Monetising the IoT Supplement

IoT Now: ISSN 2397-2793

SEPTEMBER/OCTOBER 2016 • VOLUME 6 • ISSUE 4

MONETISING THE IoT SUPPLEMENT

AMDOCS INTERVIEW Accelerate consumer adoption by creating a seamless customer experience

INSIDE: Data-driven monetisation strategy • New business models for capitalising on IIoT • Aeris interview • Flexera and IoT Now preview new monetisation report

Transitioning to SOFTWARE is a Daunting Task!

But it doesn’t have to be.

Watch the video to see how a device manufacturer transformed from a hardware to a software-centric company so they can:

Maximize new and recurring revenue Fuel growth and product innovation Deliver more efficient operations Improve the customer experience WATCH NOW SOFTWARE MONETIZATION LIFECYCLE

Licensing & Security

Entitlement Management

In-Product Analytics

Delivery & Updates

www.flexerasoftware.com/idm-iot

CONTENTS

Monetising the IoT Supplement

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MONETISING THE IOT

INTERVIEW

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S12

INTERVIEW

REPORT PREVIEW

IN THIS ISSUE S4

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MONETISING THE IOT Kate O’Flaherty says one app can make the business case for IoT but multiple apps enable monetisation to be achieved INTERVIEW: ACCELERATE ADOPTION AND CREATE A SEAMLESS EXPERIENCE TO MONETISE CONSUMER IOT Yuval Mayron, the general manager of Amdocs’ Internet of Things business unit tells Antony Savvas that service providers and OEMs need to work together to deliver the next technological revolution

S10 INTERVIEW: CAPITALISING ON IIOT REQUIRES NEW BUSINESS MODELS AND PROCESSES Eric Free, the senior vice president for strategic growth at Flexera Software, discusses four key business processes that are key to monetising the IoT S12

REPORT PREVIEW A preview of the new ‘Monetizing the IoT’ report, written

by IoT Now and supported by Flexera Software

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INTERVIEW Mohsen Mohseninia, the vice president of market development for Europe at Aeris, tells George Malim that monetisation is the focus as pilots and trials move into large scale deployments

The Amdocs IoT Monetization platform allows service providers to unleash the potential of consumer IoT by supporting multiple additional engagement models, such as white-label billing for the IoT provider, reselling IoT services direct to the consumer, or becoming an IoT services billing provider. The platform handles complex settlements across the different engagement models and manages the entire financial flow between all the involved parties. www.amdocs.com

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Supplement IoT Now - September / October 2016

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MONETISING IOT

One application makes the business case for IoT, the others achieve monetisation IoT user organisations are moving towards a data driven strategy where deployments are utilised for multiple applications, writes Kate O’Flaherty

This evolving model is being driven by the huge amounts of data collected by businesses – dubbed big data – and their growing ability to analyse it. According to Ian Hughes, IoT analyst at 451 Research, companies are achieving greater efficiency gains by applying machine learning and analytics “to understand things better”.

Jon Collins, analyst at Gigaom, explains: “If you look at the architecture of IoT it’s about managing streaming data from multiple sources; putting it into a back end data store that can be accessed multi-dimensionally in real-time; and adding big data analytics alongside that.”

Everything in the industrial sectors can be improved in this way, says Hughes. For example, he says: “You can use less fuel, you

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can break down less and you don’t send so many people out in the field to fix things. This means you are bound to save money and maximise investment in the kit.”

Data mining As analytics systems improve, firms now have the infrastructure to perform data mining within IoT, says Theresa Bui, the head of enterprise product marketing for IoT cloud at Cisco Jasper. This gives them an enhanced ability to understand the customer and it is then possible to offer a better service, she says.

Bui explains: “People aren’t just adding devices into the field. They want a relationship with the customer and this is where the monetisation comes in. Instead of being a transaction based product sale, it’s a relationship where the vendor can sell new services and, at the same time, pull data showing how customers are using the solution.”

Bui cites the example of a connected robotic arm being used in a factory. “You have a quarter of a million robot arms used in multiple geographies. Any time the product is down is downtime for the factory, so it is ▼

Companies have historically monetised Internet ofThings (IoT) applications through efficiency improvements. This still stands, but the way businesses view their deployments is changing. User organisations are starting to look beyond investing in IoT platforms for a single deployment. Instead they are taking a wider view that investments can be used for multiple applications and therefore monetised better.

