How the Internet of Things Changes Business Models

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internet of things

Internet of Things (IoT) is a network of things connected to each other and describes an ecosystem including objects, connectivity and application/services. There are an of projections on the size of the market by 2020 and the projections differ considerably yet all projections agree to a minimum of $1 trillion-plus addition to economic activity as a result of IoT. This is a large number and driving almost every firm (even remotely related to IoT) to encash the IoT buzz. At Faststream Technologies, we employ scientifically proven and tried – and – true methods to refine our customers’ IoT business model.

Given the passion on the Internet of things as well as the challenges in this space, the significance of IoT business models and partnerships could not be overemphasized. It is very important that the industry interacts in partnership to accomplish the market objectives. It is similarly vital for the numerous entities to understand that will be best positioned to lead the partnership. Let’s begin with the value chain to arrive at the proper IoT business model for which would certainly need to be based on collaborations as well as the partnership.

IoT Business Model – Value Chain

The value chain is probably one of the most integral parts of IoT business model. It specifies how the service is delivered. IoT has an extremely intricate value chain as a result of the fact it affects a large number of process. The big opportunity likewise implies numerous stakeholders who would have to interact to deliver on the promise of IoT.

Plainly, the partnership formation is challenging when each of the entity would consider itself more vital compared to the other. In such a situation, one of the most vital question for any kind of business interested in IoT is to find its position in the value chain. The position in the value chain would define its relevance, significance, and opportunity. The big question is who will lead the IoT or win. The player who is getting the biggest pie of the value chain needs to preferably take a lead in forging partnerships. A glimpse at the value that could be targeted by different players, it is clear that the platform providers are best positioned to lead the IoT as they catch as much as 50% of the value. Capturing the biggest value share would not make them an automatic choice and competing claims would proceed to fragment the IoT market.

There are 5 vital groups of players, viz., device carriers, operators, platform providers, systems integrators and application carriers. Each of this group would have numerous firms depending upon the target industry. Each of the players brings the unique strength to advance the IoT however not everyone gets on an equivalent ground.

Device Providers

They capture up to 10% of the value yet can they develop service-based IoT business model? They have the capacity to capture an additional 10-20% of the value if they are able to do so. Without a service model, they will take advantage of the buzz around IoT however they will continue to be simply a vendor. The best option for them is to participate in non-exclusive partnerships with the lead player. Players like Nest are trying to lead into the platform and application provider domain yet this method risks advancing a proprietary solution.

Operators

The operators are really essential as they provide the connectivity and have had a head start over others with M2M. It is all-natural for them to think about themselves as frontrunners. I do not think that the network providers that could connect the most devices will win not only the network value, however, are likewise best positioned to garner downstream value. The operators do not have it in them to lead the IoT space as they find it tough to think beyond connectivity and ARPU. The operators still have not learned solution selling/ managed services. Operators have to welcome the startup culture as IoT business model is moving really swiftly and is not likely to wait on the internal bureaucracies. The mindset of an operator is based upon a stable business environment and keep in mind an operator overcomes 80% of revenue from annuity business and is not likely to go too far on risky ventures. They require a partner to head to the market and are not likely to play leading role in any of IoT partnership/alliance. IoT will drive higher data usage however as a result of commoditization, connectivity is at risk of becoming to be the ‘non-value’ add component of the value chain. The risk of operators being decreased to simply the pipe to the cloud is very real.

Platform Providers

The platform is the heart of IoT and combines the hardware, the connectivity, service providers and the vertical applications to offer industry-specific IoT solutions. The most of the serious players are considering to become to be platform providers yet the success would depend upon their capacity to forge partnerships and drive towards the common objective.

IoT platform is maybe one of the most misconstrued terminologies in IoT. There are different kinds of IoT platforms like the connectivity/M2M platform mostly focused on connecting the devices using telecommunications networks/SIM cards without much focus on analytics or data processing, hardware specific IoT platform, these types of platforms are probably the proprietary platforms developed by device vendors, e.g. Nest and Pure IoT Platforms, platforms that have been particularly developed for IoT keeping the scale, requirements as well as needs in mind. Not all kinds of platforms would have the capacity to lead the IoT initiative. The winning mix is a platform that provides device management, cloud-based storage, analytics, data visualization and capacity to integrate with 3rd party systems using API or SDK to be able to advantage of legacy systems along with wide range of other IoT software and hardware.

System Integrators

They have a big role in the industrial internet of things. Not everything is plug-and-play out of the box and thus we require system integrators to make the specific components of IoT to interact in one of the most optimal ways for the customer. The best option for the system integrators is to determine their particular niche and enter into partnerships with large platforms players.

Application Providers

They are too small a player and could not carry the partnerships by themselves. The best procurement targets by significant IoT players to capture the bigger pie of the value chain. Few industry-specific large application carriers are most likely to run independently.

Summary

No provider has an end to end IoT solutions yet and therefore the only option is to partner or perish. The platform providers appear to be well placed however will require the partnerships to fully realize the potential of IoT. Device manufacturers and operators would have to partner with platform providers and vice versa to guarantee that they are not overlooked of the IoT ecosystem.

If you are ready to learn more on how to improve your IoT business ROI with our IoT Business Model. For further details on IoT Business Model, contact us at info@faststreamtech.com.


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