Research firm ISG has found that IoT investment by German manufacturers has increased significantly over the past three years.

Building AI capabilities at the edge of OT and IoT industrial networks in particular is a focus among German firms, according to the Stamford, Connecticut based firm. AI integration with industrial IoT will continue to grow, but shortage of skilled labour in Germany will act as a constraint according to the report by ISG’s Frankfurt office.

The report, the 2022 ISG Provider Lens Internet of Things — Services and Solutions Report for Germany, finds that IoT is German firms’ steepest IT challenge, because it extends beyond traditional IT systems and encompasses components such as sensors, production equipment and medical devices.

AI capabilities at the edge of an IoT network, especially on energy-efficient AI-optimised processors, allows data collected by sensors to be processed without transmission to more central data centres, the report says. ISG expects companies to expand the use of AI in connected devices in the coming years to reduce the latency and increase the scalability of IoT systems.

The shortage of skilled IT labour is leading many German firms to seek managed IoT services, because maintaining vast networks of sensors and peripheral devices — often under varying security standards — is nearly impossible for corporate IT departments.

The report evaluates capabilities of 42 providers on strategy consulting; implementation and integration; managed services; mobile asset tracking and management; data management and AI on the edge.

The report names Atos, Capgemini, Cognizant and Siemens as Leaders in all five quadrants. It names IBM as a leader in four quadrants and Accenture and Bosch as leaders in three quadrants each. HCL and TCS are named as leaders in two quadrants each, and CANCOM, Deutsche Telekom, HPE, NTT, T-Systems and Vodafone are named as leaders in one quadrant each.

In addition, TCS is named as a Rising Star — a company with a “promising portfolio” and “high future potential” by ISG’s definition — in three quadrants. HPE is named as a Rising Star in two quadrants.

“German companies understand that enterprise-wide IoT delivers measurable added value,” said Christian Decker, partner and EMEA lead, ISG Smart Manufacturing. “As technologies such as edge AI improve, they have even more reason to build and expand IoT solutions, especially as we see a greater convergence of IT and OT \operational technology].”

“Managed services give companies the financial and operational flexibility to carry out more comprehensive IoT projects,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research.