ERP systems
IT manager analyzing the architecture of ERP (Enterprise Resource Planning) system on virtual AR screen with connections between business intelligence (BI), production, HR and CRM modules

By their nature, enterprise resource planning (ERP) systems utilise data from a range of functions, taking advantage of production information all the way across to finance data and systems.  As the addition of sensors and devices gives rise to the Internet of Things (IoT), a disconnect between IoT and ERP systems is becoming clear.

This is according to a survey by IFS across survey respondents from a variety of industrial sectors, in which it was found that only 16% utilised IoT data in ERP systems.

"That means 84% of industrial companies face a disconnect between data from connected devices and strategic decision making and operations, limiting the digital transformation potential of IoT," according to the report authors.

"Not even the most advanced companies were very likely to say their ERP systems did a very good job helping them consume IoT data," says Rick Veague, chief technology officer for North America at IFS. "The ability of ERP systems and other software applications to support IoT is still not robust enough."

Veague says: “IoT is a very specific thing. Digital transformation is a concept. Trying to correlate these things is difficult. But here we offer a view of the current state of IoT and how it relates to digital transformation. And right now, the primary value industrial companies are seeking from IoT seems to be cost avoidance. The greater potential for IoT in these settings, however, is business growth. In order to realize this benefit, companies must not only think more creatively about IoT, but be able to use IoT data in the context of their business, which likely means tighter integration with applications like ERP.”

To move to the next level of digitalisation, ERP systems must be brought into the IoT space - ensuring more connectivity between corporate systems and devices and sensors in the field.

According to the survey, the following are challenges that need to be addressed in order to fully maximise the business case provided by IoT:

IoT and digital transformation are closely related:  Study data shows that industrial digital transformation is tightly aligned with IoT.

Enterprise software must facilitate IoT: "ERP systems have long focused on tying systems together, from plant floor to financial systems," the survey authors state. Digital transformation depends "largely on the ability of each company to extend IoT data from the plant floor or the field to the C-suite, facilitating direct communication between enterprise systems like ERP, enterprise asset management and field service management software and sensored devices on the plant floor--or distributed assets in the field."

Aftermarket service benefits from IoT: "Direct communication between enterprise systems like ERP, EAM and field service management software and sensored devices on the plant floor--or distributed assets in the field--will be essential for organizations to achieve the more advanced use cases for IoT," the IFS report states.

While a large percentage of the most advanced companies are able to deliver IoT data through their process automation systems, of the larger, more sophisticated companies, only a third of these are able to leverage data from their systems. Less than 20% are able to correlate data with ERP systems.

"Getting IoT data to support proactive aftermarket field service and using IoT data in context of enterprise data are two current challenges faced by respondents intent on getting more value out of IoT,” Veague believes.