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Why IoT Vendors Are Investing In Consulting, Systems Integration

Hitachi Vantara, PTC and Siemens are among IoT vendors that have recently invested in consulting and systems integration capabilities. CRN dives into the changing market and technology forces behind the trend and how it's impacting solution providers.

Some of the biggest vendors in the IoT space are investing in systems integration and consulting capabilities to tackle the complexities of deploying the technology in the field and help customers achieve desired business outcomes faster.

In the past year, IoT platform providers Hitachi Vantara, PTC and Siemens as well as Rockwell Automation, a significant industry vendor, have gained such capabilities, albeit through different paths. While PTC and Rockwell Automation acquired systems integration partners, Hitachi Vantara merged, internally, with another Hitachi organization. Siemens, on other hand, recently launched a new IoT systems integration practice called Siemens Advanta.

[Related: 5 Things To Know About Gajen Kandiah, Hitachi Vantara's New CEO]

What these companies have in common is a recognition that customers are increasingly looking for business outcomes as opposed to just the technology itself, which requires a complete integrated solution that consists of multiple components, including managed services, support services, hardware and software, according to IDC researcher Pam Miller.

"It's not like you're selling to IT, and you have bits and pieces that the IT group puts together," said Miller, whose title is director of infrastructure channels research.

"Complete solutions are the key," Miller added. "And creating what I call 'modules,' prebuilt elements that either come from a third party [or] off the shelf from your own IP, [and] pulling those together into these bespoke customer solutions and doing that efficiently" is one major reason why IoT vendors are investing in systems integration and consulting.

Systems Integration, Consulting Skills Fight Against Pilot Purgatory

When Hitachi Vantara completed its merger with Hitachi Consulting in January, the Santa Clara, Calif.-based company reorganized itself and moved most Hitachi Consulting personnel into a new services group within Digital Solutions, the new business unit that includes its Lumada IoT and Pentaho big data software offerings, according to Sanjay Chikarmane, the division's chief product officer.

Chikarmane said this was done because there is a need to help customers find real outcomes from its IoT and big data products, two areas in which Hitachi's consultants excel.

"What they do is to build the solutions around our products as well as third-party products. And in doing so, what they are able to deliver to the customer is acceleration," he said.

This is not a trivial matter, given that many companies have struggled with the complexity of IoT projects and failed to move past the pilot or proof-of-concept stage into commercialization. A survey by Microsoft last year found that while 88 percent of companies view IoT as critical to their success, one-third of such projects fail at the proof-of-concept stage, largely due to the high cost of implementation and the lack of clear benefits to the bottom line.

In a survey by Cisco Systems in 2017, businesses reported an even worse success rate, with 60 percent of IoT projects stalling at the proof-of-concept stage. The main reasons? The complexity of integration and a lack of internal expertise.

With Hitachi Vantara's new services organization, the company is tackling these issues head on. One on side of the organization are subject matter experts in manufacturing, transportation and energy verticals—three major markets for the company's IoT products. On the other is the organization's horizontal services practices for digital insight, digital modernization and digital enterprise.

The company's digital insight experts are focused on data and analytics while digital modernization is about moving IT assets and applications into cloud-based environments. The third, digital enterprise, is all about enterprise applications and the managed services and systems integration work they require.

"Having a services organization that's part of [Digital Solutions] is of tremendous value to end customers because now they can deliver an outcome or a solution as opposed to just a product," Chikarmane said.

The software and services work in Hitachi Vantara's Digital Solutions business also feeds into the company's other division, Digital Infrastructure, which consists of storage and server products.

"At the end of the day, the solutions need infrastructure to run on, so we continue to learn to leverage those synergies in terms of going to market with complete solutions," Chikarmane said.

In the months before Hitachi Vantara's merger with Hitachi Consulting was announced, Boston-based PTC made its own investment in systems integration and consulting with the acquisition of two partners: industrial IoT integrator Factora and augmented reality firm Twnkls.

When the acquisition of Twnkls was announced in June 2019, PTC CEO Jim Heppelmann said at the time that with the addition of the two firms, the company was gaining more subject matter experts to accelerate deployments for its two fastest-growing businesses.

