Software Monetization Featured Article

Software Monetization and the Internet of Things (IoT)

September 08, 2015

Whether you call it the Internet of Things (IoT) or the Internet of Everything (IoE), there is little doubt that we are moving toward a connected world where software-controlled sensors are poised to transform the ways in which we work and go about our personal lives. In high-tech, we are always looking for the Next Big Thing and clearly IoT is at or near the very top of the list.

Just because we are witnessing the transformation to a connected IoT world, don’t assume that the journey these companies must go through in offering  new products, such as value-added services and the corresponding fulfilment  process, is not without uncertainty. Indeed, the data generated by these intelligent devices is intended to make the process “smart” in their ecosystems, but is actually rather complicated.

Devices for the connected home, telemedicine, industrial automation and public safety, all share a common reward: they are able to provide real-time visibility for actionable intelligence. Remember, though, that with real rewards come real risks that should and can be mitigated. In addition, the need to protect intellectual property (IP) and data on the move—or at rest—is paramount in creating and maintaining trust in this environment. In order to survive the IoT revolution, operational efficiencies and business effectiveness that reduce costs and automate processes are critical to keeping up with the volume, pace and rapid growth of this potentially high-revenue IoT business opportunity. The highly competitive IoT market serves educated, discerning customers expecting instant results. As such, there is a need for security and protection, and a solid software monetization strategy capable of improving the way a business runs, automating processes, and keeping customers satisfied.

I recently had the opportunity of discussing IoT software protection and monetization with Aurelius Wosylus, Director Business Development Embedded and IoT at Gemalto (News - Alert). Our talk shed some light on where we are in the maturation of a trusted IoT environment, and where we are headed. He was kind enough to provide some visuals used in his discussions with developers and customers who are beginning their IoT journey.

TMCnet: The first obvious question is where are we in terms of the IoT?

Wosylus: The short answer is that we are still very much in the early stages. Sensors are becoming smaller and more powerful. Work is being done on extending battery life to increase uptime and reliability, and reduce maintenance costs, and developers are busy exploring the possibilities of new applications. As a result, and due to concerns raised by the recent hacking of Jeep, security in the design of IoT deployments has become even more critical from an end-to-end perspective. 

We are also witnessing almost every vertical moving toward a services model. Producers of physical products are recognizing the value of connectedness, especially in regard to the value of the information generated, which can be used to improve the operations of their products and, more importantly, create new revenue streams.

TMCnet: Can you provide an example?

Wosylus: The one that people can most easily relate to is the connected car. I recently read that it takes dozens of microprocessors running 100 million lines of code to get a premium car off the driveway, and this software is only going to get more complex. In fact, software now constitutes over 16 percent of a car’s value—a figure that looks set to increase. This trend is reflected not just in the auto industry, but also in car insurance premiums.

TMCnet: What does all of this mean for application developers?

Wosylus: At a high level, this really has to be an ecosystem play, and no one company can do it all. For developers, the graphic below says it all; it shows which areas are affected when designing IoT-based products. There are a lot of moving parts as the two figures below illustrate.

Source: PwC

TMCnet: What are some of the challenges for developers?

Wosylus: As I said, there are many. The top ones include: providing secure and remote feature enablement; integrating applications in the corporate IT infrastructure; preventing reverse engineering and device tampering; and making it easy to go to market in a timely fashion, since these apps are going to be deployed on a massive scale.

TMCnet: Putting challenges aside, what should developers focus on in terms of how to generate business value?

Wosylus: Again, I find it helpful to visualize with a chart. 

Notice should be paid to the compliance and security aspects, but for developers, the last two points are critical as well because they speak to monetization. Having visibility on usage so that developers can refine their offerings in terms of packaging, feature planning, and creating business models where customers only pay for what they consume, is a win-win for developers and customers alike.

TMCnet: So to recap for a moment, the pillars of a successful IoT ecosystem are end-to-end protection of the hardware and software. This means securing not just the physical devices, but also the software that drives them and the data they exchange. It includes things like strong encryption for data at rest and on the move—from remote location to back office—along with being able to integrate with other systems, and having the visibility and tracking to improve operations and open the door further to new software-controlled services. The goal is a monetization architecture that is secured physically as well as virtually, where a developer’s IP cannot be compromised, and where actionable intelligence can be used by developer and customer alike. What does this actually look like? 

Wosylus: First, the recap is correct. In particular, it is important to stress the security piece since it is so relevant to IoT. In fact, using the Gemalto Sentinel portfolio of solutions, we do three very important things regarding security: we encrypt software to prevent reverse engineering, lock software to the hardware so it can’t be transferred to other platforms, and, through licensing, we make the IoT more manageable by securely and remotely switching features on and off. Everyone wants their devices to have connectivity, and once they have it enabled, we can help customers manage their devices in the field.

This is perhaps best illustrated by our work with National Instruments (News - Alert). The chart below shows the topology of monetization of features using remote activation.

This is just one example that shows how we have been able to provide a secure environment for all stakeholders in the ecosystem and a platform for handling further IoT deployments. The beauty here is having the flexibility to upgrade capabilities through software, without compromising performance or security. 

Many companies already have products in the field. They want to sell new software-based features to existing customers. As the example shows, they can now upgrade applications with paid features as opposed to free ones. Under flexible licensing policies and rules, they can activate features across their user base to those who have paid for updates. Whereas in the past, the only revenue opportunities came from CD shipments, which obviously were not software-controlled, nowadays, new sales opportunities exist wherever a hardware base is installed.

TMCnet: Do you have any closing remarks about software monetization and IoT?

Wosylus: I think it’s important to realize that we are still early on in the maturation phase of IoT deployments, and that the level of security must be improved if the IoT is to succeed. Because there are so many ways to enter this market, we need to generate awareness of how to securely develop, deploy and manage IoT offerings. This requires a holistic approach, taking into account everything from the devices themselves to operating systems and compilers. Unfortunately, there is no such thing as total security—in theory, everything can be hacked. 

It is also worth noting that as we move toward an IoT-connected world, there is as much value in data as in applications, and protecting, extracting and acting upon that data will be key. That’s why moving to usage-based models and software licensing is something that anyone who’s serious about the IoT should consider from the start.

Finally, I can’t emphasize enough the value of having a solution that serves the dual objective of creating end-to-end trust and using next-generation software to automate as much as possible. Doing so will provide real-time information that can be leveraged for competitive gain and an enhanced user experience.

Note: If you would like to hear more about software monetization in an IoT world, LicensingLive! 2015, to be held on October 12-14 at The Juniper Hotel, Cupertino, California, is the place to find out about solutions than can help your business, and an ideal place to have a unique opportunity to interact with thought leaders and colleagues. The theme of this year’s LicensingLive! is Transforming Your Business: Monetization Strategies for Software and the IoT.

To register, click here:

Edited by Dominick Sorrentino