The convergence of internet, wireless technologies and micro services has resulted in the evolution of Internet of Things (IoT). This convergence has broken down walls and allowed for unstructured data to be analysed and used for value generation.
IoT has applications in almost every sector from healthcare to manufacturing and smart city projects. When used in healthcare it can create devices that provide real time diagnosis for a disease through smart sensors, patient surveillance, monitoring storage units and something as simple as patient status. At the same time when deployed in a smart city project, IoT enhances traffic management, monitors and integrates the conditions of critical infrastructure.
IoT is gaining popularity fast, and this can be seen in the current market trends which give a clear indication of the affinity of platforms towards IoT. The Gartner hype cycle from July 2016 identified that IoT platforms will continue to grow; therefore it would not be wrong to expect an increase in the number of IoT platforms in the near future.
There are many players in the IoT ecosystem; therefore we would like to clarify the definitions used here. We will use vendor for companies who provide the ingredient components to OEMs. OEMs create the device, products and services. Customers are the consumers of the IoT products.
IoT Vendor Approaches
IoT platforms are used for solving various issues ranging from making hardware easier to use to transferring data easily to cloud. When we take into consideration 5 broad technical areas where value creation is possible, two approaches emerge:
1) Focused (Specialized) Approach: In such a case, a vendor tries to create the best solution in one technical area. For example, a hardware vendor would create the best price/performance hardware chip possible. Sometimes the vendor goes a step further and creates an ecosystem by supporting many partners in each of the above technical areas.
2) Platform Approach: Vendors using this approach try to bring together and supply hardware, firmware, networking stacks, cloud and machine learning libraries – all in one solution. They believe that by integrating these technology areas together, they are creating a more optimal solution which is usually better than an OEM picking their own options. This approach has been gaining momentum lately.
While the above approaches create value in the marketplace, a survey of OEMs helped in identifying their biggest problems in IoT and the two things that stood out were:
1) Business models: In essence, how does an OEM make money in IoT? At the end of the day, companies have to increase revenue, decrease cost, or reduce risk. Without that, solutions will end up looking for a problem. This topic will be covered in detail later.
2) Security: Since an IoT product, by definition, is connected to the Internet, security is a big concern. It opens up the product to many more vectors of attack. Historically, an OEM didn’t have to deal with this and therefore doesn’t have the knowledge or expertise with this level of security. Business Model
Customer Expectations Have Changed
Creating a product and following the basics of sales, marketing and distribution made sense in the past. An OEM created something and pushed it down an existing channel. In the brave new IoT world though, we are seeing IoT products from incumbent OEMs struggle to gain traction. Today, more than ever, we are seeing IoT customers (consumer / user of IoT devices, products and services) wanting a closer and more direct relationship with the IoT-enabled OEM. They expect the OEM to:
Sell them the product more directly (less intermediaries)
Service/Maintain the product for the life of the product
Provide on-going operational support with things like Analytics, Control & Monitoring, Upgrades, Diagnostics
Help shift costs from a CAPEX to OPEX model.
Data/Insights is the New Currency in IoT
We have noticed that incumbent players in the industry are more focussed on making their existing product range better, faster and cheaper rather than embracing the ‘data’ available to them. Organisations that understand and accept ‘data’ are able to unlock tremendous amounts of value and gain a competitive advantage. This would mean an increase in their ASP (Average selling price) and their customer base.
Minimal Executive Support
Executives are realising the huge potential that IoT holds for businesses and decide that they need to enter this segment. This leads to investments being made, allocations of funds and other resources, however what follows is nothing different from usual business. What the organizations lack in is a business model that would go along with IoT based products, what these executives fail to identify is that although the engineering and innovations teams can come up with the required products, they cannot create a business model for it.
The end result of this is an endless loop of Review and Refine cycle for the executive management and a selling/manufacturing cycle for the sales team.
Value Proposition of Connectivity
The lack of a concrete business model leads to issues on several levels. Every OEM needs the answers to certain fundamental questions; “Why is connectivity needed?”, “What are the benefits of a connected product?”, “What is the ROI?”And even though there is a product that is being worked on by the engineering team the OEMs become hesitant and tend to ignore this new product in order to meet their quarterly sales target.
Finding the Right Talent
OEMs in the past have gotten away with creating products themselves. In fact, many of the IoT platforms created are domain neutral. The OEM is expected to use the IoT platform and layer on their domain knowledge on it. This usually means a brand new engineering cycle, which requires new skillsets. However, an Intel Labs survey, found companies are struggling to bring on board the right coding talent.
Let’s consider the problem across five technical domains. We will add one more dimension for business. As you can see in the chart below, each dimension has a lot of options (the list is not exhaustive. Not all options are shown in the picture). The options have exponentially increased over the last few years.
So if you are an executive who launched an IoT program, should you rely on one of your existing engineering leads or should you go hire someone? If you go hire someone, how do you even write the job requirement? Should you pick a generalist or someone with in depth knowledge? The same Intel Labs survey found that an OEM needed a team with breadth and depth at the same time. As you can imagine, finding such an individual (or team) is very difficult.
The lack of an appropriate business model has prevented OEMs from getting maximum success out of their products. OEMs implement their existing market channels, however these channels are not relevant for the new IoT based products. Along with the need to identify a concrete business model, these OEMs also have to understand the depth and breadth of talent which is a difficult task. In order to overcome these issues there is a need for solutions that allow the consumers to utilize and harness the potential of IoT to the maximum extent.
Amar Parmar, head of IoT Design Centre at Windriver