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MONETISING IOT

In the future, this business model will be widely applied to general products, says Hughes

valuable to be able to diagnose and predict issues; and have the ability to resolve problems remotely so you don’t need to send someone out.”

She adds: “This type of remote diagnostics is in itself a service; so the customer is buying an additional IoT based solution.”

homes will see the area reach its full potential.

“What will be a game-changer for most people will be the ability for an IoT system to monitor and alert, in real-time, problems with their heating system. In the very near future, it will be possible for your boiler to know which parts are about to fail and alert the energy company.”

With this in mind, the ability to use IoT data for multiple purposes is valuable to those looking to introduce extra revenue streams.

One firm already using IoT in this way is car manufacturer Tesla Motors, which is able to perform remote engine diagnostics as well as mine data from its devices, says Bui.

So while monetising the IoT comes from operational efficiency, it can also aid safety and risk management. Steve Baker, business development director at The Technology Partnership cites the example of car insurance firms placing devices in vehicles to monitor how users drive.

It has started to benefit from this approach. In 2014, when Tesla’s vehicles were recalled due to a safety problem, the manufacturer was able to quickly issue an over-the-air software update. “That understanding, and being able to use data to pin point the issue, increases efficiency for Tesla and makes it a better experience for the customer. That’s a company taking it a whole step further using data,” says Bui.

IoT’s future

Another use case that could see multiple gains from one deployment is smart cities, says Hughes, citing the example of lighting.

He says: “They aren’t just a light; they tend to be sensor nests of other things such as a camera to check parking spaces, or footfall.

IoT crosses silos and industries.”

The cross-over happens in consumer led markets as well, says Hughes. For example, one platform enabling two products might be a smart light bulb and a child safety device which would cause the home lights to flash red if the child was out of range.

Hughes says: “That is a service. IoT doesn’t care what things are, so there’s monetisation in crossing those boundaries.”

With this in mind, the energy sector is an industry that will make money from the further growth of IoT. Dmitry Bagrov, the UK managing director of technology consulting firm DataArt, says increased connectivity in

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Ian Hughes: IoT doesn’t care what things are, so there’s monetisation in crossing those boundaries

There is no doubt IoT’s potential is multidimensional. As firms start to realise the gains that can be had, the trend towards a multiple service model will soon become common.

In the future, this business model will be widely applied to general products, says Hughes. “Things will become a subscription product rather than a one-time buy. For example, a tyre manufacturer could charge you for how much you drive. This results in improved customer service, better products, brand loyalty and the customer is only paying for what they use. There are a lot of options, because IoT is so many things.”

This means that in the end, the monetisation comes on two levels, says Bui. The first is recurring from monthly subscriptions for a service. “Then it comes from a portfolio of services – so you can subscribe to more than one. That’s the real opportunity of IoT: it’s the enabler of recurring as well as new types of revenue.”

Bui thinks this will eventually see companies start to expand into areas outside their core offering. She cites the example of US security company Vivint. “They are starting to look outside of home security and automation and have tested services such as cloud storage.

All their products are managed in the cloud and they have this infrastructure: Why wouldn’t you want to connect another device in your house for a small additional fee?”

Dmitry Bagov: A game-changer for most people will be the ability for an IoT system to monitor and alert problems in realtime

Steve Baker: While monetising the IoT comes from operational efficiency, it can also aid safety and risk management

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INTERVIEW

Accelerating adoption and monetising consumer IoT – How to create a seamless customer experience As OEMs and service providers look to increase consumer IoT adoption, a seamless customer experience is vital, with simple exploration, registration and activation as the aims. Yuval Mayron, the general manager of the Amdocs Internet of Things business unit, tells Antony Savvas about how service providers and OEMs need to work together to deliver the next great technological revolution

The fact is that you no longer have to imagine it. All this information and much more is already available using technology which is enabling consumers to utilise smart connected devices equipped with numerous sensors. That same intelligent technology also lets you control your drone from your office, and even track your child's location from your smartphone.

