What You Need to Know about IoT Monetisation report from Aeris – Unlock your full revenue potential

HOW TO MONETISE THE IoT? UNLOCK REAL REVENUE POTENTIAL

SPONSORED BY AERIS

INTRODUCTION As organisations move from pilots and trials into larger scale deployment, monetisation of the Internet of Things (IoT) is being given far greater attention. That attention critically must cut across the entire business and engage all stakeholders because IoT monetisation means complete business transformation that will turn traditional business models on their head, turning products into services. Early cost saving projects are a red herring; the real IoT deal is IoT transformation Enabling flexibility for multiple revenue streams The author, Mohsen Mohseninia, is vice president of market development for Europe at Aeris

Most organisations that have looked at a business case for their IoT have typically focused on a business case that has the shortest path to enabling them to save money. They’ve looked at IoT solutions to automate processes such as local authorities emptying bins. With sensors to communicate when a bin is full, the authority only needs to send out a truck to collect the rubbish when the bin needs to be emptied.

This saves the cost of trucks driving round checking whether bins need emptying.

This type of example application has been the easiest path to IoT monetisation because the money it saves is measurable and evident. However, the real value of IoT to organisations lies in how it has the potential to fundamentally change their interaction with customers. The disruption IoT can have to their business model in terms of moving from a capex model to one that is much more based on a recurring opex model is at the heart of this.

For example, IoT users are harnessing the power of IoT to transform their businesses so they sell their products and services as a service rather than in the traditional model. Why can’t you sell usage of a car based on the mileage the customer drives rather than requiring them to pay ₏30,000 just to have a car? Then, on top of that, sell monthly services such as insurance and infotainments as part of a higher value bundle or package.

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The real power of IoT is in enabling this type of new model, which is where the greater portion of monetisation will take place, rather than in scenarios where automation can achieve cost savings. In the traditional way of doing business – selling unconnected products – the enterprise was focused on the features and benefits of their products whilst in the connected services world they will be more focused on the utilisation of their products as well as their customer experience. This is where they will generate the most revenue from their products. In essence, their products will become the strategic assets of their organisation where maximum utilisation will be essential for their success.

However, for that to happen and companies to achieve business model transformation, they need certain capabilities at their disposal so they can use the power of IoT across the whole business rather than only in specific departments. IoT needs to deliver value to marketing departments in terms of brand recognition, for example. It also needs to provide value to financing by providing a different way to monetise the assets of the business. IoT is not for one department, it is for all departments.

Can one provider do it all?

In order to deliver an IoT solution effectively there are many components that need to come together. A device that transmits data using some sort of transport mechanism such as Zigbee, Wi-Fi, narrowband IoT (NB-IoT) or cellular connectivity is a requisite. That device must be able to transmit a set of data on a regular basis to a data ingestion system to generate immediate insights as well as for longer-term analysis to be performed. The data must be stored securely, visualised and presented and then decisions need to be made through the decision-making machines, systems and processes within an organisation. Typically all these components are supplied by different suppliers with independent product lifecycles.

Inevitably, that has created a highly fragmented landscape and organisations that have tried to create an integrated capability themselves have found it extremely challenging to bring together a specific device, software, connectivity, data storage and analytics capabilities. The challenge is long and complex with lots of opportunities for things to go wrong.

IoT in essence is a collection of bits so Aeris' view is the more of the components and the capabilities that can be supplied as a shrink-wrapped offering, the easier it will be for companies to manage risk and the easier and faster it will be for them to deploy services. It won’t be a single supplier scenario though, that’s a utopia, but, by using a smaller number of suppliers to support more of the IoT functionality the situation will be simplified.

It’s important to recognise that these capabilities are not the core business of IoT users so their energies are better spent directed at developing new offerings, products and services which make use of IoT rather than trying to build IoT capabilities themselves. Insurance companies, for example, want a deeper understanding of how IoT can change the way they interact with their customers and provide insurance as a valued service people want to have, rather than as a necessary evil.

These insurers don’t care about the how the capability has been designed, built and delivered, just that it exists and that it provides demonstrable business value to their operations. They are thinking about potentially outsourcing the whole infrastructure including the devices and the logistics to a third party that is an expert and benefiting solely from the data and the analytics to transfer their business from product-centric to customer-centric.

Always in industry as a whole there is the question of whether to go for best of breed technological solutions or to take a holistic approach. Aeris’ view is that success is about getting to the end goals with minimal risk.

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Transparent charging It is vital for the charges to be transparent. The transformation that IoT brings is a move from capex to opex with everything as a service. If an enterprise is operating in that paradigm, having a fixed cost that it is not generating revenue from, that model would be fatal.

For example, Aeris has customers in the combine harvester market; it’s a precision agriculture business. These customers only operate from April to October so, while Aeris could say that’s their problem and charge an annual fee for using the services, we instead understand their model is seasonal. Therefore, we’ve built our billing model to cater for that so we charge them only when they make money. Parked harvesters don’t make money so when they’re not working, they’re not being charged.

It’s fundamental to be able to support your customers’ business model fully, not just in words. The only way we succeed is if our customers succeed. That’s fundamental to the opex model.

