Algorithms the heartbeat of Industry 4.0 projects
The German government-sponsored initiative Industry 4.0 has been underway for more than five years, and while many businesses have begun some promising projects, key challenges remain that are making algorithms the heartbeat of these projects, according to research firm Gartner, Inc.
By 2020, Gartner predicts that at least 30 percent of Industry 4.0 projects will source their algorithms from leading algorithm marketplaces a significant rise from less than five percent in 2016.
"Industry 4.0 projects are facing two significant challenges," says Thomas Oestreich, managing vice president at Gartner. "First in the connected world of cyber-physical systems they need to deal with the sheer volume, real-time velocity and diversity of data. Second, in order to drive new value and differentiating innovations, new algorithms need to be developed. This is making algorithms the pulse of Industry 4.0 initiatives."
Mr. Oestreich added that developing new algorithms requires skills and competencies that most companies do not have yet. To increase time to market and speed up the development process, some organizations employ service providers and combine this with using algorithm marketplaces.
Analytics vendors have started creating marketplaces for software components, such as analytical algorithms, to bring greater flexibility and choice to end users. These marketplaces will bring the benefits of the app economy to software development. They will radically lower software distribution costs and improve access to thousands if not millions of available algorithms.
Algorithm marketplaces offer reusable algorithms, which help organizations speed up their development processes and cope with the transformational changes introduced with digital business. "Reusing prebuilt algorithms and applying them to a specific use case can significantly reduce development time and will offer an important library, expanding the possibilities for in-house development teams," said Mr. Oestreich.
Early adopters of Industry 4.0 are also renovating their enterprise resource planning (ERP) solutions. ERP systems are connected to Internet of Things (IoT) infrastructure that consists of sensors and actuators, middleware to collect and store data, and applications and analytics to make decisions and trigger actions.
"Many ERP solutions are old, and they cannot cope with the amount of data and transactions to be processed, and the level of granularity in business transactions," said Christian Hestermann, research director at Gartner.
The music industry is a good example of how an industry has gone through transformation. Customers went from buying complete albums in a record store to streaming one individual song, which triggers an immediate invoice about the microamounts due. "ERP could fast become the bottleneck of digital business, not allowing a business to act quickly enough to grasp digital business opportunities in a fast-changing business world," Mr. Hestermann added.
CIOs need to develop digital business moments to grow their business. Signals coming from sensors inside products or from external sources could be used to offer additional services to customers. "This will likely require the modernization of the ERP solutions involved, as older ones will not support the level of granularity and the volumes of microtransactions required," said Mr. Hestermann.
Gartner says that, by 2020, 50 percent of the companies that have renovated their ERP core and migrated their IoT infrastructure to a standardized platform will increase customer interactions by over 20 percent.
"CIOs should determine where IoT and digital business play a role in their business scenarios, and develop Industrie 4.0 value chains by modeling the business capabilities that their organizations need," concluded Mr. Hestermann. "They also need to assess their current state and their needs for renovation on all layers of the IoT architecture and take the necessary measures to improve."