The growth of the Internet of Things is the defining technology trend of the next ten years

The growth of the Internet of Things is the defining technology trend of the next ten years, says analyst firm Machina Research [in research published in November 2015], with billions of connected devices generating trillions of dollars of revenue. 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 monetisation,” said the Machina report. “Some will be simple, based on the transmission of data, but over time we 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 monetisation requirements. Machina Research 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.

Machina Research identifies seven key capabilities required by a monetisation platform for the IoT: It must be scalable, open, real-time, flexible, transparent and secure, agile, and built with the diverse requirements of the IoT in mind.

But in spite of the many exciting consumer IoT solutions out there, says Amdocs, we’re not seeing widespread use of the technology.

In fact, the consumer IoT world has barely scratched the surface of its vast potential market and consumer adoption has been relatively low. With OEMs still struggling as they take their first steps in their digital transformation journey, now is the time to embrace IoT as the next technological revolution.

IoT Now: Why do you think consumers are slow to adopt IoT services?

Yuval Mayron: There are two main reasons for this low consumer IoT adoption rate. The first one is that there aren’t enough services – those which improve the quality of life – which bring real value to consumers. The second reason is the lack of a simple, intuitive end-to-end experience. OEMs are trying to address the service issue through innovation and the addition of value added services, while they’re postponing improvements to providing an end-to-end seamless experience.” ▼

Imagine a world where you can stay constantly updated about the location of your suitcase, the health of your car, and get alerts if the oil pressure in your motorbike is too low or before you have an engine failure.

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Yuval Mayron: There aren’t enough services which bring real value to consumers

IoT Now: One of the biggest problems standing in the way of IoT adoption is monetisation. What monetisation model do you believe can succeed in consumer IoT? YM: It’s clear today for most of the IoT device manufacturers that selling only hardware is not a sustainable business model for them whether they are large or small. The money will come from the service and the ongoing, on-demand payment from consumers in order to use the device.

Basic services are likely to be free but VAS (value added services) and premium services or content will require additional payment. This is a mature concept in the consumer connected device world.

The examples of Kindle enabling us to buy books, the Apple TV allowing us to order movies and the Xbox offering our kids games in real-time emphasises that this isn’t a new phenomenon.

These three successful IoT services are a strong reminder that OEMs need to embrace and dominate as many roles as possible in the service value chain in order to successfully monetise consumer IoT. Amazon, Apple and Microsoft are all great examples of companies which produce devices, control the operating system, and own the store from which the apps/content are purchased.

Controlling the value chain is vital for OEMs’ success and this is where they’re looking when they attempt to offer smart, connected devices.

Regardless of the solution domains and their location and size, it’s very likely that they will look to adopt this successful model in order to have the best chance of making money in the IoT consumer world.

IoT Now: There are numerous potential players poised to participate in such a model. Who are they?

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YM: In the world of selling worldwide services and content, there’s a need for a complete solution to enable a superb endto-end consumer experience. The situation is even more challenging when we

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INTERVIEW

The key elements remain the same. For every single consumer IoT service out there, there are many players involved and that’s what makes it so difficult to provide a seamless consumer experience

talk about consumer IoT that has a much more complex value structure. We’re not even talking about a value chain anymore, but rather about a value grid.

The key elements remain the same. For every single consumer IoT service out there, there are many players involved and that’s what makes it so difficult to provide a seamless consumer experience. Application developers, IoT service providers, technology enablers, connectivity providers, content providers, OEMs, store owners, and local distributors and channels are only some of the key players involved in providing a consumer IoT service.

When you put them, and the potential relationships that can be developed among them all together, you have this value grid.

IoT Now: The industry faces numerous challenges in the creation and offering of these models. What are some of them?

YM: OEMs face so many challenges and obstacles as they continue to transform themselves from solely being providers of smart connected devices to providers of digital services running on top of those devices.

YM: The largest OEMs, which also tend to have a clear IoT vision, may try to overcome some of these challenges by relying on their deep pockets, global distribution and brand recognition. But it’s almost impossible for small start-ups to succeed in the process of creation, execution, sale and management of global services when they have no local presence, no experience as a service provider, no exposure to consumers, and limited resources to integrate with all the other players in the value grid and to run global operations on a large scale.