Beyond a commodity The biggest challenge is to create consensus across organisations and across enterprises. That has to bring in all the chief stakeholders because it does impact them all. You need the entire organisation engaged to support that transformation and I believe that is starting to happen. For instance, the emergence of chief digital officers and chief IoT officers is demonstrating that IoT is going up the management chain and becoming a board level issue.

It will take time because enterprises have operated with the same business model for the last 50 years and that won’t change overnight. However, as more adopt IoT, the pace of change will accelerate. The current challenge remains creating consensus within enterprises.

Aeris’ role is as a partner that can help enterprises on the journey from being businesses that provide unconnected products to ones that provide connected services. Our technology helps them fundamentally transform their business models and the customer experiences they deliver.

An IoT platform for monetisation With more than 20 years of delivering M2M/IoT from its infancy, Aeris was one of the pioneers and because of that has learned a lot about how customers want to consume these services and the challenges they create, which extend across the organisation. Based on that Aeris has focused on enabling all its capabilities within an IoT platform. This can be accessed holistically by customers or in a modular way so they can take the pieces they need.

Aeris has a platform-centric approach to enable a decision-centric approach for customers. Many platforms are based on an asset in the centre, such as a connectivity module or a device. Aeris’ IoT platform focuses on how to take more

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out of the asset, whether it’s a truck or a probe, and make its data readily available across various enterprise processes. The value lies in allowing information from the asset to go across the enterprise and be shared.

Achieving this requires a range of capabilities that are built into some IoT platforms, including Aeris’ IoT Platform. These capabilities comprise rating, access management, maintenance, routing, alerting, security, integration and location. IoT platforms continue to be enhanced by adding more capabilities as they enable the end goal of transforming the businesses of customers. An important attribute of an IoT platform is that the essential capabilities listed above can be consumed either holistically or by customers selecting the pieces they need from different suppliers.

Conclusion The future of IoT as a whole and its monetisation will be highly dependent on policy makers and the role they will play in the ownership of data. Whether you’re a consumer of data or a manufacturer of assets makes a fundamental difference.

For example, with usage based insurance, if you have a black box that transmits data about your driving is the data yours or the insurance company’s? Or, if the box was fitted by the car maker, is it theirs? Such questions are compounded regarding whether, if the data is yours, you can take it to another insurance company. In addition, if cars become service items the car maker may take your driving data and provide insurance as part of its per mile fee for your vehicle usage.

I can see two potential outcomes. Policy makers will say that the driver is the owner or they will say the owner is the insurance company or the car manufacturer. Either model will require different infrastructure and based on that different monetisation will be needed.

Added to this is the emergence of personal cloud initiatives which see the data generated from various assets going to a user’s personal cloud and the user giving access to their personal data when they buy services from providers.

Given the above uncertainty, two key attributes an IoT supplier will need to have are apparent for the enterprise to be successful in deploying IoT solutions. These are agility and flexibility. This market is fast moving and enterprises will be looking for agile IoT suppliers that inherently have agility built-in to their products. Supplier inability to enable enterprises to react to market forces will slow some down and they will lose first mover advantage. Aeris has the flexibility to support customers’ business models, regardless of what they are.

This is a dynamic and fluid field at the moment. There are lot of challenges to look at and a lot of decisions that need to be made based on the likelihood of the outcomes.

Harnessing the flexibility and agility of an IoT cloud platform from a provider that has a deep understanding of the market place and the different pressures and goals of different organisations positions customer enterprises for effectively monetised IoT which forms the basis of their ongoing digital transformation.

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Market insights A forecast from IoT Analytics sees the IoT Platforms market growing at a compound annual growth rate (CAGR) of 33% over the 2015-2021 forecast period, with annual revenue reaching $1.6 billion in 2021.

According to a recent Capgemini survey, 70% of organisations don’t generate service revenues from their IoT solutions.

Data from ABI Research’s IoT Market Tracker, has uncovered that professional services are driving more than 40% of global IoT revenues today. However, by 2019, software platforms and analytics services will each drive more revenues globally than professional services in IoT markets.

Berg Insight estimates that total revenues for third party IoT platforms will grow at a compound annual growth rate (CAGR) of 32.2% from €450 million in 2014 to €2.4 billion in 2020.

Machina Research has looked at its global IoT forecasts through the prism of monetisation and identified that a large, and growing proportion of the revenue associated with IoT is related to more sophisticated monetisation opportunities.

Specifically, between 2014 and 2024, there is a total of US$1.3 trillion in IoT revenue that is available to companies that have sophisticated monetisation capabilities.

Gartner predicts that, by 2020, more than 50% of all new applications developed on platforms-as-a-service (PaaS) will be IoT-centric, disrupting conventional architecture practices.

Global management consultancy McKinsey & Company estimates the wider IoT to generate between $4 trillion and $11 trillion by 2025. This revenue isn’t going to come from device sales alone – it’s going to come from using software as the new supply chain.

Research by Mind Commerce has projected that global IoT platform enabled revenue will reach $9.1tn by 2021. The firm says IoT Platform security solution revenue will represent an $820bn opportunity by 2021 and general-purpose IoT platforms will overtake purpose-built platforms by 2020.

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