Cyber-physical convergence: the state of 4IR in 2021

According to a report announced in May 2021, 34 percent of enterprises have invested in Industry 4.0 (4IR) pilot projects and evaluate returns. Yet, there is still much work, and the pandemic caused a temporary dip. An overview.

A decade (time does fly) after the ‘official launch’ of Industrie 4.0 at Hannover Messe, research firms are looking at the state of Industry 4.0. These updates on the market state aren’t always easy to compare (panels, geographies, industries, precise definitions of Industry 4.0, etc.).

One of the research companies publishing a report on the state of Industry 4.0 is Everest Group. The company sees Industry 4.0 as “the latest phase in the industrial revolution,” representing “a technology-intensive transformation and convergence of cyber and physical systems.”

Most firms are still in the early stages of Industry 4.0 adoption and weigh the value proposition offered by Industry 4.0. (Everest Group, May 2021)

The digital transformation (DX) or industrial transformation (IX) of Industry 4.0 is characterized by interconnectivity, digitalization, and automation, per Everest Group. Numerous technological evolutions enable it. Among them: IoT (the Internet of Things, still at the core of cyber-physical convergence and sometimes used as a synonym, see IoT definitions), cloud, edge computing, analytics, robotics, AI (artificial intelligence) and ML (machine learning), and additive manufacturing.

Cybersecurity is another inevitable part since what’s connected by definition is vulnerable, as we’ve seen in several industries recently again.

Industry 4.0 state of the market: the transformational leap in cyber-physical convergence in practice

In the announcement of its “Industry 4.0 State of the Market Report: A Transformational Leap in Cyber-physical Convergence”, Everest Group states that 34 percent of enterprises now have invested in Industry 4.0 pilot projects and are evaluating returns.

Twenty-four percent of respondents have implemented 4IR use cases and are willing to scale up their efforts to enterprise-wide adoption levels. Five percent can be called ‘mature’ in terms of adoption, realizing significant business gains.

The rest of the respondents either build an Industry 4.0 strategy (14 percent) or are in the early stage of adoption (23 percent).

The question is what this all means in practice. A first finding is that the growth of overall global Industry 4.0 spend is relatively steady with around 15 percent, whereby most growth can be attributed to IoT (Industrial IoT or IIoT to be precise), cloud, analytics, and connected platforms. In other words: all in all still relatively limited and certainly far away from the more advanced stages of what the highly interconnected and data-intensive notion of Industry 4.0 wants to be.

Whereas some areas of investment in technologies (think public cloud spending and edge spending, to name two) were “positively” impacted by the pandemic in 2020, this doesn’t seem the be the case for Industry 4.0 overall. In 2020 there was a dip in enterprise spending on 4IR initiatives, among others, due to “a lack of visibility on returns and reduced cash flows.”

In areas where the pandemic called for measures such as remote work (definitely add maintenance to that) and changes in workplace dynamics, the need for digitally-enabled smart factories (and workplaces) has grown.

Key overarching Industry 4.0 trends – “Industry 4.0 State of the Market Report: A Transformational Leap in Cyber-physical Convergence press release

What hasn’t changed at all are the main barriers to scaled adoption. The lack of management buy-in and organizational complexity still are the top impediments.

There aren’t too many surprises in terms of emerging trends, market dynamics, and other evolutions.

On the level of IIoT, the market was dominated by prominent players such as AWS, Microsoft, and Google.

Other trends:

  • To develop successful end-to-end solutions, the development of capabilities in several technologies is now imperative.
  • Industry 4.0 isn’t just about that cyber-physical convergence: we also see converging technologies on other levels (examples including 5G, digital twins, mixed reality, intelligent assistants, nanotechnology, and composite materials).
  • Quite some governments started programs to gain a competitive edge. Expect this to continue as in a post-pandemic world, technology (often hand in hand with sustainability, climate change efforts, and a rethinking of the built environment) is omnipresent in efforts to boost economies. Everest Group mentions government initiatives such as the U.S. government’s “Advanced Manufacturing Partnership,” Germany’s “High Tech Strategy 2020,” France’s “La Nouvelle France Industrielle,” China’s “Made in China 2025,” and South Korea’s “Innovation in Manufacturing 3.0.”
  • As the market matures, more extensive partnerships and rollouts are becoming increasingly common. More prominent players have worked hard to go for ecosystem and business platforms, along with the right partners, and the competition among those bigger IIoT cloud companies is significant. Examples of such partnerships: Microsoft and SAP announced a partnership to build Industry 4.0 solutions using existing cloud infrastructure and edge computing resources. Renault and Google Cloud Platform joined forces to accelerate the digitization of Renault’s supply chain and 22 facilities.

Overall enterprise spend for Industry 4.0 initiatives has been steadily increasing; the pandemic, however, has caused some amount of dip in growth (Everest Group, May 2021)

A final element worth mentioning is that, while larger service providers hold the main portion of 4IR revenue, the growth rate is faster among smaller service providers.

You can get the full report here. Click here for a PDF with additional information.