The current pandemic has accelerated the adoption of digital means to carry out day-to-day tasks, and minimize interactions between humans. We are in an era where industrial operations, smart homes and smart offices are driven by connected devices, which will soon outnumber humans. Machine-to-machine connectivity has no boundaries, and this fundamental shift is leading to an internet that is far grander in scale and opportunity than previously imagined.
IoT is the Future
The potential of IoT has certainly caught the attention of the world’s business community. According to a recent survey, 96% of senior business leaders said their companies would be investing in IoT in some way in the next couple of years, while 68% stated that their companies were already investing budgets in IoT. However, statistics show that 70% of organizations don’t generate service revenues from their IoT solutions. This assumes that most organizations have yet to derive significant commercial value from IoT.
In this article, we take you through the various IoT monetization models and asset visibility solutions that can benefit organizations, and how IoT monetization is going to change post-pandemic.
How Can Organizations Profit from IoT?
Resilience, visibility, agility for scalability, and accessibility are going to be the main themes for enterprises operating in the new normal. More decision-makers are realizing the potential of IoT and are more likely to use it to monetize data collection. Many leading businesses on the internet have viewed two main phases in IoT. The first phase–where the focus–is to generate traction and the second phase is focused on monetizing.
IoT Monetization Models
The four models to monetize IoT focus on hardware, services, data, or ecosystem building.
In simple terms, this model means adding connectivity value to the already existing product. The key driver here is the features/benefits of the product than the product itself. The driving force here is the novelty aspect that attracts the customers.
Offering high-profit services or additional features over the regular/ existing products is another good way to monetize IoT. It helps strengthen the customer relationship, also further enabling the company to generate regular revenue.
Data is not just limited to enhancing business efficiency or improving service, it can be used for regular sources of revenue for the businesses as well as for third parties. Organizations today are looking forward to investing in data that helps them better understand their customers and boost their marketing effectiveness.
In an ecosystem, the focus is a shared platform by producers of hardware and software, service providers, and other IoT businesses, rather than a service or a product. Such a model allows the platform promoter to gain monetary benefits from end customers as well as other platform users. Platform users are charged for the listing as well as the end customer must give a share when a product is sold to the promoter. A shared platform benefits the participants in multiple ways.
Maximize Monetization with Usage-Based Billing
The method of usage-billing is already into practice due to the IoT device’s natural ability to collect data that helps clearly establish the usage of the device or service. This can further be leveraged to establish clear billing cycles that reset on different frequencies. It would subsequently please the customers that they have an option to pause and use the service as per their accordance, and will only be billed for what they use.
Monetizing the collected data can be used for direct billing purposes to call attention to a new product that the consumer might need. The data can further also be used for a monthly revenue stream by providing the customers with the opportunity to “subscribe” to these refillable/reusable items/services.
Challenges Organizations Face Monetizing IoT
The current IT Infrastructure is not compatible to accommodate the growing volumes of sensor data. Such large volumes of sensor data from a widely distributed base of connected devices challenge the conventional data storage and management capabilities of organizations.
The development of IoT solutions demands a new set of capabilities, that include envisioning new services, developing commercial models and designing service contracts that result in continuous revenue streams. Many product-centric organizations lack these competencies.
Companies lack the resources to stream process the sensor data, which is essential for the collection, integration, analysis, and visualization of data in real-time. Such a lack of real-time data analytics technologies that are critical to drawing insights from the Internet of Things is a huge setback.
The Internet of Things magnifies the challenges of data security and privacy. Recent events such as a global attack that took place in late 2013, where botnets were used to send more than 7,50,000 malicious emails from connected household appliances have revealed the enormity of these challenges.
Lack of talent to sell the value of the product rather than the product itself is another major challenge. IoT products require a sales force that is comfortable in articulating its value proposition and potential benefits. Such an approach is critical to convince often-reluctant customers to pay for a new class of services.
The advancement of the internet-enabled devices has raised the expectations from the customer support. IoT solutions may further lead to the complexity of queries. With better connectivity, customers today expect faster support, possibly in real-time.
Most organizations lack the required skill-sets to effectively interpret sensor data. Resistance, for one, is a major problem. A recent interview outlined the concern that resistance can come less from the customer – and more from within the organization, making it more challenging to align existing business processes with new IoT-based service offerings.
IoT Monetization Strategies for Post Pandemic
As enterprises gear up to make the most out of their IoT products and services in the new normal, four main areas need to be considered about IoT monetization strategy.
The value chain stacking approach will be widely accepted among enterprises that make asset visibility and location-based services a priority. Engaging in collaborations and partnerships will help enterprises to drive more value. Moreover, outcome-based pricing and data monetization with more flexibility in pricing and offer models can help in gaining relevant outcomes.
The key models for businesses to monetize IoT solutions are- service subscription, software sales, and hardware sales. Enterprises can choose for the hardware packaged with services or the as-a-service business models that require proper software enablement. There will be a greater push for standardization and ease around onboarding and life-cycle management, with security features becoming more prominent to verify the hardware integrity.
Data Monetization Options
Advanced analytics, real-time streaming and data management services and data exchange (Data-as-a-Service) will draw maximum monetization benefits. Using these methods, enterprises can gain faster time-to-value of data from the connected devices and seek industry collaboration to address the needs for cross-industry data. Vertical data sharing approaches will persist, but with greater emphasis on de-siloing, particularly for civic and government IoT.
Solution Enablement and Support
Businesses can choose from custom, platform services or packaged solutions, professional services, or IoT managed services to enable the monetization solution. Adding trust and security to solutions requires greater technology and supplier awareness, hence, consultation on the best approach, particularly for global enterprises is required. Packaged offerings will now be needed more than ever to drive resilience and visibility into the supply chain.
The Internet of Things has the potential to introduce connectivity on new levels in the future world. While numerous agile start-ups are emerging, we are still at the phase where successful monetization is challenging. The rewards of a connected world will certainly be worth the wait, once organizations can gradually start to derive profitable value from the IoT.