e-Frontiers: Germany vs US in the "Industrial Internet"

On the face of it, the "industrial Internet" is something of an oxymoron. Industry implies manufacturing goods, whereas the Internet implies a weightless economy in which transactions are conducted online. However, there is indeed a competition brewing between two powerhouses in the business of making goods. You have Germany, the world's most renowned manufacturer, seeking to digitally enable its manufacturing base by incorporating Internet-based innovations that smooth out the supply chain, automatically prompt repairs and so on. Then, you also have the United States which is keen on bringing such innovations to the factory floor. GE, for instance, has estimated that the "industrial Internet" can add $10-15 trillion to global GDP.

Who will win? Germany has an arguable advantage in the industrial part, while the US has an advantage in the Internet part. Hence fears that US technology concerns may usurp German manufacturing prowess if Germans don't get to the "industrial Internet" ahead of the US:

“There’s great concern that a Google or an Apple might master the manufacturing world,” says Heinz-Jürgen Prokop, head of development at Trumpf, a family-owned maker of metalworking machinery that’s participating in a [German] program called Industrie 4.0. “It’s important that we try to do it ourselves while we still have the opportunity.”

Industrie 4.0’s alliance of companies, academics, and political leaders was launched by the German government two years ago. The idea was to encourage the small enterprises at the heart of the economy—what Germans call the Mittelstand—to embrace new technologies. Then last year, AT&T, Cisco Systems, General Electric, Intel, and IBM set up a similar initiative called the Industrial Internet Consortium, or IIC.

The goal is not to replace manufactures but again to smooth the process of manufacturing through the use of Internet-based technologies:

Both groups aim to make it easier for machines in factories throughout companies’ supply chains to communicate with one another. The goal: to reduce downtime by anticipating when a factory will have spare capacity or need replacement parts, for example. Built-in sensors will collect all manner of data to better allocate resources, helping manufacturers cut energy use by as much as 20 percent and labor costs by 25 percent, according to consultant McKinsey.

At stake is the health of German manufacturing, which employs 15 million people, about a third of the workforce. By 2020, Industrie 4.0-related projects will account for half of capital investment by German manufacturers, or some $45 billion, according to PricewaterhouseCoopers. Globally, investment in the industrial Internet will top $500 billion a year in 2020, up from $20 billion in 2012, researcher Wikibon estimates. To avoid falling behind, the “Mittelstand must maintain contact with the customer and not lose out” to software companies that might end up with valuable market data, says Volker Treier, deputy head of the German Chambers of Commerce & Industry.

Given the size of manufacturing in Germany's economy, it's arguably the party with more to lose. OTOH, the less manufacturing-intensive US has more to gain by devising such technologies ahead of the Germans.