The connected factory: how IT and OT convergence will prepare you for Industry 4.0

The connected factory: how IT and OT convergence will prepare you for Industry 4.0
Executive Summary
The Internet of Things (IoT) and digital business transformation have created opportunities for industrial manufacturers, but these opportunities come with risks. To mitigate potential risk, unprecedented levels of cooperation are required between IT and the groups monitoring or controlling physical devices and processes in the organization. The benefits of bringing IT and OT together are simply too great to ignore. Although it may be a slow transition, the transition is inevitable. That’s why the most forward-thinking companies aren’t just trying to survive the changes; they’re working to be the ones that lead it — gaining a competitive advantage, improving operational efficiency, and maximizing profitability. In this article, we explore how CIOs and COOs can adapt to manage the operations that were once governed by separate departments.


The past 200 years will be recorded as the Age of Machines
The rapid growth of the world’s industrial output has spurred ongoing advancements in technology. Industrial systems, governed by supervisory control and data acquisition (SCADA) applications, now generate unprecedented and escalating production volumes, velocities and efficiencies.

SCADA systems’ architecture incorporates a range of individual technologies and engineered components. These include customized sensors, automated switches, peripheral mechanisms such as remote telemetry units (RTUs), programmable logic controllers (PLCs), monitoring devices and master-computers. With masses of real-time information flowing from the plant, many more variables can be calculated and derived by the PLC or the SCADA system. Many of these variables that are already available on the control level could prove useful in improving the capabilities of the ERP system.

By 2019, 35% of global manufacturers with smart manufacturing initiatives will integrate IT and OT systems to achieve advantages in efficiency and response time.

Together, this operational technology (OT) systemizes and commands the machinery, equipment, manufacturing assets, production lines and the processes of modern-day factories and plants.

… But the factory of the future may not be a factory at all
Industry 4.0 represents another wave of revolutionary change. The context is the power and scale of information technology (IT) which, since the advent of computerization, has developed along a parallel — often entirely separate — path from operational technologies.

Moore’s Law, named after the creator of the computer chip and the founder of Intel, is that processing power doubles every 18 months. This notion has held true for over 50 years, encapsulating the impetus of technological change and its effects upon industry, the global economy and society. Moore’s Law has truly permeated IT, such that the boundaries between the physical world and its virtual, digital mirror are blurred. The apparatuses of intelligence are everywhere, including in operational spaces — not least, on the factory floor.

As the manifestations of digitization constantly shape a new technology landscape, there is an inexorable migration toward operation and information technology (OT-IT) convergence. In fact, predictions are that by 2019, 35% of global manufacturers with smart manufacturing initiatives will integrate IT and OT systems to achieve advantages in efficiency and response time. This interlinking of data and information, of man and machine, is forging the sea-change directions of Industry 4.0.

Separation anxiety
Until recently, OT and IT functions have been driven in different gears. OT is often intricately specialized and housed within proprietary systems across myriad providers. In many organizations OT has been patched together, from the bottom up, as production requirements have increased or changed. OT components are expected to function continuously, remotely, and often in extreme environments requiring sturdy resilience and long-term reliability. Routinely, OT which regulates or supports enormous factories could be 20 or more years old, and close to obsolescence. This combination of factors has inhibited standardization and scalability, making OT less widely functional across industries — or even separate facilities within the same enterprise.

Eighty percent of supply chain professionals believe that in five years’ time digital value networks will be ubiquitous.

In contrast, IT’s roots are embedded in a philosophy of shared discovery. IT innovations were intended to liberate information, expand knowledge and empower users. This has resulted in closer alignment of protocols and programming designs even between competitor companies and service providers. IT exists to facilitate; its role in corporate environments is as a management tool, structured from the top down.

What does OT-IT convergence look like, and what is its promise?
The Internet of Things (IoT) has exploded in the past 5 to 10 years. According to business intelligence portal Statista, there were over 20 billion connected devices at the end of 2017. And by 2020, the projected installed base will exceed 30 billion while machine-to-machine interfaces will number over three billion.

