Distributors double down on IoT – by James Carbone

Contributing Editor of Electronics Sourcing Magazine, James Carbone

Electronics distributors are providing technical expertise and services to OEMs to help them implement Internet of Things technology into their products

Distributors say that while the Internet of Things (IoT) has yet to produce hockey stick-like growth in sales, it is still having a significant impact on business and will be responsible for up to 40 per cent of distributors revenue in the future.

To ride the expected wave of sales growth from IoT applications, distributors are not just providing customers with sensors, Wi-Fi modules, microcontrollers and other components needed to implement IoT. They are also offering services to help customers identify IoT applications with their products and to design IoT solutions and implement them. Some distributors have also partnered with carriers such as AT&T and Verizon to offer data plans needed for IoT.

Many distributors say sales growth from IoT has been modest because customers are trying to determine how best to use IoT technology. “Every business is trying to figure out how to use IoT to build better products and services, said Ashish Parikh, director of IoT platforms and solutions for Arrow Electronics, based in Centennial, Colo.

“Everyone is looking at using this technology of connected devices where you can remotely manage the devices, update them, and get information and insight to solve problems,” he said.

He added Arrow is seeing more IoT business from customers in retail, industrial, healthcare and transportation. “We have seen a pretty steady increase in the number of customers and in the footprint of what customers are buying,” said Parikh. “Wi-Fi connectivity and sensor sales have been increasing.”

IoT customers often buy sensors, Wi-Fi modules, microcontrollers as well as a range of interconnect, passives and electromechanical (IPE) devices. “It is estimated in the industry that probably 5 to 7 per cent of overall component sales are actually going into IoT applications,” said Lou Lutostanski, vice president of IoT for Avnet, based in Phoenix. He said that percentage will likely grow in the coming years, but so far there has not been the stellar sales growth for components used in IoT applications, which some industry analysts and executives had earlier predicted.

“I think hockey stick growth is very possible, but not until companies go mainstream with IoT,” Lutostanski said. “There are people doing IoT projects, but few of them are mainstream. I believe when IoT goes mainstream, there will be an incredible ramp up in sales for all semiconductors and IP&E products,” he said.

Lutostanski added one thing that is slowing down IoT adoption is companies are confused about IoT technology and business applications for IoT.  “IoT is not about technology, it’s about business transformation,” he said. Many companies are trying “to use IoT technology without understanding why they’re doing it,” according to Lutostanski. He said a company must first have a  business case to use IoT successfully.

Make the IoT case

Having a business case for IoT  is “the blueprint for everything else that you do and if you don’t know why you’re doing something, but you start doing it anyway, it’s going to fail,” said Lutostanski.

Some OEMs have identified business cases for IoT in their industrial products and equipment and other companies have invented new products that take advantage of IoT capability.

“In the industrial segment, IoT is all about predictive maintenance,” said Robbie Paul, director of strategic program development – IoT for Digi-Key, based in Thief River Falls, Minn. By using IoT-equipped industrial equipment and factories, companies can identify problems with the equipment before they become serious. One example is motors.

“There are billions of motors of all kinds in factories and it turns out the predictive variable in motors is vibration,” said Paul. If vibration levels for a motor exceed the acceptable spec, the motor will overheat and fail. Using sensors and other IoT technology, excessive vibration levels of motors can be detected so the motor can be replaced or repaired before it fails.

Attracting new customers

While industrial automation has been a traditional segment for distributors, IoT is attracting customers to distribution from other customer segments. One example is agricultural equipment. Some distributors are selling IoT related components to equipment manufacturers that make IoT capable farm equipment that helps reduce fertilizer, pesticide, herbicide and water costs for farmers.

Such equipment can monitor fertilizer, pesticide and water levels of soils and transmit that information to a computer or smart phone so the farmer can water crops or apply the necessary fertilizer or pesticides.

Some farmers are using small IoT-equipped robots on wheels to help eliminate weeds on farmland and reduce herbicide costs. The robot has a camera, GPS, and a computer and moves through rows of crops and distinguishes weeds from crops and sprays the appropriate amount of herbicide on the weeds and not the crops, said Paul. Herbicide cost is reduced by about 90 per cent because
the spraying the weeds is
precise and there is little waste, he said.

More industrial and agricultural equipment companies are finding ways to use IoT which will further drive sales for Digi-Key and other distributors over the next 5 to 10 years.

Paul said that IoT is already having a positive impact on Digi-Key’s business. “IoT is one of the driving forces for increased electronic sales this year. Automotive is the other driver,” he said .

He said Digi-Key’s IoT sales were up 38 per cent year-over-year for the first half of 2018 f and “that’s a few points higher than Digi-Key sales overall.”

IoT is also resulting in more customers for Digi-Key. “So far right now we have about 100,000 customers that buy what we consider to be IoT products. It is growing at a faster clip than overall customer acquisition for Digi-Key,” said Paul.

Enhancing IoT services

Other distributors report that they are also attracting more IoT customers and are enhancing their capabilities to service those customers. The focus is not just on selling components, but also providing services to IoT customers to help them implement IoT technology in their products.

For instance, Lutostanski said Avnet has a consulting service to help customers understand the business reason for doing IoT. He said Avnet’s IoT advisory service can evaluate a customer’s readiness and “develop a transformation roadmap with the customer on the front end for a fee. Avnet will also do “IoT device design and build services where we talk about manufacturing and the integration of inventory management of the devices being deployed,” said Lutostanski.

Avnet also offers customers IoT cloud and digital services to help customers understand “the cloud platform, analytics, artificial intelligence, the machine learning ,the user interface the user experience and the IoT connectivity,” he said.

Avnet helps deploy IoT in products and provides “firmware, security patches, technical assistance and field utilization maintenance for all the devices to make sure that all devices maintain functionality and are upgraded over time,” said Lutostanski.

He said by providing an end-to-end solution for customers, Avnet hopes to accelerate the adoption of IoT and “once it becomes mainstream, there will be many opportunities for significant growth.” Lutostanski said by 2030 IoT will be up to 40 per cent of the distributors’ sales revenue.

Arrow also wants to make it easier for customers to implement IoT and a lot of its efforts focuses on connectivity. “Last year we introduced our connectivity services, which makes it easier for customers to not only procure the modules, but also services from us,” said Parikh.

He said about four years ago, Cathy Morris, Arrow’s chief strategy officer, “pulled the leadership team across Arrow Inc., and said IoT is not just about components. It’s also about connectivity, the ability to analyze data and manage it.”

As a result, Arrow’s IoT strategy “pulls together the products and services across all business units,” said Parikh. “Global components is one of the business units, but to build an IoT solution we need connectivity, the ability to manage where that data goes, how the devices are managed and how they are updated,” he said.