But even the largest OEMs, from the car and consumer electronics industries for example, are asking for help in areas outside of their core business domains. Making the switch in both mindset and operations, and moving from the comfort zone of being device manufacturers to becoming worldwide service providers, is equally difficult for both small and large OEMs. IoT Now: Customer experience is a key factor in the success of the consumer IoT trend. How important is it and why?

We coined the term servitisation to describe this trend. It’s our belief that these challenges start from the investment phase and OEMs need to build solutions which incorporate a combination of device and services, an SDK (software development kit) for third party developers, an application store, CRM (customer relationship management) and a lot of IT infrastructure.

YM: Today’s consumer attention span can be summarised using the term “tl:dr” (too long, didn’t read it). It all begins and ends with the customer experience, and success in consumer IoT requires delivering a seamless experience. Consumers want to find services fast, buy them fast and start using their connected devices immediately. You have to offer an integrated solution and customers need to be able to own their experience in no more than a few clicks.

Then the next step is to establish an ecosystem of business partners who will help them push the solution to the market. But it doesn’t end there. The selling phase presents numerous challenges to OEMs, like global outreach for device activation and connectivity, collecting payment methods and guaranteeing a simple consumer experience.

Consumers simply want to compare and select IoT connected device service providers, buy the device, service and required connectivity, and subsequently pay for the services and the connectivity using their existing payment method. And they want to activate it in just a few clicks and do all this using a single store.

The post-sale and service period following the sale brings to the table even more challenges, like consumer billing and support, as well as settlement between the players in the value grid.

IoT Now: What can be done to help the industry in accelerating the adoption of consumer IoT?

IoT Now: Large enterprises and small startups are vastly different when it comes to implementing consumer IoT services. What are some of the primary differences?

YM: While OEMs are struggling to embark on the servitisation journey and search for suitable partners to help them on their journey, local service providers are also trying to find their way into the world of IoT. Some have gravitated towards opportunities providing connectivity for the consumer segment but there’s growing recognition that cellular connectivity is not going to be the defining factor in the communication service providers’ revenues from IoT. ▼

The various business processes like registration, activation and charging, which aren’t integrated, already present another challenge resulting in the inability to monetise current and future consumer services.

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The capabilities that make up the Amdocs IoT Platform

Analysts predict that mobile connectivity will account for only about 10% of the global IoT connectivity market by 2020, so communication service providers need to seek out other IoT revenue sources. We’re already seeing some evidence of change like the development of a full solution for specific consumer IoT domains.

The reference here is to both communication service providers as well as any other domestic service providers like utilities, security, health and others, which have a lot of value to offer to the OEM. This value might include a local presence with a strong brand, customer base, stores and being compliant to local regulations.

I believe that the opportunity for cooperation between service providers, OEMs and other players in the value grid is immense. It’s just a matter of every player bringing their own assets to enjoy the value created out of the joint IoT solution.

Not only does IoT create the ideal platform for different players to come together to pool resources and create solutions, but the added value for OEMs who partner with service providers is massive. In using several service provider strategic strengths, IoT relies on ubiquitous connectivity across wide geographic areas, taking advantage of existing service provider network footprints.

OEMs are on fertile ground to get on board because service providers already have extensive networks of channel and technology partners that can help them meet IoT challenges. In that respect, the industry has already laid the groundwork.

IoT Now: How can Amdocs help make this a reality?

YM: The challenge the market needs to solve is what I like to call a many to many to many situation – many OEMs to many content and service developers to many local service

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providers. We believe there’s a need for a technology and services platform that will enable the different players to meet, cooperate in creating solutions, and use all the available resources to deliver an end-toend experience around consumer IoT services.

The real win-win for both service providers and OEMs is when consumers can find devices and service offerings quickly within this IoT technology experience-focused platform, regardless of their connectivity provider.

Amdocs, as a trusted, independent and nonbiased vendor, has the knowledge, experience and innovative drive to create, manage and offer this platform to every player in the consumer IoT value grid. Such an IoT platform will serve as a single integration point and a matchmaker between service providers, OEMs and enablers, offering consumers visibility to relevant devices and services.

