Date: October 2017, Location: Caracas, Quito, Guayaquil, Ecuador.
|Miércoles 04, 5:37 am
I read the report:
How to start a business with IoT
1st Literature Review
Post by Canonical:
- For many businesses looking to take their first step into IoT, how to start and the benefits are unclear issues.
- There are three key elements to start with: how can IoT be monetized, what skill are required and addressing fundamental security concerns.
From the connected factories of Siemens and AirBus, through to smart home products of Samsung and Bosch, the Internet of Things is providing businesses with a whole new platform upon which to build innovative products, processes and new business models.
With a current market valuation of over $900bn1, both manufacturers and those looking to adopt IoT solutions are well aware of the potential of IoT. However, in trying to leverage this potential, many business are still grappling with how IoT can benefit their business and the best approach to get started with their IoT initiative.
Businesses see massive opportunities in IoT, but are also aware of significant challenges Broadly-speaking, respondents to Canonical’s survey see a number of basic ways in which the internet of things might benefit the business community:
While a quarter of IoT professionals are focused on the opportunities offered by new connected products and services, just as many are excited by the potential big data insights that connected technology could provide their brands.
These same professionals stated that the most immediate challenges they are faced by IoT are:
Similarly, when asked what they believed was needed in order to encourage IoT adoption among enterprises, the top priorities to emerge were:
While IoT professionals recognise the potential of IoT, it’s clear that they believe the underlying business case and how to get started implementing IoT needs to be better understood. The above findings indicate not only concerns about security, as to be expected, but also how they set up an IoT ready organisation and how to turn their investment into one that can drive new revenue growth. In addressing these points, this report will answer three simple questions:
1. ‘How can IoT investments be monetised (and justified)?’
2. ‘What skills are needed in order to develop and maximise
3. ‘How can the industry address the issue of IoT security?’
Approaches to monetizing IoT
Many organizations are struggling to understand what many would argue to be the most important question in IoT – how, exactly, will they make a return on their investments? This section will look to explore the different routes to monetization and which may be most wise for the long run.
Many vendor companies will continue to profit through hardware sales
As it stands, 55% of IoT professionals see their profits as coming from the sale of hardware. And with hardware revenues continuing to go up, driven by the sheer volume of hardware required by the IoT, these hardware vendors can be confident of the fact that they will continue to make decent money for some time to come.
With chipsets and electronics dominating the cost of IoT devices, it’s a natural place to explore when trying to determine the future of IoT hardware. With every generation of IoT hardware, we are witnessing an increase in processing ability, a reduction in size, and ultimately, a significant reduction in cost. As electronic hardware becomes cheaper year after year it potentially means lower bills of material and higher margins for hardware vendors.
The reality however is very different. The pressure of commoditization means that without product differentiation, the downward pressure on price is stronger than the reducing cost of the bill of material. This leaves hardware vendors with little choice; either choose more expensive custom components with a price premium and serve less price sensitive, niche markets, or use commoditized components and try to differentiate.
This second approach is the one chosen by an increasing number of IoT device manufacturers, turning their backs on bespoke hardware solutions and choosing instead to fit their devices with fully general-purpose single-board computers (SBCs) or system-onchips (SoCs).
Where once the idea of running a full computer rather than a simple microcontroller would have been viewed as overkill (both in terms of cost and functionality), as the size and price of SBCs such as the Raspberry Pi or Orange Pi has plummeted, developers can now justify using them as a low-cost, high-power alternatives at the heart of all of their IoT devices.
So how are IoT businesses looking to differentiate and turn profit in the Internet of Things?
Monetising IoT – Expected monetization methods of IoT
Profit will be increasingly driven by services and software – which are also potential monetization routes for owner/operators.
The results from the survey question above speak loud and clear with IoT vendors exploring a number of new business models to complement hardware and envisaging that the sale of software and services promises greater revenues. We can see that the overall percentage of IoT revenue represented by hardware is on the decline. 78% of IoT professionals agree that the real monetization of connected devices will lie in the creation, deployment and maintenance of value-added services, with 40% stating it will be, specifically, through the consumption of services. With the exception of consultancy services, all the other monetization models are from scalable productised services. And the only way to deliver these services is through embedded or cloud software which effectively turns a hardware product into a ‘thing as a service’.
This shifting of the value center sharply towards software is rendered possible only by the commoditized electronics available to hardware vendors. In a world where all compute can affordably be general-purpose, the functionality of virtually all devices will be defined by the software running on them. But this shift of value also needs a change of approach from device manufacturers to put software right at the heart of their product.
This valuable new avenue for monetization can only come from a connected device using a general-purpose-compute SoC/SBC, that treats software, not as a one off component that ships with the hardware and never changes again, but instead as an essential part of the product that will evolve over time and that can be bundled and monetized in a number of ways. This starts with the operating system and extends all the way to the business specific applications being run on the device.
As a result a versatile, IoT specific operating system such as Ubuntu Core, that can be repeatedly upgraded and has the ability to add new functionality in the form of apps plays a key role to opening up the IoT to new based software business models.
