On September 28, 2016, SAP announced the creation of its SAP Internet of Things (IoT) division, dedicated to the rollout of IoT projects. SAP IoT's first contract award and deployment was announced immediately after, on September 29, with Italy's largest train network Trenitalia. The most significant aspect of the announcement was Trenitalia's estimation of the financial impact that its new Dynamic maintenance Management System (DMMS) will have, thanks to the use of IoT for predictive maintenance.
What's good for the customer is good for the company
The focus of any IoT contract has to be on the enterprise or organization served and the problem that has been solved for them. For Trenitalia, the problem was the maintenance of the rolling stock, which is "a runaway cost for a company," according to Danilo Gismondi, CIO of Trenitalia. The answer to this issue for Trenitalia is its new DMMS, developed in partnership with SAP.
Thousands of sensors onboard Trenitalia's new trains, plus real-time connectivity to SAP's HANA cloud platform to crunch the data, will allow DMMS to predict the failure of long-distance components. DMMS will thereby remove the need for statistics or time interval-based train management and can improve efficiency, create cost savings, and, most importantly for Danilo Gismondi, raise safety standards and improve his customers' travel experience, which are key goals for Trenitalia.
It is rare that revenue figures for IoT deployments are made public. Trenitalia estimates that in the first year of operation, it will see up to a 10% decrease in annual maintenance costs, as well as a €10–20m ($11–22m) saving in cost-of-failure and disservice payments. As a €50m ($56m) investment, DMMS will be on track to pay for itself in its first year, generating pure profit for Trenitalia thereafter.
The pain point that drove the project was purportedly the need to improve passenger experience, simply because a better-running service will be a more attractive and profitable business for its operator. "Maintenance is a competitive factor, not just a cost," says Trenitalia's CTO Marco Caposciutti; and activities can now be directed to where they benefit customer experience the most: improving Wi-Fi operation and air conditioning, for example. Interestingly, the cost savings could actually be considered a secondary, albeit welcome, side effect.
The lesson being taught by SAP and Trenitalia is a simple but crucial one for all technical enablers of enterprise IoT projects: namely, that the focal point must always be placed on the customer's customer. I firmly believe that the proliferation of this attitude will be instrumental to the successful growth of the Internet of Things.
Read Jamie Moss's research note on Trenitalia and SAP's IoT initiative on the Ovum Knowledge Center.
"Trenitalia and SAP's IoT initiative puts the customer first to save tens of millions of Euros," TE0019-000018 (October 2016)
Jamie Moss, Principal Analyst, Enterprise & IoT