Software Monetization Featured Article

IoT and the Impact of Software Monetization

September 11, 2014

The Internet of Things (IoT) is about a whole lot more than things. It is about people, processes and new services. And, it is about all of what I like to describe as the “Infostructure”, i.e., networks and software that enable it to not just monitor stuff but create value.  In fact, it might just be that the biggest opportunity of IoT is software monetization.

How so?

I recently had the opportunity to discuss the monetization of the software that will be embedded and otherwise essential to making IoT function with Jeff Kaplan, THINKstrategies, Managing Director. He paints an interesting picture that speaks to those opportunities that lie ahead.

TMCnet:  IoT means different things to different people. Indeed, there is an old saying that, “where you stand depends on where you sit.” Let’s start with your definition of IoT.

Kaplan:  We are living in what will be a ubiquitously connected world. In this new world that is emerging, what we are looking at is not just the ability to connect to a universe of things, but even more importantly the ability to capture timely info about those things so their quality can be improved and a host of truly innovative new services can and will be created. It is all about the data.

While the bulk of use cases are about notifications of changed status, there is other critical information being generated about on-going utilization patterns which will enable us to better understand how things are used.

TMCnet:  Can you provide an example?

Kaplan:  One to consider is truck fleet management. In the first instance, IoT will notify those managing the fleet if there is something wrong with a truck in real-time so corrective action can be taken. However, given the information being generated there is also the ability to take that information to proactively mitigate risks related to truck wear and tear, highway conditions, traffic, weather, etc. In addition, the application of sophisticated analytics means fleet operators will be able to make the entire fleet more efficient and effective.  In short, a lot of monetization opportunities lie with uncovering new business opportunities.

I should add that the smart grid with smart metering holds tremendous promise, especially in the area of using captured data for the utility to engage in load-shedding, and for customers to get a better handle on their usage.  Again, this is about using the awareness created by IoT to react to real challenges, be proactive on things that are problematic and use the captured data as the foundation for entirely new services.

TMCnet: At the risk of sounding alarmist, what about security when it comes to IoT and software monetization?

Kaplan:  This is a real concern. The industry is aware of it obviously. The interesting thing is that we would not be talking about IoT if we were not talking about the cloud and the ubiquity of wireless communications.  The combination means we can capture the data generated by all of those things. That is the good news. We can also now share the data with whoever needs it on the web which means security is critical. 

The interesting thing is that thanks to nanotechnology sensors are now inexpensive and are becoming pervasive. Plus, embedded software and back-office processing software is making all of this possible while expanding the vectors of vulnerability. 

We are still at the bottom of the on-ramp of the learning curve when it comes to IoT. What we are lacking is how to effectively manage these sensor networks to determine the liability boundaries and ethics that need to be in place in terms of not just security but privacy.  When networks go from managing a few sensors to possibly hundreds of thousands it is clear that new security and new IT management systems will be required.

It also means that every part of the ecosystem will have some responsibility for security, as well as a need to monitor, track and apply the right terms and conditions for usage of all of the software. 

TMCnet: There have been sensor networks out there seemingly forever. Yet, IoT has literally burst on the scene as something that has caught everyone’s imagination.  Along with cloud and mobility, what else makes the case for IoT so compelling now?

Kaplan: First, the impact of the cloud, mobility and inexpensive sensors cannot be under-stated.  We are witnessing the dissolution of proprietary boundaries to deployment. In addition, and this is why software is so important, the impact of open source software is extremely significant. Now software can be built through APIs so it can be universally interoperable.  In fact, I would say that any cloud vendor who is not API-friendly is on the path to demise.

TMCnet:  In this new world, how do you keep track of things? And, how do you monetize the software?

Kaplan:  As with so much of technology advancement, the trick is going to be to make the complex simpler.  What we are seeing right now is evidence in fact that this is going to take an ecosystem to accomplish since no one vendor will be able to do IoT end-to-end.  What this means is that the technical expertise of various ecosystem partners will need to be used, and things like testing and certification will be important for all of the companies building out things with APIs and connectors. 

In addition, along with the ability to manage the network and its elements, clearly having a state-of-the-art software licensing capability will be absolutely vital. And, since every vertical market and company will have unique requirements, the monetization opportunities for professional services will be huge.

As to monetization, the smart metering business is a great example that is applicable to almost every sector.  After all, every time something is used it will need to be billed. That is software at work.

TMCnet:  Any final words of advice?

Kaplan:  What people should remember and needs to be emphasized about the IoT is that it really is not just about changes in status. The data being generated has immense value both in real-time and for creating entire new businesses. This is about focusing on outcomes and extracting real actionable business insights. 

Jeff has a lot more to say on this subject, and readers can have a chance to hear more from him and a terrific group of industry subject matter experts who are busy creating the future on September 18 in Boston at the Connected Cloud Summit.  In fact, for those interested in learning more about how to build a successful business around IoT, there will be an executive roundtable at the event on the subject where panelist Shlomo Weiss, General Manager, Software Monetization, SafeNet (News - Alert) will be able to provide insight an answer questions about IoT and software monetization. 

Hope to see you there.

Edited by Maurice Nagle