Tricky thing, monetizing the Internet of Things. Certainly, subscription services and usage-based rate plans are among the most discussed methods of IoT monetization, but declining consumer interest has left the market in a lull. IoT is caught between the initial hype and the projected promise of a connected world, as consumers pull back on device purchases and companies struggle to solidify a fluid ecosystem.
A report out today from cloud consulting agency THINKstrategies Inc., in partnership with IoT monetization platform goTransverse (Tranverse LLC), explores the current challenges companies face in IoT monetization. The white paper calls out the lack of value-added services and technological ease-of-use needed to regain consumer interest in IoT. Despite Gartner Inc.’s estimates of connected devices exceeding 20 billion units by 2020, and McKinsey & Company’s projected $11.1 trillion market impact of IoT by 2025, the current climate for IoT business is raising questions about those predictions.
Tale of two data camps
It seems the value of IoT data is falling into two camps: the data that helps customers, and the data that helps internal operations. It’s the latter currently seeing more interest in the enterprise, leaving some businesses to ponder the true market potential in consumer IoT. This gap is a misguided landscape of uncertain revenue streams, putting many IoT business initiatives in jeopardy.
The report from THINKstrategies cites a 2015 Gartner survey reporting 43 percent of participating businesses around the world are already using or plan to implement IoT solutions in 2016. Over half of those see primary use cases for IoT in improving operational efficiencies, gaining cost savings and increasing asset utilization. By contrast, the efforts focused on IoT to enhance customer experience and increase revenue were only 40 percent.
“The reasons why companies are shying away from pursuing new revenue opportunities include technical complexity, lack of organizational experience, potential disruption and security concerns,” the THINKstrategies report reads. “The issues highlighted … have caused enough hesitancy among corporate executives to call into question the aforementioned IoT market forecasts. These concerns have also led to a series of serious mistakes for some organizations currently pursuing IoT monetization opportunities.”
Most common mistakes in IoT monetization
What kind of mistakes? According to THINKstrategies, many companies are too focused on the device instead of the value-added service layer. While a shiny, new gadget was once enough to pique consumer interest, hype has dissipated with market saturation. The isolated silos of device and app data also limits a provider’s ability to extend value-added services, ultimately diminishing consumer demand.
The X factor is another impact to IoT’s capacity for monetization. The variables to be considered are growing exponentially, on all fronts. There are dozens of mobile handset models released on an annual basis, each with their own set of variables, from the operating system to the web browser. Within the enterprise, a single department like supply chain management, for example, must deal with a bevy of knowns and unknowns, from geographic location to factory output, weather patterns to consumer demand. Additionally, today’s dominant business models for targeted marketing and usage-based rate plans present even more variables to calculate.
It’s no wonder the enterprise finds more immediate benefits in applying IoT data analytics to self-improvement. After all, you can’t help others if you can’t help yourself. Yet the consumer market stands to be the largest market opportunity in sheer number of connected devices alone, by a long shot. Gartner predicts the consumer market will remain the largest market for several years, outpacing business applications with a widening margin.
IoT monetization needs agile IT
Those hoping to cash in on IoT’s biggest opportunities will need a unified vision of IoT goals, agile infrastructure, and a C-level executive to navigate this new terrain, according to THINKstrategies. Easier said than done, though a growing number of companies are up to the challenge, pushing innovation in IT services.
Networking at the edge
Demand for agile IT affects the entire stack, from data warehousing to networking, and all the software services between. The rapid growth in connected devices has especially spurred innovation in networking this year alone, where more data processing must be done at the edge of the network to retrieve and deliver information in real time.
One company sees these networking challenges as an opportunity to expand its offerings to meet IoT demands. Riverbed Technologies Inc. revealed details for its newest product, SteelConnect 2.0, this week at its Disrupt event. The SD-WAN provider’s update comes after key acquisitions this year to accommodate today’s business needs for visibility and democracy in end-user data.
“IT has a choice: keep up or get out of the way,” said Hansang Bae, CTO of Riverbed during an interview with SiliconANGLE at Disrupt. “Why are we building networks? We have end users consuming, and application vendors producing.”
“SD-WAN says, ‘let me simplify the basics of networking,’” Bae said. “With it, we now have this living, breathing network where users can impose their will on the router. With SD-WAN, we can create this dynamic network.”
Removing the engineering bottlenecks
Further aiding these agility requirements is software automation, minimizing the tedious task of legacy IT upkeep for enterprise engineers. Thanks to ubiquity in the IoT device market, data itself is no longer the differentiator. A given business may have easier access to data, but so do the competitors. “We’re in the age where speed is the new black. Getting to market fast is key,” said Brendan O’Brien, co-founder of monetization platform provider Aria Systems Inc.
With $50 million in new investment capital, Aria Systems has set out to eliminate IT bottlenecks for engineers and developers. “Being agile means removing the engineering,” O’Brien told SiliconANGLE. “You do that right, and you stay at the forefront.”
On the networking side, APIs support this. For goTransverse, APIs “help support entitlement and authentication globally as part of the edge networks,” explained Ed Popow, principal of IoT and OTT services at the company. “This is particularly important for our customers’ consumer and business applications, especially those who deliver OTT (over-the-top) or other forms of multimedia content … the need to provide a seamless customer experience is more important than ever.”
New leaders, shifts in culture
The need for better IoT business solutions has also been characterized by the emergence of new roles in the executive suite, the chief Internet of Things officer and chief data officer. According to THINKstrategies’ white paper, many businesses lack the internal expertise and tools to manage today’s variety of data sources and desired use cases. Again, the variability in desired data solutions is reflected in the range of job descriptions for the Chief IoT Officer and CDO.
“If you look at all the CDOs out there, their job descriptions are very different,” Jarrel Jimmerson, CDO for Texas Health and Human Services, told SiliconANGLE in an earlier interview. While some CDOs might be charged with security and privacy management tasks, Jimmerson’s job is to “focus on the business value data brings” to his company, he explained.
Even as the chief IoT officer is employed to lead companies into the new data-first era, they will also need to cultivate a culture of open dialogue amongst industry players. In the end, businesses can’t provide the automated ease-of-use needed for internal or consumer-facing IoT applications without interoperable devices and platforms.
Specifically towards igniting consumer IoT market opportunities, digital tech consultancy Accenture PLC outlines the benefits and requirements of the necessary shared ecosystem:
“Increasingly no individual company can develop and deliver the holistic experience customers demand. Instead the industry needs to look for collaborative partnerships that leverage the unique capabilities of different players. The range of strengths needed include brand, customer experience design, hardware engineering, software development, value-added services and customer data insights. In particular, data is an extremely valuable new asset that device vendors have at their fingertips.”
The map to IoT monetization traverses rocky terrain and unexpected obstacles, but prioritizing the adaptable principles of speed and agility can help future-proof business models seeking their big break in this still promising market.