Smart dresses are making the news and with each passing day the booming projections for the number of ‘things’ that will be connected to make up the Internet of Things make it easy to think we are peaking through a hype cycle.

Each week seems to bring another report forecasting trillions of dollars and billions of things. It can be beguiling, if for no other reason than advanced economies need this type of shot in the arm each decade just to keep afloat.

But as ever with technology, opportunity does not automatically translate to profit. Big numbers attract stiff competition. Competition can depress margins and before you know it that investment case that looked so solid starts to whither. Any company that ‘makes things’ and thousands that ‘service things’ and even those that provide services around services and things will tell you that they have an Internet of Things strategy. Most will point to the huge projections. And they may be right.

One company which ‘makes things’ and which is speaking about the Internet of Things with a cool head is Panduit.

When speaking with Panduit CEO Tom Donovan (pictured above, left, with the author) there is no hint of baton twirling, marching band brass section cacophony or catwalk prowling often associated with the IOT.

For Panduit, a maker of infrastructure equipment for running data centres, all types of commercial buildings, hospitals and factories, the Internet of Things is Industrial (IIOT) and has already started in manufacturing.

The IIOT is about the factories that make things being equipped with sensor fitted intelligent plant connected through intelligent network infrastructure. This is the platform layer for factories before they themselves can become engines for making ‘smart things.’

Panduit is a 60 year old privately held US manufacturing firm which started out making plant floor equipment. It makes power and networking communications infrastructure, the fibre itself, the ducts, trays and runs that cables need to connect to industrial plant and equipment in data centres and the management of those systems. (see below)

Mr Donovan, says: "Except for the blinking lights and the cooling we are into every other aspect of data centre infrastructure. The racks, the fibre connectivity, the trays, the conveying product, DCIM (data centre infrastructure management, through its acquisition of software maker Synapsense) access control. So it very comprehensive data centre offering."

The Industrial Internet of Things has started on the plant floor, it says. So what is Panduit’s play?

Ethernet/IP
The Industrial IOT space is the newest focus for the business and is being partly built on its backing for Ethernet/IP protocol. Ethernet/IP is combined with the Common Industrial Protocol and is the most widely used networking communication standard in industrial applications such as manufacturing and process and is seen as the platform for automation and robotics. Panduit has long standing partnerships with Cisco and Rockwell Automation and is involved with the IOT World Forum (see box below) This is an organisation which is striving to build a platform for enabling the evolution of industrial IP.

For manufacturing industry, Industrial IOT a $3.88tn opportunity according one analyst. That’s a big number which brings us to our first fork in the IOT road. There is much discussion in and around IOT between those who favour investments in smart cities and those who can see greater and quicker returns in Industrial IOT.

Says Mr Donovan, while the ‘sexier’ space is smart cities with metros such as Dubai, Chicago and Paris researching and investing in the range of technologies that go to make up a smart city, industrial IP is where the money is being spent today.

"In the industrial space we’re in a position where we’re talking about making a market. It is not an easy transition to move from separated closed proprietary systems on the plant floor – whether they are created by Siemens or Schneider or Rockwell or whoever.

It is not a standards discussion as such. It is about leveraging the existing protocol, Ethernet/IP. So today you have a choice. Continue down the old path and go with a closed system or go with an open system. And more and more we see people moving to the open system."

Does open mean insecure?
When speaking of open IP and Ethernet connectivity the conversation with manufacturers rapidly moves to the cybersecurity question says Mr Donovan with C-levels naturally concerned about potential breaches.

"Open means connections and the question is usually in the following context: ‘Ok, I get it but I don’t want to get hit by the security issue’. If I open my plant up I don’t want to get hit by a Stuxnet situation. Will I be protected."

How does Panduit view the cybersecurity threats to critical infrastructure and its own exposure at an industrial level?

"There are two ways to look at this. We’re working with Cisco and Rockwell. There is no better security solution than Cisco and being under the Cisco umbrella is how we address it in general. And in other environments , we can provide off network security so if it was penetrated it wouldn’t give you access to the crown jewels."

And how does it address it as a customer issue?