Analysts predict that mobile connectivity will account for only about 10% of the global IoT connectivity market by 2020, so communication service providers need to seek out other IoT revenue sources

The platform supports all the business processes which enable a one click experience for consumers, including, for example, opening an account within the different OEM stores, SIM and connectivity assignment and service purchase. The bottom line of what this platform offers is the ability for everyone to benefit, especially the consumers.

Relying on our close relationships with more than 300 service provider customers and the fact that we help to monetise billions of end consumers, Amdocs is best positioned to enable service providers to utilise their numerous assets and partner with the OEM to drive this mega business for them.

In cooperation with our partners, we can use our expertise as global service and experience providers to connect the dots to enable endto-end consumer services, and manage the reconciliation in the value grid, using new business models and providing exciting experiences to consumers all over the world.

www.amdocs.com

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INTERVIEW

Capitalising on the Industrial Internet of Things requires new business models and processes Global players in many industries such as telecommunications, medical, industrial and manufacturing, and transportation are changing their business models to create new offerings and to capture their share of the trillion dollar Internet of Things (IoT) market. This is not an easy task; it means fundamental change to operations, sales and marketing, product management and operations as well as a redefinition of pricing and go-to-market strategy.

Here, Eric Free, the senior vice president for strategic growth at Flexera Software, discusses the four business process areas that are key to monetising the IoT – licensing and security, entitlement management, delivery and updates, and in-product analytics

Eric Free: There are tremendous opportunities for manufacturers to create new revenue models and establish new and recurring revenue streams

Eric Free: The general IoT numbers are quite staggering and will require a transformational shift as companies evolve from a traditional hardware product mindset to an Internet of Things solution mindset. Manufacturers of all sizes, from startups to conglomerates, must have monetisation strategies in place to capture value at all stages of this transformation.

We're seeing an emerging class of intelligent device – hardware – manufacturers that are going through a business transformation that encompasses business model and core

business operations changes. Every discussion about this change involves software – either embedded on devices or connected to them to deliver additional services, often involving data analysis and business intelligence. This puts software at the very heart of any Industrial IoT (IIoT) solution. As a result, the initial hardware sale will cease to be the main source of revenue and software monetisation models will have to be put in place to add value through software and services. This includes subscription revenue as well as additional application functionality sales.

In addition, in the IIoT world, manufacturers can unlock operational and manufacturing efficiencies by using software to differentiate and build exactly the right solutions, rather than building different hardware products or product lines. The reality is that all of this is for nothing if the manufacturer does not take into consideration the customer experience and deliver on customer expectations. In this new

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IoT Now: We’ve all seen the predictions from Gartner, IDC and many other analysts on the expected size of the commercial – as opposed to consumer – IoT market but the question is, regardless of all the hype, how are businesses actually going to make money or better yet save money with IoT and improve processes and customer experience while doing it?

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IIoT paradigm, knowing and understanding how customers use and consume products is paramount to customer success.

IoT Now: Are there specific examples you have seen in the commercial, consumer and industrial IoT markets?

EF: We’ve worked with many manufacturers across a broad range of industries that had very different business models and requirements. A few use cases that come to mind include: • A medical manufacturer that needed to meter how many times a doctor is allowed to use a MRI scanner and store images in the cloud so that data could be easily shared with authorised parties • An audio producer that needed to enable customers to download apps from their app store, as well as update features on the device and then store that media in the cloud to capture buying patterns • An industrial cleaning device manufacturer that wanted to sell the whole product as a service and charge it per square meters cleaned – including maintenance and service processes, functionality updates and usage analysis • A networking manufacturer that used a gateway model where all the end devices needed to send usage and profile data to a common gateway and the application running on the gateway controlled the behaviours of the end devices All of these examples have a common theme – and that is making hardware more intelligent by using software, so a key consideration is to architect IP with technology that enables manufacturers to protect and monetise in a variety of ways as well as understand how, when and where products are being used so that manufacturers can profit from the IIoT through innovation and predictive analytics.

IoT Now: So, for a manufacturer making that shift from hardware to software and IoT, what processes or systems need to be considered and implemented to support this?

