It's easy for most of us to think of the Internet as something that we tap into to read news articles, watch videos, or connect through social media. But for companies looking to lead the next wave of industrial advancements, the Internet offers much more.
The Industrial Internet of Things (IIOT) adds sensors to machinery like airplane turbines, tractors, conveyor belts, and more, and connects them to automation services, predictive maintenance tracking software, and other analytics services. By its most simple definition, the Industrial Internet of Things allows companies to automate systems, analyze data, and use sensors to improve efficiencies and increase revenue.
To help understand exactly how the IIOT works, let's take a look at three key benefits of implementing Industrial Internet technologies.
Predictive maintenance efficiencies
Right now, most industrial companies have a reactionary approach to equipment failures: When something breaks, they go out and fix it. But putting sensors in manufacturing equipment and pairing those sensors with software allows companies to predict when equipment will fail, and it gives them the opportunity to fix small problems before they become bigger ones.
For example, companies can use General Electric's (NYSE:GE) SmartSignal predictive analytics software to find anomalies in their equipment.
For example, earlier this year, GE's service found a problem with an oil-and-gas customer's pipeline valve and was able to notify them of the issue before it became a major problem. The result was limited downtime while the valve was replaced, compared to if it had failed completely and damaged other equipment.
According to research from Accenture, predictive maintenance services like GE's SmartSignal could reduce industrial maintenance costs for companies by up to 30%, and downtime by up to 70%.
Innovative ways to track and analyze equipment
While predictive maintenance is a great way to use sensors for the Industrial Internet of Things, other companies are using them for real-time data tracking. Michelin sells some of its tires with embedded sensors to track fuel consumption, tire pressure, temperature, speed, and location in fleet trucks. That data is then sent to a Michelin cloud service, where company analysts look at the data and recommend to truck fleet managers how they can save fuel.
Michelin's innovative sensor and analytics solution is a prime example of upgrading age-old industrial equipment (tires!) with an Internet-related solution. As a result, fleet managers have saved up to two liters of fuel for each 100 kilometer driven, according to Accenture. Additionally, the company uses the sensors to allow customers to buy tires on a per-kilometer basis -- something that would never have been possible without sensor and data-tracking technology.
Of course, improving efficiencies and adding new innovative solutions are only as good as the revenue they can bring in. Many companies are still at the beginning stages of implementing the Industrial Internet of Things, but the payoffs are just around the corner.
For GE, the company's Industrial Internet software, Predix, has earned $5 billion in revenue this year. While that's still a relatively small amount compared to the conglomerate's massive size, it's worth remembering that GE is just getting started in the space.
Apache Corporation, an oil and gas exploration and production company, says implementing IIOT solutions that improve pump performance by just 1% could net the global oil industry an additional 500,000 barrels of oil per day -- or $19 billion per year. And Accenture research shows that the value from Industrial Internet of Things technologies and services could bring in up to $15 trillion in global GDP by 2030.
Slow and steady
Of course, not all companies see the benefits from the Industrial Internet right now, and there are likely many companies that cannot afford to invest in new IIOT services even if they did. But as the larger players continue to invest in sensors and data-tracking services, competition in the space is likely to heat up and force more companies into the space. And with worldwide spending for the Industrial Internet of Things expected to hit $500 billion by 2020 -- up from just $20 billion in 2014 -- it won't be long before many companies in the sector start diving in.
Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of 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.