Hitachi reorganizes to focus on IoT

The Japanese giant combines units to create a major international player in the Internet of Things market.

Hitachi reorganizes to focus on IoT
Gnsin (CC BY-SA 3.0)

In yet another sign of how the Internet of Things (IoT) is re-arranging the international corporate landscape, Japanese manufacturing giant Hitachi is reorganizing to challenge the global leaders in the IoT market. The conglomerate is combining three of its Bay Area divisions into a single $4 billion unit responsible for growing Hitachi's IoT operations in more than 130 countries.

The new IoT-centric operation will combine Hitachi Data Systems (data center infrastructure), Hitachi Insight Group (big data software) and Pentaho (analytics) into a wholly owned subsidiary called Hitachi Vantara, which will employ some 7,000 people (about a of third of Hitachi’s IT workforce) out of its Santa Clara, California, headquarters.

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The company made its goals clear in a press release: “Hitachi Vantara will harness business, human and machine data across OT and IT environments to build comprehensive, data-driven solutions. Customers will be able to manage, store, govern, blend, analyze and visualize data — and then take action based on uncovered insights.”

On a more practical level, according to Nikkei Asian Review, “Vantara will be responsible for linking IT teams in Japan, China, India, Europe and elsewhere to develop new services and create proposals for clients in markets around the world from Silicon Valley. The reorganization allows Vantara to give orders across departments and group companies.” 

Fortune reports that the three groups’ customers include Disney, BME, InfoSys and Marks & Spenser.

Targeting large-scale IoT deals

The move is significant for a couple of reasons. First, it’s a big bet on Insight's Lumada IoT technology platform for connected devices in industrial settings. Also in Fortune, IDC Research Director Stacy Crook explained, “The big reveal is now Lumada will be a standalone commercial offering and sit at the middle of Hitachi's IoT strategy.”

More importantly, though, it’s a clear announcement of intentions to compete on the largest-scale IoT deals against the likes of GE, Siemens, Microsoft, Amazon, Google and others.

Reports also noted that Hitachi is investing some $2.8 billion in three years to further build out its IoT business. For example, Hitachi Data Systems and Pentaho reportedly hired an additional 1,000 people last year. (Hitachi Data Systems bought Pentaho in 2015 for a reported $500 million to $600 million.) Hitachi’s overall goal is reportedly to boost IoT revenues by 20 percent from 2106 to almost $1 billion in 2018. 

Vantara Chief Solutions and Services Officer Bobby Soni told Fortune, "Our strategy is to bring industrial IoT expertise, our software and ability to manage and run technology. We don't think many companies are in a position to pull all those things together."

Clearly, there’s a lot at stake: Hitachi’s press release cited Gartner estimates that the IoT market will top $440 billion by 2020. And Bloomberg noted that IoT accounted for $5.4 billion of Hitachi’s sales in the fiscal year ended March 2016, about 6 percent of total revenue.

But Hitachi is convinced it can grab a bigger share of the potential market. The press release made it explicit: “The new company is targeting the emerging IoT market opportunity in which there is no clear winner yet.”

And with a variety of huge multinational technology companies wading in, it may take a while for the clear winners to separate themselves from the also-rans.

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