How are businesses leveraging the IoT and automation technologies today? Are automation strategies evolving to keep up with new advancements? Research shows exciting trends in the IoT and automation market that hint at changes across numerous industries.
How Are Industries Adopting IoT and Automation?
In June 2023, McKinsey & Company released a detailed report on shifting trends in industrial automation. As businesses adapt to digital transformation, how are their needs and automation priorities changing?
Strong Emphasis on Cloud and the IoT
One of the clearest trends in McKinsey’s research is an emphasis on cloud and IoT in today’s automation strategies. The current market for these technologies is especially strong for hyperscalers and software providers. This should not be surprising since IoT and cloud-based tools have become cornerstones of industrial automation.
The IoT is effectively the nervous system of current automation strategies, providing data for other tools to respond to. It allows businesses to automate the process of taking action based on real-time data, which has powered some highly sophisticated strategies.
Cloud adoption remains strong due to several factors. Growing interest motivates businesses to expand their computing capabilities, but high costs and low supply in the semiconductor industry make that complicated. Cloud computing is a clear alternative to on-prem servers and comes with its own unique benefits, such as security advantages.
Growing Interest in Smart Sensors and Software
IoT adoption has not yet peaked. In fact, research shows the global IoT market has a CAGR of 26.1% through 2030 — a clear indicator of incredible growth yet to come. McKinsey’s 2023 findings support this and indicate a few areas where adoption and interest are rising.
For example, businesses are showing an expanding focus on smart sensors and connectivity infrastructure, specifically hyperscalers. Considering the role of hyperscalers, this indicates companies may be shifting their focus to expanding or upscaling their existing automation strategies.
Hyperscalers already offer the cloud-computing resources organizations need for larger-scale automation. They are now looking for a greater presence of smart sensors in the automation environment and stronger communication throughout their networks. In other words, rudimentary automation strategies are maturing to keep up with the cutting edge and improve on existing strengths. Businesses are looking to hyperscalers to support that evolution.
Sustainability and Energy Savings
Growth and change in the automation market are seeing an increasing influence from an important external factor — ESG initiatives. More and more enterprises are prioritizing sustainability, which frequently involves finding ways to reduce energy consumption and waste. Automation is an excellent way of accomplishing this.
That challenge-solution relationship supports overall growth in the automation market and drives changes in businesses’ automation goals. This is true across highly differing industries, often for cost-related reasons as well as environmental concerns.
For instance, one of the top reasons health care institutions are adopting automation — particularly in care-critical areas — is energy savings. Automation can significantly reduce energy costs, which currently make up at least half of building management budgets at health care facilities.
By automating critical systems, health care organizations are providing better care while reducing overhead costs and cutting emissions. This combination of automation goals is on the rise as companies in diverse industries look to improve their ESG ratings in a cost-effective manner.
Are Automation Strategies Shifting?
What do these trends reveal about the future of industrial automation? Developers and providers in this niche do not need to worry about declining interest in automation technologies, but the way businesses use those technologies is changing.
For example, there is clear interest in more advanced, interconnected automation tools and platforms. The IoT will be central to the future of automation, acting as the nexus where data meets action. Enterprises are focusing less on implementing basic tools, and more on leveraging and scaling their data to meet big-picture goals.
ESG initiatives are likely to be a top goal for automation to support progress. There are financial incentives for this, as well as performance and environmental benefits. Surveys show 79% of investors cite ESG practices as a top factor in their decision making. So, businesses that are not moving toward effective ESG strategies could begin losing money.
Automation is a prime tool for improving ESG compliance while providing a good ROI. As a result, changes in ESG standards, regulations and practices will likely influence the types of automation technologies organizations invest in.
Additionally, there is also a major shift toward AI. Generative AI and large language models are creating huge disruptions in nearly every industry. Businesses want to be at the cutting edge of this technology and leverage it wherever possible. This is driving significant growth in high-power computing capable of running AI and machine learning.
Interestingly, this trend could be the factor that slows the pace of change in industrial automation. McKinsey’s report indicates two possible futures for automation — one that sees slow, reformed growth and another that sees rapid, disruptive growth. The speedy emergence of generative AI might seem to indicate automation is heading toward the latter, but that is not necessarily the case.
Concerns about the use of AI — particularly generative AI — may lead to an increase in regulations over the next several years. Thus, companies may find developing and integrating AI tools more difficult.
AI relies on powerful industrial-grade GPU chips, which are in incredibly short supply in 2023. Ongoing delays and shortages in the semiconductor market could very well hold back an explosion in AI growth throughout the 2020s. While interest in AI will remain strong, it will not necessarily overhaul the state of automation within only a year or two. Businesses will continue using tried-and-true tools prefer for those that include AI features.
How IoT Professionals Can Prepare for the Future
Trends in automation technology investments indicate changes are underway in the market. The IoT will only continue to grow in popularity and importance, although enterprises’ priorities are shifting. IoT professionals can prepare for these changes by pursuing innovative ways to improve interconnectivity and sensing capabilities. Businesses are also showing strong interest in AI-based tools, which could be part of an exciting future for the IoT.
By Ellie Gabel – Revolutionized