There are a number of additional business models at play in IoT today, including:
Things as a platform
• Revenue from industrial insights: for example, sale of failure analysis stats
gleaned from industrial machinery
• Revenue from personal insights: similar to the above but at a consumer level,
for example, the sale of anonymised fitness tracker data
• Revenue from 3rd parties creating applications for your hardware
Things as a service
• Support: for example, repairs resulting from the prediction that a device will require maintenance could result in the device-owner saving money further down the line. Repairs can also be directly monetized, and can result in improved brand loyalty
• The use of IoT devices for context-specific advertising
• Value from the interaction of human factors and machine interaction: for example, warning a consumer when their device detects it is too close to a source of danger (‘pay per warning”)
The opportunities that these business models present to device manufacturers are much more attractive than the old hardware opportunities. However, migrating to these approaches requires a mindset shift from hardware manufacturers:
This is a paradigm shift not dissimilar to the one the consumer software industry went through when migrating from shrinkwrapped software to app store business models.
Profiting through IoT app stores
An ‘app store for things’ is the natural extension of the app store concept. But rather than being applied to software applications running on a phone they apply to any new software-based service that can be offered on a ‘thing’.
App stores for things have the following characteristics:
• They can be used to distribute any type of software-based service: new functionalities, reconfigurations, analytics and so on
• They offer an online sales channel
• They take care of the software distribution without any effort from the developer
• They can be used to distribute securely any software, whether internal or 3rd party
• They can be ‘white labelled’ to offer services specific to the device they are installed on
Through the development of an IoT app store, businesses can offer add-ons and enhancements to their existing connected devices, charging users to download and install packaged applications to build upon their existing IoT technology. Such stores represent an opportunity not only for vendors, but also for software vendors and system integrators to widen the market for their software and services.
This software sales or app store approach is set to fundamentally change the way that businesses benefit from investments in the internet of things, with 55% of IoT professionals saying that they intend to monetize their devices through the use of ongoing software-led upgrades.
The ‘app store for things’ can be used in a variety of ways. For example, Lime Microsystem, producers of mobile base stations, use a white label appstore from Canonical to let base station owners configure their device in one click and turn a 4G base station into e.g. a powerful Wi-Fi hotspot. Lime Microsystem uses the fact that the configuration file that makes the hardware a 4G base station or a Wi-Fi hotspot is only a piece of software, and packages that configuration file as an application that can be downloaded from a store.
It is also worth bearing in mind that, while the term ‘app store’ is usually associated with paid third party applications, it is also possible for companies to use an app store as a simple yet effective distribution mechanism to distribute their own software – either as a means of delivering upgrades or to patch devices en masse in-the-field.
In a world where every connected device generates data, the opportunities for monetizing this data are limited only by your access and your imagination. We’re likely to see a number of until now unpredicted methods of monetization emerge as the industry develops further.
It is this approach that Canonical promotes through its growing work in the IoT space, encouraging the adoption of a single IoT operating system6 upon which advancements and new functionalities can easily be developed and delivered via snaps.
This is the future of the IoT – a future of software defined everything. But in the same way that companies require new approaches to software distribution to approach the IoT they also need a new set of talents.
Identifying and hiring the right skills
Of course, there’s little point choosing a business model or technology unless you have the capabilities necessary to deliver on them. Many businesses are concerned by their own lack of knowledge and skills within the IoT market. With high potential for profit and low barriers to entry, widespread promotion of the internet of things has led many technology brands into a gold rush of IoT investment and product design. Unfortunately, given its relatively new status, many business leaders have found themselves running headfirst into a set of technology and business challenges that they do not yet fully understand. What they need is a new generation of talent with the knowledge and skills to navigate the current Wild West that is the internet of things.
The evolving architecture in the IoT landscape is rapidly moving from basic end-point devices delivering data to cloud applications to a more diverse and complex computing model. This means that in addition to the need for data science and security skills, that are in short supply, distributed computing skills are also emerging as an important requirement. Any current ‘full stack’ developer or architect now has to be aware of many more components, it may be anything from machine learning, Artificial Intelligence or Blockchain to new user interfaces such as Augmented Reality or communication stacks on emerging networking protocols. The physical world presents design challenges too, where time of day, remote locations or weather conditions can alter the ability to operate reliably.
The first question that an organisation looking to embrace IoT needs to address is what skills they require and whether any of these already exist in-house. The sheer scale and scope of IoT means there is a plethora of skills that could be required depending on the project or projects within an organisation. The requirements for these may vary and evolve over time, meaning that organisations need teams who are multi-functional and thus generalists by nature but also cover a number of specialisms across the entire software stack from low level embedded code to machine learning capabilities in the cloud. Inevitably some of these skills will be commonplace already but IoT will also increase the need for skills that weren’t previously required.
It’s not just cloud development talents that are required. When asked what skills they deemed necessary to be an IoT expert, after data analytics (at 75%) software development skills were found to be the most needed skill (according to 71% of IoT professionals). In one sense this is surprising, as embedded development is by no means a new discipline. But when considering the fact that hardware is rapidly commoditizing, with monetization and differentiation increasingly coming from software, it is natural that businesses invest in building up their embedded software development capabilities. Unfortunately, 33% are struggling to hire employees with this particular skillset.
Full article: Defining IoT Business Models
Review by: Larry Francis Obando – Technical Specialist
Escuela de Ingeniería Eléctrica de la Universidad Central de Venezuela, Caracas.
Escuela de Ingeniería Electrónica de la Universidad Simón Bolívar, Valle de Sartenejas.
Escuela de Turismo de la Universidad Simón Bolívar, Núcleo Litoral.
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