The Thing About the Internet of Things

Matt Rowland-Jones
Nov 23, 2016
6 min read

We’ve all read predictions about the impact that the Internet of Things (IoT) will have on our daily lives. Called by some ‘the next industrial revolution’ the growth of IoT is hard to ignore. Its forecast that there will be 34 billion devices connected to the internet by the year 2020, up from 10 billion in 2015 (1). Six trillion dollars will be spent on IoT solutions over the next five years (1). These are numbers that are hard to take in. 34 billion connected devices equates to five connected devices per person globally.

IoT is about ‘big data’ and ‘analytics’. 34 billion connected devices means huge amounts of data, and huge amounts of data means smart analytics tools are needed. That’s clearly an opportunity for technology vendors and services providers, who can focus on a range of challenges from data storage to data security, and from dashboards to predictive AI.

IoT and the Channel

The rate of IoT growth is clear, but its impact on technology routes to market is not so clear. Cloud technologies have already disrupted traditional channel models, by putting software off premise, and by creating a ‘pay by use’ commercial model. IoT overlays new challenges.

Top of the list of challenges is redefinition of what a channel partner actually is. We’ve seen a new breed of ‘born in the cloud’ partner emerge with SaaS. These are channel partners who have built their commercial model around services and ‘pay by use’ as opposed to resell. But that shift is likely to be massively eclipsed by the wave of new partner types that come onto the radar with IoT.

The point about IoT is that the route to market is not formed around the technology. The route to market is formed around the ‘things’ that IoT puts connectivity into.

In the pre-IoT world your data analytics software was sold to an end customer by a data analytics software reseller. So your channel was made up of data analytics software resellers. In the IoT world your data analytics software might be sold to an end customer by an industrial pump specialist.

Hence the title of this article. The thing about IoT is the things. The industrial pumps, the vending machines, the medical appliances, the warehouse shelving … IoT is about all of these. And each one has its own route to market, its own reseller base and its own service specialists. Suddenly these are all relevant to you as a technology vendor.

Here’s why.

Industrial Power Management

Think about industrial power management: the electrical boxes, power switches and cooling appliances that manage power to a large manufacturing plant. Power management solutions like these have been sold into manufacturing customers for many years through a specialist route to market. Let’s call them ‘power management design and installation specialists’.

In the pre-IoT world, power management design and installation specialists would hardly have figured in the go to market model of a large technology vendor. But that is changing.

Makers of the electrical boxes, power switches and cooling appliances are putting internet end points in their products. Not only that, they are creating software tools that allow users to analyse this data to help manufacturing customers reduce power costs. And manufacturing customers will pay a good deal to achieve that.

The traditional power management design and installation specialist is now required not only to be good at connecting cables to boxes, but they also have to be good at data analytics software and services. And it’s quite possible that data analytics software and services can generate more profit than connecting boxes. So the design and installation specialists are likely to want to get good at this quickly, before someone else beats them to it.

The power management design and installation specialist is becoming a software reseller. Suddenly that looks very interesting to a technology vendor.

Three Levels of Ecosystem Maturity

IoT routes to market are highly verticalised, as is clear in the above example. Power management specialists sell power solutions to manufacturers, warehousing specialists sell space management solutions, and vending specialists sell on site retail solutions. Each category has its own ecosystem of providers, and each ecosystem, at its own pace, is moving inevitably into big data and analytics. In other words each ecosystem is edging closer to becoming a ‘technology channel’. Some ecosystems are already there.

We use a three step model at bChannels to understand the maturity of a vertical ecosystem, as IoT moves the ecosystem towards being a technology channel. This three step model is useful as you consider which verticals are most relevant to you as a technology vendor, and how you should engage with them.

STAGE 1 TRANSFORMATION: DEVICE INSTALLATION INTO DATA ANALYTICS

In this transformation the device manufacturer starts to place IoT end points in devices, and the data supply is ‘turned on’. Design and installation specialists in the vertical route to market look to the device manufacturer to provide data aggregation and dashboard solutions that leverage the data.

Thinking of our power management vertical, this would be when IoT end points are put into power management devices, and the device manufacturer provides software tools to help the installer gather and use data gathered from the devices. The ‘installer’ might start to develop services capability, focused on power management optimisation, and leveraging the data that is gathered.

STAGE 2 TRANSFORMATION: DATA ANALYTICS INTO SOFTWARE SOLUTIONS

In this transformation the ‘installer’ is extending its services practice, so it’s no longer just about working with the manufacturer’s tools and dashboards. The ‘installer’ is becoming a software business. They are selling services packages and software applications that provide customers additional value beyond the core device and dashboard.

Thinking of our power management vertical, this would be when the ‘installer’ begins to consult with manufacturing customers on power management. Something that was an ‘installation’ business is now offering packaged services and software applications that use data gathered from IoT end points to improve power efficiency. The ‘installer’ is forming some relationships with traditional IT vendors to manage data, to secure data, and to analyse data. The power management device manufacturer is likely to have a ‘software program’ to encourage ‘channel partners’ to deploy and service their software solutions.

STAGE 3 TRANSFORMATION: SOFTWARE SOLUTIONS INTO APPLICATION SERVICES

The services packages and the software applications get ‘productised’. They are marketed and sold separately to the device installation, as well as with it. The ‘installer’ is now likely to have a fully-fledged analytics business, leveraging technology that traditional ‘IT Channel Partners’ will be familiar with. Much of it in the cloud. On line marketplaces start to form, providing application developers (the old ‘installers’) access to a customer base for their vertical solutions. Vertical solutions marketplaces are funded by device manufactures, who are looking to create developer ecosystems for their software platforms.

Thinking of our power management vertical, this would be when the old ‘installer’ has branched out to become a power management application vendor (what we would know as an ISV). This is a full on technology play, and the old ‘installer’ is now recruiting software programmers more than they recruit power engineers. The company markets their power management applications through an on line marketplace that is funded by a power management device manufacturer. The power management device manufacturer is likely to have a ‘developer program’ to encourage application development on their software platform.

What it means for Technology Vendors

Vertical industries where most of the route to market is in ‘Stage 1’ transformation (Device Installation into Data Analytics) are not that interesting for most technology vendors, and many verticals have been at this stage for some time. Putting IoT end points into devices, and providing installers with tools to read the data is not in itself that interesting for technology vendors.

It gets more interesting from Stage 2 onwards. Vertical industries where most of the route to market is in ‘Stage 2’ transformation (Data Analytics into Software Solutions) are starting to become software channels. Many vertical industries are in this stage. Take any industry and check out the ‘device manufacturer’ websites, and you see ‘software programs’. These programs are aimed at engaging ‘installers’ (let’s call them ‘channel partners’) to adopt and drive value from software solutions that leverage big data. These channel partners are getting interesting for technology vendors for two reasons:

They are becoming consumers of technology, so they are interesting as a ‘sell to’ proposition, but more importantly …
They are becoming influencers in large accounts, advising line of business owners on technology infrastructure and vertical solutions.

Stage 3 goes a step further. Vertical industries where most of the route to market is in ‘Stage 3’ transformation (Software Solutions into Application Services) are potentially critical to technology vendors. There aren’t many vertical industries that have reached this stage. Yet. When they do they represent fully fledged technology routes to market. They feature ecosystems of small ISV developers looking to partner with providers for a range of services – as we said earlier in this article – “from data storage to data security, and from dashboards to predictive AI”.

Stage 3 IoT ecosystems will disrupt legacy technology routes to market.

Cloud technology looked like a game-changer. Perhaps it was. IoT is for sure. If you’d like to talk more about how IoT routes to market are relevant to you, connect with us at bChannels.

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