"PTC, in general, is a software company, not a services company, but we do want to have enough services capacity to do the early implementations, to work with the strategic customers and, frankly, to enable and then support bigger ecosystem providers," Heppelmann said last year.

In a similar manner, when Rockwell Automation announced it was acquiring Kalypso, another PTC partner, earlier this year, the Milwaukee-based company cited the firm's "expertise across the digital value chain," which it said would help enhance Rockwell Automation's "ability to deploy technology and deliver even greater value to customers."

Miller, the researcher at IDC, said she is seeing technology vendors, not just IoT vendors, invest in systems integration and consulting capabilities as the technology buyer shifts from IT professionals to business users, the latter of whom care more about outcomes than the products themselves.

"Business users could care less what the various elements are," she said. "All they care about is getting the outcome and the [key performance indicators] that are tracking that outcome to prove to them that they're accomplishing what they need. Otherwise, if they're not, they're probably not going to want to pay for the recurring revenue."

What It Means For Vendors' Channel Partners

With vendors gaining more systems integration and consulting capabilities, the trend inevitably raises a few big questions: What does this mean for their channel partners? Can this lead to channel conflict situations where the vendor wins deals that partners would have traditionally sought?

In the case of Hitachi Vantara, channel executive Kimberly King said channel conflict between the company's services organization and partners is rare and that the company has put mitigations in place, like required deal registration, to avoid it.

"We really have thought of every nuance of how do we engage partners across the sales cycle and with us, and if there is a potential challenge or an issue where we would potentially compete, we acknowledge that way up front, we communicate that and partners are respecting that, but we see very little of that," said King, whose title is vice president of global partner strategy.

In fact, King said, Hitachi Vantara has seen more collaboration between its services arm and partners, particularly large global service integrators, because each party has its own strengths and focus areas. She cited the company's work with French IT services giant Atos for Disney as an example of how the services organization and a channel partner can serve complementary roles.

Chikarmane, the Hitachi Vantara Digital Solutions executive, said while Hitachi Vantara provides IoT solutions to Disney to monitor rides at their parks, Atos focuses on the entertainment giant's managed services needs. There are also other opportunities where Hitachi Vantara's services team has been involved, he added, because of its expertise in video monitoring.

"Even within a given opportunity, there is plenty of opportunity for us to stay collaborative and focus on our respective core competencies," he said.

In some cases, Hitachi Vantara's services team may not have the right competencies to deliver the best solutions. For example, according to Chikarmane, Indian IT services giant Tech Mahindra is delivering a solution around Hitachi Vantara's Lumada platform to British Telecom.

"That's just another example of how we are leveraging partners on the one hand for certain industries, for certain specialties, and then our own solutions, our own services organizations for certain other industries, so it's a very symbiotic relationship," he said.

King said the solutions Hitachi Vantara's services team develops around the company's products can also be made widely available among partners depending on customer agreements.

"As they build out and build IP around specific offerings and go to market, we are now able to share that IP across the partner community where needed," she said.

IDC's Miller said channel partners shouldn't see vendors investing in systems integration and consulting capabilities as a threat as long as they build up their own specialties. According to an IDC report from last year, more than 75 percent of IT channel partners said they have developed deep specialization, which Miller said is significantly higher than what it was a few years ago.

"My message to partners on an ongoing basis is, don't worry about what other people are doing, worry about where you're differentiated and where you have competitive advantages because you've specialized and gone deep," she said.

There's also the fact that most IoT deployments require multiple partners to handle and service different components. For example, Miller said, applying predictive maintenance to an injection molding machine in a factory requires several different competencies.

"It needs to have a cognitive element. It needs to have an IoT element. It needs a multi-cloud data center element. It needs a telco element," she said. "It's complex. And when I show that, I typically say there are probably three or four different partners involved."

But even then, concerns linger in the channel, particularly as the coronavirus pandemic slows down the economy, which will likely accelerate the rate at which solution providers are consolidating, according to a senior executive at a solution provider company that has long partnered with Hitachi Vantara.

"We're going to see a lot of regional players get gobbled up or go away because in order to compete in this market, you have to have a lot of offerings, not just products," he said. "And that just narrowed the playing field to largely nationals or very specialized boutiques, but if you're in between, you may or may not have enough time to adjust to that."

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