At this extraordinary level of connectivity, industry can be scaled even larger — ironically, through ever smaller, smarter devices. Any complex global supply chain now relies on process automation and digital communications. Data proliferates, from that garnered by RTUs, to scanners monitoring batches on the production line, to consumer information mined via social media. Eighty percent of supply chain professionals believe that in five years’ time digital value networks will be ubiquitous.

Smart, disruptive technologies — the likes of cloud computing, predictive data analytics, robotics, drones, wearable devices and 3D printing — are fast gaining traction. These digital innovations are spawning new business modes and models, which seamlessly incorporate real-time connectivity, improved predictive and forecasting techniques, and enhanced supply chain agility. Linking OT with IT is a gateway to the next level of business performance.

Quick win benefits of convergence

  • Next-level automation
    Smarter machines can do more, with absolute precision. To a greater degree, the workforce can now be directed to more profitable and productive tasks — or labor costs can be trimmed. For example, driverless vehicles and drones, together with smart sensor tracking capabilities, are already altering the face of logistics, especially for last-mile navigation through dense urban areas.

  • Next-level productivity
    IoT technologies can boost collaboration within a workforce, whether for training, maintenance actions, or to support real-time operations involving highly technical instructions. Boeing used the Augmented Reality (AR) application Google Glass to test productivity and accuracy on a complex wiring assembly, reporting time savings of 25%. The project fault rate also halved.

  • Improved access and control across dissipated operations
    Wireless communications and mobile devices allow for rapid data delivery and information sharing. Not only can organizations now reach, instantly, even their remotest operations or field offices, but unimpeded and comprehensive visibility enables real-time actions. For example, utility companies can now use dashboards which report live consumption data, stratified across multiple monitoring requirements such as suburban versus industry consumption or usage by area. The system may also use predictive algorithms to warn of overloads, imbalances or outages — and automate the required adjustments to the grid.

  • Deeper insights
    Integration opens a window to model improvements in defined areas of the business. Using analytical tools, accumulated as well as live data can be modeled for improvement. OT-IT synergies can generate enhanced production flows, or seed customer collaboration opportunities, or provide consumer research data for R&D — fast. The keys are to prioritize ambits of application, and to understand how to reduce the data toward issues that provide business-changing insights. Knowing which areas to focus upon requires a strategy and planning (see sections below “Overcoming the challenges” and “Key actions to effective convergence”).

An OT-IT merger will be an imperative for next-generation supply chains, as it will enable the synchronization of data and information throughout R&D, marketing, manufacturing and distribution. Organizations with smart — or intelligent — manufacturing and integrated technologies gain all-round agility and improved competitiveness.

Before Industry 4.0, there was little need for a common lexicon between an engineering technician and a software or network programmer. But now it is key.

Overcoming the challenges
But, depending on industry, OT-IT transformation could be tricky or even difficult. The lateral rather than symbiotic development of OT and IT means that companies face challenges in fully migrating toward a merged OT-IT systems architecture.

  • Collapsing organizational silos
    Generally, despite some existing synergies, OT and IT are housed under separate departments, often with duplication. The merger will require a structured approach involving, among other steps, an operational maturity assessment, prioritization of digital initiatives and setting up of a digital operating process model. Manufacturers should also consider lessons learned from the earlier generation of technology deployments and stay away from taking a silo-based approach. (See section below “Manage, smartly, the transition to centralized technology governance”.)
  • Integrating employee skills — directed to the future
    IT staff and OT crews bring different primary skill-sets and motivations. OT employees have engineering or manufacturing backgrounds, and a lateral-minded practicality in keeping machinery operational. IT professionals are passionate about software innovations, the power and process of programming — less so how these can be applied on the factory floor. Before Industry 4.0, there was little need for a common lexicon between an engineering technician and a software or network programmer. But now it is key. From both independent areas of expertise, 21st century companies need a newly hybrid OT-IT department that are staffed by:
    IT and OT convergence
  • Locking in technical interoperability
    Many companies can report stories of basic IT applications causing crashes in machinery or operational systems. OT systems themselves suffer from interoperability shortcomings; operations hardware is often linked suboptimally with numerous components created for singular, isolated functions. Designers of Industrial IoT (IIoT) systems must strive for greater interoperability, both within legacy operations technology and in its embrace of IT.