"It is top of mind for everyone in IOT. Look at what the COO is thinking. You had IT and operations tech (OT) and in the past they were separate silos. Today the OT guys have a subset which is under the CIO. It is under the CIO because of security and it is on network. You no longer have a physical firewall between the enterprise IT and manufacturing side. They are bringing it all together.

The CIO has been given that responsibility," he says.

The next thing the executive wants to discuss says Mr Donovan is ‘I want to ensure there is an ecosystem of partners, that will take me to this future state nirvana that you are promoting to me.’

"As I see, none of us want to be on the bleeding edge but we want to be on the leading edge. Be first over the wall the risks and costs are too high. But we want to be an early adopter," says Mr Donovan.

So the question for today is: How real is the industrial internet of things?
It is being built on Ethernet/IP taking advantage of the Ethernet standard. Today firms have built out for 10Gb Ethernet and are readying for 40, 100 and in some cases 400Gb Ethernet says Panduit.

"In industrial plant terms we’re at that transition point of market development – and we’re crossing the chasm now."

Mr Donovan offers the example of a global auto manufacturer with six plants around the world. It is on its third plant upgrade.

"We’re working with them to deploy industrial IP into this plant fleet with partners. This is as opposed to their historical approach which was to develop a closed system. Another example is the leading consumer packaged goods manufacturer with whom Panduit is working with to deliver brown retro fit and green field sites from a variety of mish-mashed systems to a standard Cisco based IP deployment."

Mr Donovan is promoting is use cases. He says the advantage today is that from Panduit’s perspective it can go to a customer and say, ‘we’ve been there and done that, you’re not going to be the first guy through the funnel. It’s proven.’

"We’re onto phase two of the journey. You can see the progress."

Already there are deployments and use cases of firms using automation and robotics, IOT sensors and information over Ethernet, sent back to a data centre which has the ability to do analytics on the data in real time. This is driving intelligent and automated decision making on the floor. Smarter decisions improving yield and productivity in manufacturing processes.

"We have sensors, today a lot of those sensors are very basic. End point devices are part of our strategic objective. We are a manufacturer. We are a solutions provider and are a lot different from competitors. We provide a holistic solution. We look at deployment on the Industrial IOT side. For the automotive customer (referenced above) we’re working with on five plants around the world we are providing solutions that are all pre-determined. It is a reference design that is validated and has been designed in other environments."

Down the road – the journey to industrial IOT
Panduit, says Mr Donovan will continue to search for acquisitions. As a 60 year old company that didn’t do any acquisitions until three years ago, he says, they will continue to be a strategic part of the path forward.

The firm itself is going through change.

"A couple of years ago we brought in Bain & Company and made changes rapidly in how we would move forward. Our sales in the US were four to five times market growth. The market was up a couple to three points and we were up in low double digits. We’re doing the right things to grow the business sustainably."

Panduit is privately held. It says it will invest 8% of revenue in R&D. It invests in people, technologies and partnerships, says Mr Donovan. "We partner for life. Since 1996 it has partnered with Rockwell Automation."

Discussing the advantages of being private comes with qualification says Mr Donovan. Panduit is a debt free private company that comes with an ownership structure that is about investing in the future of the business. The benefit is the shareholders are about long term, ‘so the investments we make have much longer time horizons.’

"We weather. In the 08-09 timeframe when everyone was cutting back, and slashing and burning, we didn’t do that, we made some changes that were needed. but we didn’t do that [slash and burn] for a variety of reasons. One, we knew the economy would recover and two we don’t do that to our people. And when the economy came back our growth was dramatic because we had capacity and people. And so the benefits are built on a business with long term investments. You need a viable model and shareholders who aren’t interested in taking everything out of the company so you can invest in your future. And we’ve got that," says Mr Donovan.

Box Out One: What is the IOT World Forum

See www.industrial-ip.org

The IOT forum is a broad group of companies which are promoting Ethernet as the standard networking protocol for communications in industrial environments.

There’s a steering committee made up of 50 companies. Cisco started this ball rolling and a broad group, integrators. That steering committee helps set direction. Each year at the IOT world forum come together including customers to broaden our capabilities and hear technical presentations.

Mr Donovan says: "At the first IOT forums we were discussing intelligent garbage cans – it was like: ‘guys, we have to have a better example’ and the second was intelligent bus and water systems in Barcelona."

The fourth event takes places in Berlin in October