German enterprise investment in the IoT is rapidly growing as companies see the technology as a competitive advantage, according to research firm Information Services Group (ISG).

The 2022 ISG Provider Lens IoT report for Germany finds the adoption of IoT in Germany has increased significantly in the past three years as enterprises seek to optimise business processes, expand product offerings and improve customer experience.

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

AI capabilities at the edge of an IoT network, especially on energy-efficient AI-optimised processors, allow 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 growth of IoT continues despite major challenges, including growing data security concerns, slow adoption of sustainability initiatives and, especially, a lack of qualified personnel in Germany, ISG says. German companies cite IoT as their steepest IT challenge, because it extends beyond traditional IT systems and can encompass components such as sensors, production equipment and medical devices.

The shortage of skilled IT labour is leading many enterprises 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.

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

The report also explores a wide range of other issues around IoT in Germany, including the importance of careful project planning, proofs of concept and determining the legality of technology that handles image data.

The report evaluates the capabilities of 42 providers across five quadrants: strategy consulting, implementation and integration, managed services, mobile asset tracking and management, and 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.