By 2025, more than 100 billion Internet of Things connected devices are predicted to be live, generating an overall revenue of close to $10 trillion, writes Neil Hamilton, VP of Business Development at Thingstream
The industry’s unprecedented growth to date looks poised to continue globally over the next few years, with the sensors market alone estimated to grow at a CAGR of 26.91% during 2016 to 2020. This has provided businesses with a huge opportunity to utilise IoT applications to reshape their business models, fully optimise their performance and open up new revenue streams through wide-scale, intelligent solutions. This has contributed to the global implementation of IoT across many sectors, as businesses look for new and innovative methods in which to manage and monetise their services.
Utilising the ‘Everything (X)-as-a-service’ model
With IoT technology presenting new ways to deliver applications quickly and efficiently via the Internet, the ‘Everything-as-a-Service’ (XaaS) business model has garnered huge interest of late. XaaS provides a great opportunity for enterprises to transform their business models from selling products to selling business insight; generated via products that are now provided free of charge or for a nominal fee.
As more companies look to diversify their offering in an increasingly competitive landscape, the opportunity to take advantage of an XaaS business model is only growing. The value of the traditional cloud-based SaaS market is now forecast to grow to over $132bn by 2020, however this is likely to be undervalued given the shift to combining IoT with SaaS and PaaS services.
Rapid developments are already being made in this space across various industries worldwide, which are now changing how those services are charged for, providing businesses with greater continuity when it comes to generating revenue. For example, aero-engine manufacturer Rolls-Royce’s ‘Power-By-Hour’ model now enables airlines to pay by-the-hour for engine usage. This cloud-based IoT approach also allows for engine maintenance to be predicted, better optimising resource efficiency and reducing disruption.
These advances demonstrate a transformational shift away from a pay-for-hardware model and towards paying for the data and valuable business insights collected through analysis, enabling more intelligent business decision-making and improved cost efficiency. To successfully open up new revenue streams, many are now moving their sales models from a CAPEX to OPEX-focused structure, in order to better manage their operating expenses.
Disrupting the value chain
The willingness amongst businesses to embrace intelligent IoT and use it as a catalyst for change demonstrates how thinking differently can open up new revenue streams, transforming a business for the better. Across the IoT spectrum, it is now vital that device owners are making intelligent decisions when it comes to the type and amount of data they collect, how it is managed and where it is processed.
Smart IoT connectivity at the Edge of the network now enables devices to push only vital intelligence to the cloud, close to the source of the data, while becoming instantly accessible to all players. For example, connected sensors can be transmitting their own data feed directly to a cloud service whereby it can be routed to each player in the value chain.
As a result, the sensor manufacturer is adding value for the owner of the IoT application from the beginning, not only by enabling new revenue streams but improving productivity by freeing up resources, which can then be invested in other areas of the business.
What’s more, businesses are now increasingly able to build their own IoT solutions using manufacturer components, tailoring their applications for potential new IoT revenue streams that they have identified within their own operations.
Leveraging low power connectivity
With IoT devices now presenting businesses with new ways to increase profitability on a global scale, it is equally important that they are utilising more secure and efficient ways for devices to communicate with each other. Today, leveraging a low-power, wide-area network (LPWAN) also provides businesses with another way to improve scalability and open up revenue possibilities.
Low-bandwidth messaging can be used to send small quantities of data across the core GSM network, which is embedded across the world in 2G and LTE networks. An MQTT-SN-based messaging protocol provides a globally connected network to support the development of new revenue streams. Because this type of connection doesn’t require any form of internet connection that would otherwise leave it prone to external intrusions, greater stability is offered for IoT devices, keeping connectivity levels high and costs low.
This type of connectivity allows IoT devices to communicate freely when travelling across worldwide networks, even in areas with limited connectivity or which are not currently available with a cellular connection. This creates new possibilities for businesses to effectively open up their services to a wider range of markets.
As IoT technology continues to develop, we will gradually see fully automated solutions – which only send data when parameters change – become increasingly commonplace, minimising the need for human interaction. This will enable easy, wide-scale implementation of new, intelligent IoT solutions, presenting increased cost savings for existing streams, while offering further scope to build new business models.
It is now crucial that organisations adapt their business models accordingly, allowing them to utilise IoT in further monetising these services. By successfully leveraging advancements in Edge analytics and low power connectivity, organisations can strengthen business models and add value to existing propositions, while future proofing their technology to ensure they continue to lead the way in innovating for their customers.
About the author
Neil Hamilton is the VP of Business Development at Thingstream, a division of Myriad Group. Neil is a technology evangelist who has been a founding member of a number of successful technology startups. Neil is passionate about demystifying complex technology and evangelising the business benefits and new revenue opportunities such technology presents.