In a 2018 survey conducted by Inmarsat, a provider of satellite communications, one quarter of survey respondents said they anticipated spending at least 10% of their IT budgets over the next three years on Industrial IoT. Most were expecting good returns on their investments. However, in the same survey, most of those who deployed IIoT said they were experiencing higher than expected costs of deployment.
Managing the costs of IIoT deployment is a concern in many organizations because there is so little empirical knowledge about cost to deploy. Instead, companies have piloted IIoT and then implemented it in use cases such as managing operations and tracking assets. These implementers are only now beginning to collect data that can tell them how long it will take to recoup their initial IIoT investments.
Because there is limited cost and budget history with IIoT, a good approach toward managing IIoT costs starts with identifying those areas that are most likely to experience cost impacts because of IIoT. Here are seven areas that may see increases in costs from IIoT deployment.
1. Expanded network connectivity
IT networks will have to support more diverse and numerous devices with IIoT, ranging from smartphones and RFID readers to sensors and industrial equipment and robotics. At first glance, it might seem straightforward to simply start calculating how many more servers, storage, routers, Ethernet, and Wi-Fi capabilities you need to support X number of devices—and then figure in at least a third more of network capacity for expansion. But it will not be that easy or that straightforward.
Instead, companies should also look at expanding the flexibility of their networks for the many different communications protocols IIoT is likely to introduce. The network will have to support protocols for Bluetooth, Wave, Wi-Fi, and Ethernet, but likely other protocols that IT has limited experience with, since many IIoT devices come with proprietary operating systems, protocols, and interfaces.
In short, network architecture needs to be revised—and the changes in network architecture are likely to result in new investments in network hardware, software, and services you might not know upfront.
2. Network quality of service
Several months ago, I visited with a medical clinic serving rural California and Nevada patients. The clinic's IT director told me that one of the greatest challenges his staff faced in deploying IIoT for connectivity with medical equipment, telesurgery, and telemedicine was QoS, or quality of service.
"Every piece of network gear we deployed came with its own default presets for optimum quality of service," he said, "But the presets were only for those individual pieces of equipment. The presets don't necessarily correspond with the settings that are needed to provide overall QoS along an entire network."
Unfortunately, no one on staff was trained to calibrate individual network assets in ways that enabled these assets to deliver optimal QoS for an entire network. "We ended up having to bring in a very expensive outside consultant to do this job," he said.
3. Network security
NordVPN, a virtual private network service provider, projects that IoT cybersecurity attacks are likely to rise as IoT deployments expand.
Unfortunately, in the IIoT world, security risks go far beyond cyberattacks at network perimeters. Internal threats can factor in as well, because so much of IIoT deployment takes place in industrial plants, in remote facilities, and in other "edge" applications of the business that end users—not IT—control on a daily basis.
One solution is the introduction of more zero trust networks that enable IT to bake in rules for user authentication and access, without end users having to worry about it. However, implementing zero trust networks potentially requires investments in zero trust software, and IT must also be trained in zero trust network implementation. Initially, this might require seeking (and paying for) the skills of an expert consultant.
4. Business liability insurance
Companies have general business liability insurance, and more are enlisted in cybersecurity and data protection liability insurance.
The cybersecurity and data protection insurance policies are still areas where both companies and insurers are learning about the risks. In this process, the addition of tens of thousands of IIoT sensors and other devices will compound that risk—and increase costs of coverage. And if there are major events such as a hack of medical IoT devices that results in leaks of patient information, or a compromise of industrial IIoT that leads to a plant shutdown, rates on policies could dramatically rise.
5. System integration
Investors are pouring billions of dollars into IIoT startups that hope to develop revolutionary solutions for sensors, software, and other IIoT edge equipment. While these companies spark innovation, they often develop products with proprietary operating systems that make it difficult for the IIoT to integrate with existing enterprise technology.
There are efforts within the IIoT industry to standardize, but standardization is far from a given. This places the onus on IT to find ways to integrate IIoT.
Integration might consist of developing custom APIs (application programming interfaces). It can also include a need to make custom modifications to existing applications and databases so they can work with the IIoT. And if larger enterprises want their trading partners to use the IIoT, there might be cash outlays needed to assist (and help fund) the smaller trading partners so they can meet enterprise IIoT requirements for doing business.
Regulatory agencies will certainly get onboard with IIoT by issuing new requirements for security and compliance. One example is transportation, where the US Department of Transportation began issuing new rules and regulations for drone and unmanned aircraft. Another example is the FDA's regulations governing the safety of foods and drugs.
As these regulations evolve, companies will seek out attorneys and consultants to clarify requirements and then engage IT to make the necessary changes to hardware, software, and networks to ensure compliance.
Outside audit firms are also engaged to examine systems and to point out any weaknesses that must still be addressed.
All of these are costs above and beyond IT's normal compliance and audit spend levels—and should be factored into any new IIoT project.
IT professionals will need training in IIoT if they are going to develop IIoT apps and support IIoT. It will also be necessary to train end users who are operating IIoT at the edges of the enterprise in the fundamentals of system security and administration.
Formal training courses and certifications will require funding. In some cases, it might also be necessary to retain outside consultants to operate IIoT systems while internal employees get trained.
Managing your IIoT costs
The first step in managing IIoT costs is to identify and anticipate them.
Companies will be unique in their IIoT funding needs. For example, there will be some companies that already have IIoT talent onboard, while others will need to train employees and temporarily employ consultants while employees get up to speed.
What all organizations should do is have C-level sponsors sit down with their user and technical staffs to identity the hidden costs that are likely to occur for their own IIoT implementations—and plan for them.
If you need to invest in IIoT training for employees, the costs should be identified and budgeted. If you need to upgrade networks and security, the costs should also be identified and budgeted for in your IIoT project.
Only then can you begin to develop accurate return on investment (ROI) formulas that factor in all your true costs for the IIoT you are planning to acquire and deploy.
As a final precautionary measure, a reserve fund of 20% of your IIoT budget should be set aside for any costs that occur that you couldn't anticipate. These funds can be used to cover audits you didn't plan for, or outside consulting you didn't realize you would need, or rising insurance liability premiums that could catch you by surprise.
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