Market Insight

Hannover Messe tradeshow highlights: IoT platform vendors partner, simplify

April 15, 2019

Sam Lucero Sam Lucero Senior Principal Analyst, IoT

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Hannover Messe tradeshow highlights: IoT platform vendors partner, simplify

Sam Lucero, Sr. Principal Analyst, IoT

The Hannover Messe—focused on industrial technology—is one of the largest technology tradeshows in the world, nearly double the size of either Mobile World Congress (MWC) in Barcelona, or the Consumer Electronics Show (CES) in Las Vegas. As usual, IHS Markit sent over 30 analysts to the show to meet with industry stakeholders.

Over the past several years, industrial IoT platforms have been an increasingly important topic at Hannover Messe. Not only do all the major industrial automation vendors (e.g. Siemens, ABB) show what they are doing in the platforms space, but the Messe also draws in leading ICT vendors, such as AWS, Cisco, HPE, Microsoft, and many others.

Below are some of the key industrial IoT platform-specific trends and issues that surfaced during our time at the Messe:

Further signs of consolidation: There are hundreds of IoT platform vendors and many of these vendors are active in the Application Enablement Platform (AEP) segment of the market. However, new platform introductions have declined, and “exits” have increased since 2015.

Number of IoT platform introductions / exits, by year

These are indicative of market consolidation. At Hannover Messe, we learned that HPE has decided to limit future development of its Universal IoT Platform to focus on existing customers. To be clear, HPE will still provide a service to connect disparate field devices to cloud-based applications, but it will no longer target the full range of device management and data management functions typical of AEPs that were addressed by the Universal IoT Platform.

We learned that another AEP vendor has also chosen to pull back from a full stack AEP offering to focus on device connectivity. (We cannot yet publicly name this vendor in connection to this change of strategy.) We expect that such strategic focusing will become more common over time.

Moving from “kitchens” to “menus”: Several vendors told us that prospects and customers were increasingly interested in simplified, configurable application development options. One vendor used the analogy of customers previously wanting to “come into the kitchen (of a restaurant) and start cooking with the ingredients” whereas customers now wanted to stay out of the kitchen and simply receive a menu of options that could be mixed and matched.

This desire for ever more simplicity aligns with the increased pace of “solution accelerator” introductions by platform vendors – white label applications that can be configured by the customer. It is also why, for example, Siemens acquired Mendix in October 2018 to integrate “low code” app development capabilities into Siemens overall offerings (including its MindSphere IoT platform.)

People are the hardest challenge: The manufacturing sector tends to view its workforce as “aging” and close to retirement. In this context, the industrial IoT (supported by IoT platforms) is seen as a means to operate more efficiently, with less staff, and ameliorate the loss of “tribal knowledge” as experienced workers leave employment. However, industrial stakeholders also report worker resistance to the introduction of technologies seen as a threat to jobs.

Several companies mentioned to us that the challenge of organizational change management and line worker acceptance of IIoT technology was harder to solve than pure technical challenges. One vendor stated that they sought executive-level buy-in from the customer for new technology, rather than approaching operating unit staff directly, to initiate sales discussions.

More comfort with clouds: Industrial customers have traditionally been very reluctant to open their plant environments to cloud-based technology. Their primary fear is cybersecurity-related: attacks on mission-critical infrastructure, disruption to industrial processes, theft of trade secrets, injury to staff, and harm to brand reputation.

While the industrial sector remains relatively reticent about using cloud services, contacts at Hannover Messe indicated they are seeing more willingness among their customers and prospects to at least consider cloud infrastructure models. It was suggested that the migration of CRM and ERP to the cloud has served as a learning experience for industrial companies and is possibly making them more open to putting some plant data in the cloud as well.

At the same time, cloud service providers are working to meet industrial customers where they are now, through edge computing initiatives. Most notably, Microsoft’s introduction of Azure Stack—providing the full Azure cloud service using on-premises hardware—was seen by some at the show as very useful for increasing the comfort of industrial companies with moving along the spectrum from on-premise to cloud-based computing infrastructure.

Ecosystems are critical: While no surprise at all, ecosystem development and partnering were on full display at Hannover Messe. Both leading industrial automation vendors (such as Siemens) and leading ICT vendors (including AWS, Cisco, and Microsoft) had huge partner pavilions highlighting their ecosystem capabilities. Many of the one on one conversations revolved around how the company being interviewed was working with partners to enable IoT solutions.

This trend at the show aligns perfectly with how vendors in the IoT space in general, and the IoT platform space in particular, are approaching the market.

The bottom line: Hannover Messe underscored strong secular trends underway in the IoT platforms market: consolidation, further simplification, the rising importance of cloud computing (with a dose of edge), and the key role ecosystem development has for IoT platform vendors.

One fun thing: industrial equipment was not the only technology on display at Hannover Messe. Below is a picture of an attendee playing air hockey against an AI opponent.

Hannover Messe 2019 attendee playing air hockey against an AI opponent

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