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The Internet of Things: An Interconnected Approach to Digital Transformation

October 26, 2015 by Andreas Schmitz 108

Smart, low-cost sensors and rapid data processing are now paving the way for innovations based on the Internet of Things.

While it seems like only yesterday CIOs were consolidating and standardizing their company’s IT primarily to achieve greater efficiency and improved processes, they will soon be turning their attention to another important objective: facilitating innovations – and ultimately, digital transformation – through the IoT.

“That will be crucial for companies looking to set themselves apart from the competition,” asserts Joseph Houben.

Well Organized ERP: Cornerstone of Any Digitalization Strategy

“To achieve this, a company should first bring its ERP landscape up to date and, ideally, have uniform processes to rely on,” explains Houban, vice president of SAP’s Customer & Strategy Office, regarding a key prerequisite of functional IoT configurations. Companies that use assorted ERP systems involving different implementation methods will face a “higher level of effort concerning the interfaces at hand,” he adds. After all, the integration of sensor and business data is precisely where the power of the IoT lies.

According to some analysts’ forecasts, 50 trillion sensors will enter the marketplace by the year 2020. “From apparel, cell phones, and watches to factories and windmills, it’s going to be hard to find a form of technology that isn’t outfitted with sensors,” predicts Houben, an electrical engineer who has spent years in IT, including at Deutsche Bank and in the Office of the CIO at SAP. The IoT has afforded him the chance to combine his two areas of expertise for the first time.

Principle Behind the IoT

In essence, the IoT is very simple: Sensors report their measurement data to middleware, which then compiles the information received into a standard log. Since the measurement data can come from a variety of devices, it is typically collected on a cloud platform capable of further processing and analysis. The objective of integrating sensors is to gain new insights into certain processes.

This is why it can be important to establish a direct connection to an ERP system that can “translate the information into actions,” as Houben puts it. If a component is about to succumb to the usual wear and tear, for example, a workflow can not only notify the service employee responsible, but order the necessary replacement part, as well. This would not be possible without a link to the company’s central ERP system.

Ideally, the aforementioned cloud platform already offers a range of basic functions, such as for predictive analyses, location-based information, data logging interfaces for the IoT, and rapid big-data processing – all of which are provided by SAP HANA® Cloud Platform for the Internet of Things. Big data analytics, standard IoT services, and visualization instruments: SAP’s cloud platform is a development environment in which companies can build their own tools that provide custom functionality while meeting the latest user experience requirements (through SAP Fiori).

Even the simplest ideas can provide business utility thanks to the IoT:

  • Breweries: The Israeli start-up Weissbeerger is applying sensor strips to beer taps to measure how much is being consumed at a particular bar or restaurant. As soon as the kegs start to run dry, the brewery receives a notification so it can set about resupplying the watering hole in question.
  • Automotive: BMW and Volkswagen are now installing sensors that monitor the overall condition of their vehicles. When certain parameters exceed their normal threshold, the manufacturers’ service divisions receive an alert; an employee can then contact the vehicle’s owner about making a maintenance appointment.
  • Home appliances: The German manufacturer WMF has begun outfitting its coffeemakers with sensors. The company analyzes any error codes produced in the cloud and automatically issues corresponding notifications to its service department. In the future, WMF could also apply predictive analytics to the vibrations of its machines’ grinders, which would enable its service employees to take action before these components break down.

Digital Transformation: How IT Has Already Evolved

The last several years have shown how cloud services are changing the tasks handled by companies’ IT departments. “Five years ago, IT was all about ERP and production systems, networks, and PCs,” Houben recalls. “Then came the fast, low-cost cloud solutions user departments were desperate to have.”

Since then, many companies have been using a range of different cloud offerings – which, however, are often isolated and seldom provide end-to-end functionality. With respect to the Internet of Things in particular, Houben expects the full integration of cloud applications to become increasingly important, regardless of which manufacturer made them. This is where a technology like SAP HANA Cloud Integration comes in.

For Houben, the particular appeal of the Internet of Things is that more or less everyone can build his or her own version of it – be it a startup using SAP’s cloud platform or the “Lego” technology of the IoT age, Raspberry Pi. Available for €35 and small enough to fit in the palm of your hand, this single-board computer serves as a type of starter kit for assembling a personal IoT.

“It’s especially popular among 16- to 30-year-olds,” reports Houben, who is currently pondering the applications he could build with Raspberry Pi for his next sailing trip.

Where might this all lead one day? “Soon enough, machines will probably start creating other machines,” Houben reveals – but would he welcome such a development? While he would prefer having a human involved for security reasons alone, one thing is clear: “The Internet of Things has the potential to shape the Fourth Industrial Revolution,” Houben declares.

Learn more about leadership in the digital transformation age with Prof. Helmut Krcmar from TU München in a free openSAP course, Leadership in Digital Transformation.

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