EF: First of all, manufacturers need to ensure that business operations are aligned with strategic objectives. Running a software and IoT business is very different from running a hardware business. Ensuring systems and processes are in place to support a digital supply chain and manage hardware, software and IoT offerings requires a hybrid approach.

Software monetisation is a critical requirement for implementing and managing a digital business and supply chain. It includes four business processes areas that manufacturers need to consider as they shift to IoT: 1. Licensing and Security which enables manufacturers to implement business

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models by defining how products are packaged, sold, monetised and protected against overuse and tampering.

2. Entitlement Management which enables manufacturers to track usage rights, such as which customers have access to which products, to manage the licence lifecycle, to uncover cross-sell and upsell opportunities, to manage maintenance and renewal processes and to provide anytime, anywhere access and visibility into entitlements.

3. Delivery and Updates which enables manufacturers to automate the process to deliver both the initial software and subsequent product software and firmware updates, such as security patches, seamlessly and transparently to entitled customers.

The shift to hardware plus software has and will continue to transform IoT business models and provide great opportunities for those that take this path

4. Telemetry and In-Product Analytics which provides manufacturers with intelligence about how products are being used so that they can improve customer service and make better, smarter product decisions.

IoT Now: From your experience, what advice can you share with executives that are responsible for this shift from physical to digital solutions?

EF: The shift to hardware plus software has and will continue to transform IoT business models and provide great opportunities for those that take this path. Nevertheless, it is a big change. We encourage manufacturers to build a plan, create a vision and get executive alignment. We recommend by starting with a manageable project, like a single product or product line. We like to say: “Think big, start small, act quickly”.

For example, implementing an entitlement management platform can be complex but is absolutely essential for running a successful software business. Often hardware manufacturers don’t realise how unique managing software and the licence lifecycle processes are or the number of departments it will impact. So it is very important to get executive and department alignment before starting any project.

There are tremendous opportunities for manufacturers to create new usage-, valueand outcome-based revenue models to establish new and recurring revenue streams.

At the same time, this is a huge change to financial processes like cashflow and revenue recognition. To that end, finance should be involved in these projects early on to make sure that this change gets managed accordingly.

It’s an exciting time and manufacturers that make the transformation and adopt a software monetisation platform will be will poised to capture their share of the IoT market.

www.flexerasoftware.com/swm

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REPORT PREVIEW

Monetisation capabilities open up a profitable world of large-scale IoT offerings As businesses in all corners of the world grapple with the Fourth Industrial Revolution and digital transformation, it is clear IoT is and will continue to play a fundamental role. A new report, written by IoT Now and supported by Flexera Software, explores IoT business model and monetisation challenges and is previewed here

Traditional hardware manufacturers that are looking to become IoT providers and offer hardware, software, connectivity and services to enterprise organisations will be presented with a series of monetisation challenges.

There is much to consider and several different business models and approaches are emerging to take organisations from trial projects into the profitable world of largescale IoT offerings.

The potential for the IoT market is enormous.

IDC’s Vernon Turner predicts that, by 2025, approximately 80 billion devices will be connected to the internet. Today about 11 billion devices connect to the internet, and IDC predicts that will nearly triple to 30 billion

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by 2020 and then nearly triple again to 80 billion devices five years later.

Research firm Machina Research has projected that, between 2014 and 2024, there will be a total of US$1.3 trillion in IoT revenue that is available to companies that have sophisticated monetisation capabilities – a significant part of the total anticipated revenue opportunity of $4.3 trillion.

Global management consultancy McKinsey & Company estimates the wider IoT to generate between $4 trillion and $11 trillion by 2025.

However, in spite of the glowing prospects, there may be a disconnect between the expectation and the reality. In a recent survey, Cap Gemini Consulting uncovered that while 96% of business leaders globally said their companies would be using IoT in some way by 2017, 70% of organisations do not generate service revenues from their IoT solutions.

Why are traditional device manufacturers transitioning to IoT offerings?

Overall, the consensus among most analysts is that IoT will be the new norm. IoT is increasingly cited by management as critical

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Many industries, including telecommunications, medical, manufacturing, retail and transportation are undertaking IoT initiatives to capture their share of the trillion dollar IoT market. Some IoT deployments are moving beyond initial trials to implementation and some are just getting started. The challenge now, is how manufacturers can generate revenue from these IoT initiatives.

