How IoT Business Models maters ?

Business model is in my point of view a big blocker for IoT tsunami : when IoT is service and service is monthly fee, IoT is also objects and objects business model is based on push the box and get 30% standard business model.

These two approaches are really different and distribution must change its business model to correctly fit with IoT and extract the right level of value. Taking 30% one shot is quick & easy but getting a regular revenue based on service delivery is more profitable.

The blocking point seem to simply be process, people and software: actually distribution is not organized and equipped with the right IT for managing recurrent revenue, for this reason the distribution have no major interest is service oriented product and prefer all inclusive device where service is included in the initial price.

The problem of this model is that it is not profitable for IoT industry : IoT have a making cost to produce the object but year after year each object generate a service cost. In most of the existing business case, new object sell are funding the service for old objects. This can work when the company is growing and make scale effect reduction on service cost. The problem start as soon as the market is decreasing and the cost of running service is higher than the margin made on new object sell. This problem is a killer as soon as your service cost is high like when you have to support a recurrent communication fee (like for what I consider real connected object, I mean objects able to communicate with no local infrastructure dependencies). The only way is to make money on data collected from the object and be payed on client privacy. This equation is really dangerous for the client, even for the IoT industry as much as privacy regulation law are growing and data market not really predictable.

I’m quite sure that this situation will soon change as distribution can make much more money based on service than based on box pushing and as soon as they will be organized to manage it, as the business is better, they will make a lot of available space for service business model based object, enabling the IoT tsunami.

 

 

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2 Responses to How IoT Business Models maters ?

  1. Nestor says:

    Totally agree.

    I am in the case that “new object sell are funding the service for old objects”.
    Clients are accustomed to pay for the hardware but refuse to pay for the software or the service, even if the fee is without benefit, just to save the costs.

    • Paul says:

      I’m not sure of this : deezer, netflix, cell-phone… I agree people prefer to get it for free but a part is ready to pay for service and quality. Problem in my opinion is the place for service based model in the distribution.

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