Following the Money in the IoT
KNOWLEDGE TO POWER THE BUSINESS OF IOT
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CEO and Founder, goTransverse
The Internet of Things, also known as IoT, means many things to many people. To me, it’s “the next big thing” for businesses and lies at the heart of the next frontier of technology. At its core, IoT innovations are simply enabling communication between devices through a combination of software, hardware and IP connectivity. Going forward, it will be more and more common that not that making a device smart will be less expensive than keeping it dumb. This is the game changer of IoT; with everything connected, software becomes the new supply chain.
Estimates of IoT’s financial impact vary greatly but one thing is for certain, it is going to be big. Forecasts from McKinsey & Company estimate it at between $4 and $11 trillion by 2025 and General Electric, a major IoT player, predicts the “Industrial Internet” will reach $10 to $15 trillion over the next two decades. IoT brings the possibility of vast wealth generation for companies wiling to invest early, corner valuable IP and capture market share.
“Show me the money”
What IoT promises is something so revolutionary that even traditional “offline” industries like logistics, manufacturing and alternative energy are getting into the IoT / Big Data game. But behind the hyperbolic buzz and eye-popping revenue projections lurks a tiny problem every business hoping to offer IoT has to solve…how do I actually make money?
The ability to monetize IoT requires a new way of thinking about monetization. What constitutes a monetized transaction? How do you track, measure and apply a rational monetization methodology to a data set that could amount to data potentially millions of transactions? How do companies present charges to consumers in a way that doesn’t lead to confusion and disputes?
Monetization strategies and subsequent solutions must be transparent, understandable and able to withstand the scrutiny of all potential stakeholders—customers, board members, internal and external auditors as well as regulatory bodies like the Securities Exchange Commission (SEC). If not, companies could create confusion leading to fines, earnings re-statements and even customer or shareholder lawsuits.
SaaS Online Billing to the Rescue
Some companies have made the choice to buy traditional on-premise billing solutions, while others decided to custom develop solutions in-house to support their monetization strategies. Both are capital intensive, intractable and usually chasing a moving target.
At goTransverse, we made the bet on SaaS. We believe that purpose-built, cloud-based on-demand software optimized for IoT, coupled with extensive domain expertise will be the preferred option for most companies looking to monetize their IoT offerings. It’s the reason why we built TRACT®, our online billing and revenue recognition solution, as the only multi-tenant SaaS platform on the market able to monetize the promise of IoT and the associated massive amount of generated data.
But it is not enough to support the monetization of any combination of one-time, recurring/subscription and usage-based offerings with batch real-time (“just in time” or as fast as information is received) metering, rating and native revenue recognition. An agile monetization solution has to be able to operate in real-time. The solution also needs to be scalable, highly extensible and capable of configuration so that many industries running different ERP and CRM systems can seamlessly bill for any conceivable transaction.
Granted, the mechanics of billing may induce a coma for some. But rest assured, it could spark the interest (and ire) of customers, critics and regulatory bodies like almost no other business process. Who wants to hire a call center to handle customer-billing complaints when an online billing solution can provide a flexible model for long-term scale and innovation? The ability to address enormous amounts of data in addition to challenges with scale and complex product catalogs, all the while keeping compliant with the prevailing rules of revenue recognition, is the most future-proof solution of all.
Remember the Money?
While many traditional and newer technology industries have been successful at utilizing devices to the benefit of their users, they have expended significant resources in doing so. Companies with IoT investments are rapidly reaching a critical juncture where they must figure out the right way to mediate usage data, monetize transactions and recognize revenue in a compliant manner.
In order to do this, these companies need to ask themselves the following questions:
• What would our customers like to improve?
• What information do we need to do that?
• How can we capture that information?
• Once captured, how can we analyze this information to better understand what’s happening?
• How should we charge for this intelligence?
The answers to these questions will ultimately determine whether or not they will be able to make money from IoT. After all, if you’re not billing for it, it’s just a hobby. Explain that to your shareholders.