Gartner Says by 2020, At Least 30 Per Cent of Industrie 4.0 Projects Will Source Their Algorithms From Leading Algorithm Marketplaces

Industrie 4.0* has been underway for more than five years, and while many businesses have begun some promising Industrie 4.0 projects, key challenges remain that are making algorithms the heartbeat of these projects, according to Gartner, Inc. By 2020, Gartner predicts that at least 30 per cent of Industrie 4.0 projects will source their algorithms from leading algorithm marketplaces — a significant rise from less than 5 per cent in 2016.

"Industrie 4.0 projects are facing two significant challenges," said 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 Industrie 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.

Reusable Algorithms Can Reduce Development Time

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.

"We encourage CIOs to build a task force with data and analytics leaders to evaluate algorithm marketplaces, and then create their own library of available and potentially useful algorithms," said Mr Oestreich.

Modernise and Transform ERP Solutions Into a Solid Foundation for Industrie 4.0

Early adopters of Industrie 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 modernisation 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 said that, by 2020, 50 per cent of the companies that have renovated their ERP core and migrated their IoT infrastructure to a standardised platform will increase customer interactions by over 20 per cent.

"CIOs should determine where IoT and digital business play a role in their business scenarios, and develop Industrie 4.0 value chains by modelling the business capabilities that their organisations 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."

Gartner clients can read more in the report "Predicts 2017: Industrie 4.0." They can also visit Gartner CIO Mission Control for complimentary research and webinars.

Gartner analysts will provide further analysis on the planning and management of Industrie 4.0 projects at Gartner's CIO conferences taking place 8-9 May in Magaliesburg, South Africa, 18-19 May in Munich, Germany, and 6-8 June in Toronto, Canada. For news and updates from these events, follow us on Twitter using #GartnerCIO.

Industrie 4.0

Industrie 4.0 is a German Federal-Government-sponsored initiative to create smart manufacturing that is gaining broader support as a framework for connected, smart products and systems.