New Articles
  March 17th, 2016 | Written by

Manufacturers Play Catch-Up with IoT Opportunity

[shareaholic app="share_buttons" id="13106399"]


  • Gartner predicts that 6.4 billion devices will be connected to the internet by the end of this year.
  • The ability to connect devices, equipment, cars is the new frontier in manufacturing.
  • BDO data reveals manufacturers are lagging in cybersecurity and research and development credits.

The phenomenon known as the Internet of Things is already impacting nearly every industry, and the revolution is just beginning. Research firm Gartner predicts that 6.4 billion devices will be connected to the internet by the end of this year, and Cisco forecasts 50 billion devices will be online by 2020. The ability to connect devices, equipment, cars and even people to collect, send and respond to data is the new frontier in manufacturing.

The MPI Internet of Things Study, sponsored by BDO, found that manufacturers view IoT as a strategic imperative for their businesses, but few are ready to capitalize on it. 64 percent of manufacturers believe that IoT will have a significant impact (17 percent) or some impact (46 percent) on their business in the next five years. 63 percent of manufacturers believe that applying IoT to their products will increase profitability over the next five years. More than one-third of manufacturers have no plans to develop an IoT strategy for their processes and products.

With an estimated economic impact of more than $11 trillion over the next five years, IoT is an opportunity manufacturers can’t afford to pass up.

Manufacturers Must Become Cyber-Ready

In spite of nearly two-thirds of manufacturers believing that IoT will increase their profitability, data exclusive to BDO reveals they are lagging in two critical areas: cybersecurity and research and development (R&D) credits.

With billions of devices connecting to the internet over the coming years, manufacturers must ensure they have the proper protections in place to minimize their exposure to increasing cybersecurity attacks. The U.S. Department of Homeland Security reported in January that investigations of cyber attacks on the manufacturing sector nearly doubled in the year ended Sept. 30, 2015. As more devices collect and share what may be sensitive personal or business data, the number of exploitable vulnerabilities and entry points also grows. Hackers only need to find one gap in security to break into an interconnected network.

Despite the growing cyber threat, manufacturers are not shoring up their network defenses as only eight percent of manufacturers report they are very confident in their current cybersecurity protections to prevent an IT breach.

R&D Tax Credits are Underutilized

Just 17 percent of manufacturers say they are planning to claim R&D tax credits and incentives for their IoT investments, meaning most manufacturers are missing a significant tax savings opportunity.

The R&D credit, modified and extended permanently at the end of last year, is one of the most beneficial tax-planning opportunities to save ― and even generate ― cash and reduce effective tax rates when embarking on innovation. Still, every year, billions of dollars in credits go unclaimed.

For those manufacturers not planning to claim credits and incentives for IoT investments, nearly half (45 percent) say the reason is based on a lack of documentation. Only 11 percent of respondents cite concern about the associated costs as their primary reason for not claiming the credits.

Almost 200 years after the Industrial Revolution, manufacturers are in the midst of another transformative era. Through implementing the right protocols and precautions and by taking advantage of cash saving and generating opportunities, they should be as successful as they were the first time around.

Rick Schreiber, partner and leader of the Manufacturing & Distribution practice at BDO USA, LLP, has over 23 years of public accounting experience. He was recently named to the National Association of Manufacturers’ Board of Directors. To contact Rick, e-mail him at