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Monetizing the Internet of Things

Posted by: Devashish Bhatt On September 29, 2014 06:44 PM facebook linked in twitter

THE INTERNET OF THINGS IS HERE!! Some may call it mere hoopla and noise. While on the other hand there are internet-evangelists who swear by the numerous studies; forecasting a trillion connected devices & the resultant moolah, in not too distant future. In a recent meeting with the CEO of a Silicon Valley start-up, which provides platform & cloud for IoT based solutions; I noticed some measured optimism where every business opportunity was made to pass through the stringent quality gates of skepticism. So truth be told, there is an opportunity no doubts about it but it does come with some challenges.

SUPPLY SIDE OF OPPORTUNITY: Connectivity is now ubiquitous, storage on cloud affordable, applications accessible & technologies have advanced sufficiently to result in a much mature ecosystem than before, which are all critical ingredients in this magical brew.

DEMAND SIDE OF OPPORTUNITY: Organizations are increasingly realizing the immense potential it holds for trimming costs & there are regulatory mandates across the world (like smart energy meters, e-call facility from cars) which has whetted the appetite for these new age IoT offerings.

Yet questions still remain on how to make money from IoT. The main reasons behind these questions are certain uncertainties that are ingrained in the DNA of IoT, the major ones are:

COMPLEX VALUE CHAIN FOR REVENUES: The service delivery for any IoT solution has very diverse components apart from connectivity which of course remains the common thread in all of them. There are sensors which capture the data, there are platforms, databases, applications through which it has to travel in order to generate the desired information or in some cases alerts or warning. All this has to be sewn together into a solution by an integrator. All these put together result in a highly fragmented ecosystem & partner landscape with a complex value & revenue chain which results in the first challenge:

KEY CHALLENGE No. 1:  Managing & monetize different partner relationships in the Internet of Things

CHANGING REVENUE OPPORTUNITY: The one word that best describes this shift is “ephemeralization”—the tendency of evolving technology to become less and less material. (Thanks Buckminster Fuller). Over the years the changing technological landscape has turned the revenue potential upside down. So smart services like BI, Security, Analytics are predicted to corner a larger share of the overall revenue pie than they did before. So what would have been a great business model 2 years ago would be a complete failure 2 years from now:

KEY CHALLENGE No. 2: No proven business model in existence

LONG-TERM GROWTH PROSPECTS: Continuing with the above theme of changing revenue opportunity, research studies are indicating that growth potential is least for hardware segment but goes higher for platforms, mobile, cloud and smart services. However these are all integral to IoT based service or solution from an end to end perspective. In such a scenario how does an End-to-end service provider ensure stable returns?

KEY CHALLENGE No. 3: Ensuring a viable & stable Return on Investments.

GO TO MARKET OPTIONS: In the current landscape the B2C reach of IoT services can be left to the current players in their respective vertical who would eventually resell the service to their existing subscribers or retail customers. However on the B2C side it can either be fronted by a System Integrator & Managed Service provider (e.g. Tech Mahindra) or a telecom services provider (e.g. AT&T).

None the less all the ecosystem partners would need to collaborate to provide a pricing model which is affordable & requires minimum upfront investments

Tags: Connected Platforms & Solution
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