Revenue in this case encompasses efficiency gains, cost savings and net new IoT profits.

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to the future success of their organisation. For many traditional manufacturers, this means becoming a software and services provider to support their IoT offering. Here’s a few reasons why manufacturers are making the leap: • Grow profits by driving topline growth and recurring revenue streams – to survive in this fast paced and emerging IoT world, manufacturers need to rethink and transform their business models to create new IoT offerings through product innovation and differentiation via software, services and data. The value is no longer in the device but in the software, services and data and manufacturers that capitalise on this by offering and monetising service models can build recurring revenue streams through subscription models as well as usage or outcome-based business models.

• Streamline manufacturing costs and operational efficiencies – in today’s highly competitive market, devices are commoditised and manufacturers are seeking ways to reduce manufacturing costs and simplify hardware production processes. Many manufacturers are adopting technology to electronically control and provision device capability and capacity while at the same time implementing remote device monitoring to streamline support and service processes.

This is a baseline for success for IoT solution providers.

• Capture usage – In this use case a highend medical device manufacturer wanted to secure per procedure revenue and utilised metered, pay-per-use or overdraft models, to capture more revenue and make it more affordable to address variable market needs.

• Deepen relationship with customers and deliver an excellent customer experience – with software and services playing a major role in IoT offerings the requirements regarding customer experience change completely. Manufacturers, channel partners and customers alike need complete visibility into what each customer owns and is entitled to in terms of upgrades, maintenance and services – through multiple tiers of distribution.

• Improve competitive position – A manufacturer that makes sensors, valves and software to monitor, track and manage the flow of oil and gas pipes started to monetise value-added software via a usage-based model. This enabled pricing flexibility during turbulent times – such as when oil prices are depressed - by aligning value to revenue model and enabling customer organisations to adopt pay-asyou-go/grow. They also monetised on optimisation, fault detection and operator training system usage runs thereby enhancing customer lifetime value.

New IoT business and monetisation model use cases The IoT offers opportunities across many industries. Some interesting use cases include: • Anything-as-a-service – In this scenario, the producer started to monetise embedded and server software across an entire public safety value chain from radios and cameras to video processing and jail management. In this IoT model, the solution is delivered as a service model and priced per public safety officer per year.

• Expand value with an ecosystem approach – In this scenario, a casino expanded its value within a broader ecosystem and maximised revenue per patron with software-driven gaming machines integrated with casino management software and digital signage.

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Figure 1: Example for Anything-as-a-Service model

• Monetise connected and managed devices – This example involves a medical device manufacturer that embedded software in medical infusion pumps and monetised it based on connection to EMR/ EHR systems and management software.

• Reduce manufactured device variants to one – An electronic test and measurement device manufacturer configured devices with software in order to lower manufacturing and inventory costs, turn features on and off for targeted solutions and enable field upgradeable devices.

The full report contains further discussion of new models for IoT monetisation and explores the key questions manufacturers should ask as they transition to IoT offerings.

It also features guidance on transitioning from hardware to software plus services and IoT offerings, examines some of the security issues facing enterprises and shares further market indicators. The report, in its entirety can be downloaded free at www.monetizingtheiot.com

in today’s highly competitive market, devices are commoditised and manufacturers are seeking ways to reduce manufacturing costs and simplify hardware production processes

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INTERVIEW

IoT monetisation means enabling enterprises to offer everything as a service Mohsen Mohseninia is vice president of market development for Europe at Aeris.

With more than 18 years of experience in the telecoms sector and an early pioneer of the machine-to-machine market, Mohseninia joined Aeris in 2013. Prior to that he was head of M2M for Logica in the UK, having worked for the company in Europe, the Middle East and Africa developing Logica’s global Operational Support Systems business targeting telecom businesses. Here, he tells George Malim that, as organisations move from pilots and trials into larger scale deployments, monetisation of the IoT is being given far greater attention. That attention, critically must cut across the entire business and engage all stakeholders because, as Mohseninia emphasises, 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

Mohsen Mohseninia: 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 is full, thereby saving the cost of trucks driving round checking whether bins need emptying.

