The Cost of Falling Behind: Why Ignoring IoT is Holding OEMs Back

Introduction:

The manufacturing and industrial sectors are at a critical crossroads, with IoT and servitization proving to be the differentiators between companies thriving in the new digital age and those being left behind. However, many OEMs are hesitant to invest in these technologies, and this reluctance is coming at a significant cost.

According to the Eseye 2024 IoT Adoption Report, over 58% of IoT projects still fail at the device level, stalling progress. Additionally, less than 1% of OEMs have successfully adopted Equipment-as-a-Service (EaaS), despite the vast potential it offers for creating recurring revenue streams and boosting customer loyalty.

In this article, we explore the risks of not investing in IoT and servitization, drawing on recent industry failures and successes, and we conclude with how OEMs can overcome these challenges with the right tools.

The Cost of Delaying IoT Investments

Recent findings from IoT Analytics highlight the slow adoption of EaaS models, with several major OEMs struggling to transition from traditional product sales to service-based models. A prominent example comes from the heavy machinery sector, where only a few OEMs have made the leap into EaaS. As a result, many have lost significant market share to competitors who have embraced IoT solutions, which enable real-time equipment monitoring and predictive maintenance.

According to Forrester, companies that have not integrated IoT into their operations are seeing 20% higher downtime costs, which directly impacts their bottom line and reduces customer satisfaction. This trend is consistent across industries such as aviation, where OEMs relying on outdated models have seen revenue losses in the billions

IoT and Servitization: Unlocking New Revenue Streams

IoT is the backbone of modern servitization, enabling OEMs to transform their traditional sales models into service-oriented businesses. The global EaaS market, which reached $21.2 billion in 2023, is projected to grow at an 11% CAGR until 2028, underscoring the vast potential for companies that successfully implement IoT

While adoption rates are still below 1%, those companies that have embraced IoT are already seeing substantial returns. For example, a key manufacturer in the industrial automation sector implemented IoT-powered asset performance solutions, resulting in a 10% sales increase and an 80% boost in service revenue. By leveraging predictive maintenance and real-time monitoring, these companies are improving customer satisfaction and driving recurring revenues through long-term service contracts

Failure to Innovate: Risks for OEMs

OEMs that resist adopting IoT and servitization are not only missing out on these revenue opportunities but are also exposing themselves to significant risks. Eseye’s 2024 report notes that 58% of businesses attribute project failures to poor device design and insufficient IoT integration, leading to issues with scalability and connectivity

Moreover, industries once considered early adopters of EaaS, such as aviation, have faced considerable setbacks. For example, a major jet engine manufacturer experienced severe losses when usage-based service revenues plummeted during the pandemic, resulting in over $5.6 billion in revenue losses

These cases serve as cautionary tales for other OEMs that continue to rely on outdated business models.

How Flex83 Can Help OEMs Lead in IoT

For OEMs ready to step into the future of IoT and servitization, Flex83 offers a cloud-agnostic, scalable platform designed to help manufacturers implement IoT solutions with ease. Flex83 enables real-time asset monitoring, predictive maintenance, and the ability to launch Equipment-as-a-Service (EaaS) models, unlocking new revenue streams and driving operational efficiency.

With Flex83, OEMs can reduce time-to-market, lower downtime costs, and build long-lasting customer relationships through continuous service offerings. The time to invest in IoT is now—don’t let your company fall behind in this rapidly evolving industrial landscape.