While all the talk at CES this year was on the IoT - from connected cars to smart home systems to wearables in healthcare – one aspect that isn’t being talked about is the practical and necessary component – how to make money from this ubiquitous connectivity and the ensuing avalanche of data.
Cashing in on the IoT Requires Agility
Key to this is the ability to quickly and easily create monetization, pricing, and mediation schemes, enabling monetization business strategies that didn’t exist yesterday. It doesn’t matter what one is trying to monetize: API calls, MRI machines, car services, security, voice services, storage, or access.
Brendan O’Brien, Co-founder at San Francisco-based Aria Systems and an innovator in cloud billing, agrees that the IoT is probably the most hyped technology in his lifetime.
'But the huge upside has yet to materialize,' says O'Brien. 'While many companies are driving customer service, operational, and supply chain improvements using IoT, most companies are still working in the margins when it comes to monetizing IoT. When companies upgrade their systems only then can the hype be actualized.'
Following are two trends he points to that are bringing about the 'Monetization of Things'
1) All revenue will become recurring revenue
Think of the variety of consumption and subscription-based business models. Perhaps not in the next 12 months, but the mandate is clear: customers increasingly want what they want, when they want it and how they want it. Already 47% of U.S. businesses have adopted or are considering adopting a recurring revenue model to be able to respond rapidly to customer demands and the number is steadily rising.
Billing as we know it is broken. The $8.9 Trillion dollar IoT opportunity requires new approaches to billing and monetization. Without agile billing engines behind recurring revenue models, IoT offerings will fail to fully launch.
2) Usage will be the key driver for IoT monetization
There is a gold mine in the data collected from IoT devices, sensors, etc., and a green field opportunity for companies to determine how to provide value to customers from that data. But of even greater value will be the role usage plays in customer retention.
For customers to buy offerings on an active and repeating basis over time, you need to know them very well - to anticipate their needs, maximize their satisfaction, and present them with cross-sell and upsell opportunities they love. That knowledge comes from usage data. Understanding how customers consume products and services provides insights into their habits, behaviors and patterns that can’t be seen otherwise. The vendors who succeed at getting close to their customers will win the IoT market.
There are many use cases to consider. One major industry already benefiting from usage and consumption-based models is healthcare but others abound.