This has been the easiest path to IoT monetisation because it saves money.

However, the real value of IoT to organisations is in the way it fundamentally changes their interaction with customers. The disruption it can have to their business model in terms of moving from a capital expenditure (capex) model to one that is much more based on a recurring operational expenditure (opex) model is at the heart of this.

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I’m talking about IoT users 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?

The real power of IoT is in enabling this type of new model, 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 expereince. 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 have that business model transformation

Mohsen Mohseninia: The real value of IoT to organisations is in the way it fundamentally changes their interaction with customers

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IoT Now: How can organisations gain the flexibility to offer multiple services over their IoT infrastructure, thereby enabling multiple revenue streams?

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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.

IoT Now: What are the advantages of using a single provider to control the entire service chain? Why is this better than using several providers?

MM: In order to deliver an IoT solution effectively there are many components that need to come together. You need a device that transmits data using some sort of transport mechanism such as ZigBee, Wi-Fi, narrowband IoT (NB-IoT) or cellular connectivity. A device that transmits a set of data on a regular basis to a data ingestion system to generate immediate insights as well as longerterm 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.

As you can see, it’s a really fragmented landscape and organisations 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.

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IoT in essence is a collection of bits so we think 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

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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

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. I’m talking to insurance companies who want a deeper understanding of how IoT can change the way they interact with their customers and provide insurance not as an evil people must have but as a service people want to have.

These insurers don’t care about the how of the capability, just that it exists. They are thinking about potentially outsourcing the whole infrastructure including the devices and the logistics to a third party that is expert and just benefiting 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. My view is that if you get something at 20% of the risk that provides 80% of the desired solution it beats something at 80% of the risk with 120% of the solution. It’s about getting to the end goals with minimal risk.

IoT Now: How can suppliers create confidence in customer organisations that they won't be charged for functionality they're not using? How might this work in seasonal industries?

MM: I think it is vital for the charges to be transparent. The whole shift IoT brings is a move from capex to opex with everything as a service. If you’re operating in that paradigm having a fixed cost that you’re not generating revenue from would be a fatal model.

We have customers in the combine harvester market; it’s a precision agriculture business.

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They only operate from April to October so, while we could say that’s your problem, here’s an annual fee for using the services, we understand the model is seasonal and we’ve built our billing model to cater for that. 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.

IoT Now: What are the challenges involved in educating the market place to look beyond IoT capabilities as a commodity and look to the value IoT platforms can generate?

MM: 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.

IoT Now: How does Aeris add value to basic IoT capabilities by bringing in additional capabilities such as analytics?

MM: We see our role as being the 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. ▼

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.

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Our focus is how to take more out of the asset, whether it’s a truck or a probe, and make its data readily available across various enterprise processes

We’ve had more than 20 years of delivering M2M/IoT from its infancy. We were one of the pioneers and we’ve learned a lot about how customers want to consume these services and the challenges that it creates which extend across the organisation. Based on that we’ve focused on enabling all our capabilities within our IoT platform. This can be accessed holistically by customers or in a modular way so they can take the pieces they need.

We have a platform centric approach to enable a decision centric approach. Lots of platforms are based on an asset in the centre, such as a connectivity module or a device.

Our focus is how to take more 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. That’s where our focus is and what we’re interested in.

Achieving this requires certain capabilities we’ve built within our platform such as rating, access management, maintenance, routing, alerting, security, integration and location. We are continuing to enhance the platform by adding more capabilities as we move forward.

This is all about transforming the businesses of our customers and these are essential capabilities that can be consumed either holistically or customers can select pieces they need from different suppliers.

We’ve focused on investing where we believe customers will need capabilities to enable them to move from an asset-centric approach to a decision-centric one that goes across the entire corporation.

IoT Now: What do you see as the major ways in which IoT monetisation will mature in the next 12-24 months?

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MM: One thing that is clear is that 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 your personal cloud and you giving access to your personal data when you buy services from providers.

Given the above uncertainty, I see two key attributes an IoT supplier will need to have in order 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. We have the flexibility to support customers’ business models, regardless of what they are.

This is a dynamic and fluid field at the moment and we want to work out what it’s going to look like in 24 months. 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.

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