The revenue possibilities that can be driven by the Internet of Things (IoT) has been estimated to be anything up to $1.3 trillion1, with SAP estimating it could be as much as $201 billion for utilities alone.2
According to the report CEO Perspective: The Internet of Things for Utilities. Top Priorities to Build a Successful Strategy, a successful implementation strategy needs to be put in place before any efforts can be made to derive income from the IoT.
This includes the need to embrace innovation such as increased operational efficiency, the intelligent grid and enhancing the customer experience; thinking big and considering opportunities to operate outside of traditional operational or regional areas; considering the human element in the design of your system and not underestimating the value of Big Data the value of Big Data and analytics. Of course, none of this is possible without the necessary infrastructure, privacy, security and process integration in place.
Capgemini3 has, however, identified three key challenges to the full monetisation of the IoT - security and privacy concerns, which hinder consumer adoption; lack of standards, which limits the revenue potential; and successful monetisation, which demands signifcant investment in acquiring new capabilities.
Characteristics to monetise the IoT
However, the following seven characteristics are vital to the success of any monetization platform: “scalable, open, real-time, flexible, transparent and secure, agile, and built with the diverse requirements of the IoT in mind.”4
Scalable – The network effects of even small numbers of devices in a modest deployment being added to the IoT and interacting with numerous other IoT implementations are potentially substantial. Hence, scalability is critical. Any monetization system for the IoT must be proven as highly scalable, which means almost inevitably using a cloud-based software-as-a-service (SaaS) model.
Open – No single company can deliver the Internet of Things and cooperation within the ecosystem is essential. Platforms will be multi-tenant, business models will be multisided, and data sharing between multiple parties is implicit.
Real-time – The IoT will be real-time. One of the reasons for tracking remote assets is to be able to act immediately. Part of the point of connecting in many cases is to allow for real-time rating and billing of services.
Flexible – Any IoT monetization platform must be able to deal with lots of the different models as well as every possible demand from different sectors. The platform has to be able to cope with constantly evolving business models incorporating any conceivable (and many not-yet-conceivable) subscription, usage-based, behaviour-based, ad-funded models.
Transparent and secure – In essence, the IoT is a partner ecosystem that requires sharing data from diverse sources between diverse users. And the interplay between those partners, in terms of multisided business models, will be complex. Any monetization model must allow for total partner transparency while ensuring data security.
Agile – The IoT will usually integrate with wider business processes, so any monetization platform will need to be able to handle that integration. Businesses will be increasingly built on servitization models, where the IoT permeates the whole of the business process, and the way in which monetization occurs is likely therefore to change.
Vertical understanding – All the use cases in the IoT are different (often radically so), so there is no generic one-size-fits-all answer to monetization. As a result, it is critical to have a good understanding of the specifics of the verticals, to ensure the monetization tools are appropriate. While the system should be service agnostic, it’s still valuable to understand the requirements of the verticals to be sure of meeting them most effectively.
The IoT covers a diverse range of enterprise and consumer use cases, each with their own characteristics and requirements. Each will also have its own requirements for monetization. Some will be simple, based on the transmission of data, but over time we can expect the business models associated with IoT devices to be increasingly complex, encompassing the likes of multi-sided business models, data analytics, servitisation, and data exchange. These changing business models bring with them more complex monetization requirements.
The growth of the IoT will be phenomenal
The falling cost of connectivity and hardware is creating an environment in which numerous sectors are exploring the benefits of using the IoT. Historically, the focus has been on the more mundane efficiency savings, but increasingly companies are seizing the opportunity to use embedded intelligence and connectivity to switch from selling products to selling services.
Revenue can be generated from two main service streams – the first being the ‘machine-to-machine’ offering, and consists of the up-front cost of devices and installation and the recurring fees accruing for connectivity and M2M services. This part of the revenue is based on end-user average spend on hardware and services for each of the multitude of different applications multiplied by the number of connections.
The second element cannot be explicitly associated with an individual connected device. It deals with application development, the integration of IoT data into enterprise back-office systems, data analytics and various other opportunities associated with managing and monetizing the data that comes from connected devices.
The IoT future ultimately promises billions of devices, trillions of events, everything as-a-service, real-time data analytics, constant feedback loops from customers, complex data brokering, and completely new business models, amongst other things. In that world, all of the above features are critical parts of an IoT monetization platform.
1 Machina Research:
2 CEO Perspective: The Internet of Things for Utilities. Top Priorities to Build a Successful Strategy
3 Monetizing the Internet of Things: Extracting Value from the Connectivity Opportunity
This article first appeared in Metering & Smart Energy International, Issue 1 2016.