Data is the new oil. It’s valuable, but if unrefined it cannot really be used.
–Clive Humby,
Chairman and Co-founder of a UK-based customer science company


How to lead and seize advantage
To truly embrace the IIoT requires a daring imagination. What would it mean to use new-wave, smarter devices, interfaces, equipment and machinery? What would it look like if these were all integrated and connected within a new-generation production plant? If these smart plants were interlinked within a revitalized organizational communications network, in turn also connected to suppliers, customers and consumers, would this always-on value chain represent the next generation of industry?

This is the vision and promise of Industry 4.0, of which OT-IT cohesion forms a crucial part. Data and information must be synergized and spread throughout the company so that new analytical capabilities can be applied to generate insights, improve visibility and extrapolate productivity. Whether the data originates from industrial machines — production line gauges, pipeline equipment, pump monitors or remote terminals (RTUs) — or supercomputers, this will be the fuel that feeds the IIoT value proposition.

Key actions to effective convergence

  1. Redesign the enterprise architecture.
    OT-IT alignment forms part of an organization’s Industry 4.0 vision, and should encompass a plan for next-generation digital value networks. The enterprise architecture (EA) department can play a central role in reducing the complexity associated with digital transformations. Most companies have a dedicated EA group embedded within the larger IT organization. This group typically oversees the entire systems architecture, including business processes and IT infrastructure. It helps to establish rules for and processes around technology usage to ensure consistency across business units and functions.
  2. Re-assess enterprise risk planning.
    As an overall principle, Industry 4.0 value chains require enhanced cybersecurity, as many OT assets, previously unconnected, are now more vulnerable. But convergence planning should also incorporate divergent OT-IT attitudes to the scale of potential problems. IT failures such as server unavailability or lost data can usually be rectified quickly; corporate reputation may suffer temporarily, but the monetary and business process risks are low. But OT is the arterial system surrounding the beating heart of industrial enterprise, managing near-irreplaceable infrastructure. When production stoppages occur, there is an inevitable and immediate effect on the bottom line. Further, in some industries, outlier events — dreaded “black-swans” — carry the drastic potential to cause billion-dollar damages and endanger lives.
  3. Manage, smartly, the transition to centralized technology governance.
    Beyond technical renewal, the organizational culture will need transformation. Employees will need leadership toward a renewed, common OT-IT vision. This transformation is essential to truly break down barriers, and eliminate silos of information and isolated systems. Only then can an organization align technology with its business objectives and become more responsive and efficient.
  4. Plan technology investment carefully.
    This may need to be prioritized in stages, but should include smart hardware to configure the factory of the future, systems technology to collaborate across network partners, virtual ecosystem capabilities, and advanced analytics such as artificial intelligence (AI) applications.
  5. Lean toward simplicity.
    The complexity and volume of information and data should not overwhelm implementation of strategy. OT-IT convergence must retain focus upon its goal: to optimize the industrial system at the heart of the enterprise, and to synchronize it within a company future-proofed for Industry 4.0.

Peering around the next corner
The next quarter century will reshape, again, the connections between people and machines. We are just on the cusp of the new generation of supercomputers. Our grasp of the future ambit of AI may be hazy — apart from knowing that it will deepen the ability of value chains to adapt, predictively and autonomously, in response to multiple sensors. Even companies specializing in IoT technology and future-focused services express amazement at the escalating pace of change. “I don’t think anyone could confidently tell you that they have a plan for 15 more years of Moore’s Law,” says Greg Yeric, Director of Future Silicon Technologies at ARM Research.

What is clear, however, is that within business and industry, operational and information technology is increasingly governed by IoT, opening an expanded horizon for physical and cyber-systems — manufacturing machinery, data centers, retailer software systems, customers’ home appliances — to share information.

The challenge is determining how to harness digital technology’s power to adapt and compete. Blending the inward- and outward-looking models of technology into a new alignment will mean the difference between coping with disruption, or capitalizing on the inherent opportunity of Industry 4.0.



This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.

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