Much of the talk about the Internet of Things focuses on hot products such as smartwatches, autonomous cars, or Internet-connected home appliances. And with good reason. These formerly unconnected things will bring about new autonomous systems and a treasure trove of data for analysis.
Therein lies a huge opportunity in the Internet of Things, or IoT: the ability to automate factories and collect actionable data that could potentially save companies billions of dollars in efficiencies.
For years, Cisco Systems (NASDAQ:CSCO) and Intel (NASDAQ:INTC) have trumpeted the benefits of the IoT to the market, but practicing what they preach, they also leverage the IoT in their own operations.
A bet on IoT and its employees
In an interview with The Wall Street Journal last week, Cisco Senior Vice President John Kern discussed a $4 million fund through which employees can develop new IoT solutions to make the company more efficient.
One recent effort is a $700,000 project to outfit a Cisco plant in Malaysia with thousands of new sensors that monitor how much energy is being used and also make decisions on how to reduce that usage. Kern said the project managers believe that deploying the sensors across all Cisco manufacturing plants would cut company-wide factory energy usage by 20% to 30% -- which could mean tens of millions of dollars in savings.
While Cisco acknowledged that some of the projects under this program will fail, the company wants to demonstrate it believes the IoT will change manufacturing processes.
And it is not alone.
Intel is saving millions
Toward the end of last year, Intel also started using its own predictive maintenance technology at its manufacturing plant in Malaysia, which allows the site to run more efficiently with less downtime. Intel added factory automation systems and paired them with data analytics to improve equipment uptime, increase manufacturing yield, and conduct preventive maintenance before equipment failed. As a result, the company saved $9 million from the efficiencies -- in just one factory.
After testing out the systems, Intel started selling automation and predictive maintenance services to businesses this year.
Which leads us the real reason why both Cisco and Intel are focusing their energies on new Internet of Things manufacturing opportunities: it is a huge market.
A PricewaterhouseCoopers survey released in February showed that manufacturers are implementing Internet of Things systems into their plants faster than in any other part of the industry.
Part of that growth comes from predictive maintenance systems, similar to the Intel example, which are poised to be a huge part of the manufacturing IoT. IDC said Internet of Things predictive maintenance will become one of the most important trends in IoT solutions this year, and General Electric said it will create $100 billion in value for the energy and utility industries by 2020.
About 18% of global industrial machinery companies are already using IoT devices in their manufacturing processes. As more companies implement the IoT systems Intel and Cisco are already using, the two companies are poised to benefit from all that new spending.
Both have already shown the value of adding sensors, predictive maintenance, and other IoT systems to manufacturing -- and the manufacturing sector is right behind them. BI Intelligence said the manufacturing industry will invest $140 billion in Internet of Things devices and services over the next five years. Intel and Cisco are in the perfect place to benefit from all this growth.
Chris Neiger has no position in any stocks mentioned. The Motley Fool recommends Apple, Cisco Systems, and Intel. The Motley Fool owns shares of Apple and General Electric Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.