from 3.5 zettabytes in 2016 to 14 zettabytes by 2020, a
investment on the software analytics to transform the data zettabyte is one trillion gigabytes). That is an eye watering
into commercially useful information. What they saw was

7
level of predicted growth, and comes from an organization terrorist, espionage, or political reasons. While these risks
well placed to see over the horizon. are real, and there will be breaches, if we look at the effect
The message then is simple. Doing nothing is not an similar risks have had on on-line commerce globally it is
option. To ignore the fact that IIOT is going to happen and fairly minimal in terms of the growth that continues to
that it will affect your business will result in serious accelerate.
consequences in the future – remember Kodak! As history has shown with every previous stage of
IIOT is going to affect all aspects of the oil & gas industry, industrial revolution, change is inevitable, and those who
upstream, downstream, onshore, offshore, marine, pipeline embrace the change will be winners, those who resist or
etc. It will affect OEM suppliers of infrastructure and ignore the changes will become losers.
machinery, and the contracting sector. It will be highly
disruptive, but the lesson of history is that it will bring greater VIII NOMENCLATURE
efficiency and with it new opportunities, and that it will be a
change for the better. IOT Internet of Things
The lesson of history all shows that those who ignore this IIOT Industrial Internet of Things
latest revolution risk future survival, no matter how big or A.I. Artificial Intelligence
dominant they currently are; but also that those who adapt UPS Uninterruptible Power Supply
and adopt quickly will be best placed to increase their OEM Original Equipment Manufacturer
market size and position and solidify the ability to increase
their profitability. IX REFERENCES
At the heart of IIOT is the creation of data. Without
sensors there is no data, with the result that the benefits of
IIOT are unavailable. Consequently, there is a growing
[1] Schwab, Klaus. "The Fourth Industrial Revolution: what
it means, how to respond". World Economic Forum.
recognition that for OEM’s it will become essential, if they
are to remain competitive, that they offer designed in
condition monitoring sensors as part of their standard [2] https://www.statista.com/statistics/379046/worldwide-
product offer. retaile-e-commerce-sales/
They should also now begin to consider changes to the
business model such as leasing, to improve profits which [3] https://www.statista.com/statistics/664814/global-e-
IIOT will make more possible. commerce-market-share/
For end user organizations, it is vital they understand that
they must now include condition monitoring sensors in their
specifications of new electrical infrastructure, because if [4] https://www.statista.com/statistics/243699/share-of-
they do not then they are building in obsolescence into global-retail-e-commerce-sales-usa/
every new panel which has a nominal life of 25 > 40 years.
The cost of subsequently installing them will be 3-5 times
the cost of installing them at the point of manufacture. In [5] Mark. J. Perry : Fortune 500 firms 1955 v 2016. AEIdeas
short it will be a strategic investment mistake. ` public policy blog December 13 2016
For contractors, it is equally important they recognize the
changes which are likely to happen as a result of IIOT. Once [6] Technavio Market report – Global switchgear Market
again those who adapt and adopt at an early stage will be 2018
best placed to take advantage of IIOT, while those who
ignore it will find it much harder to catch up, or even survive [7] Developed from Market & markets report – Global MCC
in the new order. Market
Applicable to all will be the issue of reliability of sensors.
Having made the decision to invest in sensors to create data [8] Gartner – www.gartner.com/technology/research/
with the objective of reducing costs and increasing internet-of-things
production uptime, the worst subsequent decision will be to
install sensors which require maintenance and/ or
X VITA
replacement during the lifetime of the equipment, as this will
incur on-going additional costs, often with the additional
Ross Kennedy is Founder & CEO of the QHi-Group,
cost of expensive downtime. As the sensor market
increases to cope with this new demand level, there will be providing innovative, technology-based solutions to a
many sensors which appear on the market which promise diverse cross section of industry for over 20 years. Prior to
more than they actually deliver. setting up QHi-Group, he had a successful career in
It is thus essential that sensor selection should international management positions with Reed
incorporate a specification that the sensors offer lifetime International, Turner & Newall, & Unilever. Subsequently he
warranty with zero maintenance, with a proven track record founded and sold successful businesses in the Printing and
of successful deployment.
also the Rail industry. Ross has pioneered the use of
A further issue applicable to all will be cyber security. This
will pose many challenges and inevitably it will be a never innovative technology for continuous thermal monitoring of
ending battle between those wishing to protect the data and electrical infrastructure, utilizing unique infrared technology,
those wishing to hack into it for criminal, or state sponsored and its application in the IIOT revolution.

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