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Every 'Thing' Needs Software - Why IoT Will Churn Out Thousands of New Software Vendors

Every 'Thing' Needs Software - Why IoT Will Churn Out Thousands of New Software Vendors Image Credit: Deutsche Telekom

Manufacturers churning out electronics such as light bulbs, the electric kettle or even the automatic garage door will find the Internet-of-Things (IoT) slowly redefining the competitive landscape they are currently operating in. The change comes on the heels of many competitors adopting IoT and machine-to-machine(M2M) communication technologies to enable the devices and appliances they manufacture to be integrated to the rest of the Internet.

What does this mean anyway? It simply means that they want their customers to be able to turn on, turn off and control these devices and appliances remotely, for example, via their mobile devices or their laptops. They want to enable their customers to be able to manage these devices regardless of their location or connectivity, as long as they have access to the Internet. More importantly, they want to enable customers to have access to information captured and transmitted by these appliances and also be able to build in intelligent machine-to-machine commands that enable these appliances to automatically respond to triggers and hence various situations, automatically.

And why is this critical for manufacturers? For most manufacturers, deploying IoT technologies enables them to create an edge for their products in the marketplace. It also enables their products to respond to the rest of the ecosystem in which they operate in. For example, within the connected home ecosystem whereby users are able to configure, control and manage lights, ceiling fans, thermostats, doors, windows and showers remotely and virtually, an electric kettle that requires manual intervention to be turned on or off will no longer fit into that ecosystem.

Fearing that competition will push 'dumber' appliances out of the market, manufacturers are scrambling to implement IoT technologies for their appliances. What is interesting in this development is that manufacturers whose domain has always centered around hardware and electronics are now venturing into the software market. This arises from the need to bundle their products with applications on both the server as well as the user end. These applications enable the transmission of information from and to the appliances, allow the processing and analysis to take place (in the cloud) and at the same time, create the interface, on user devices, from which the analysed information can be received and stored and from where inputs can be controlled.

Gartner, in its recent report, "The Internet of Things Enables Digital Business", explained how manufacturers' foray into the software market will be opening up new revenue streams for these players, namely from licensing and entitlement management (LEM). LEM, broadly speaking, refers to the terms of payment and use of software, and is key to monetization of software solutions. Without a proper LEM in place, developers of software stand to lose billions of dollars from not being able to charge for the use of their software and for having no control on the intellectual property rights on their work.

$5 From Every Appliance

According to Gartner, for device manufacturers becoming first-time software vendors, LEM systems must be put in place, without which the firm expects "a 20 percent drop in potential revenue generated from software". Laurie Wurster, research director at Gartner added that, "By monetizing the software on their devices, these vendors will be able to increase and drive recurring revenue streams, creating billions of dollars of additional value. For example, with an estimated 25-plus billion 'things' in the marketplace, and if manufacturers are able to collect an average of $5 for software from each of these installed units, that translates to additional revenue estimated at $130 billion."

While the software market will always be the domain of software houses, appliance manufacturers looking to gain a stronger foothold in the wider ecosystem they are operating in, specifically in the realm of IoT and M2M will soon or later move into developing their own capabilities in this market, at the minimum to enable them to keep their products ahead of their competitors. What is more, with the continous evolution in IoT and M2M communication technologies - the likes of Zigbee, Z-Wave, LoRaWAN and Sigfox, and with the proliferation of IoT platforms provided by a growing number of IoT service providers, manufacturers will want to be independent of third party software support to ensure their products remain compatible and flexible across the systems, infrastructure and partner platforms that they wish to be part of.

Author

Executive Editor and Telecoms Strategist at The Fast Mode | 5G | IoT/M2M | Telecom Strategy | Mobile Service Innovations 

Tara Neal heads the strategy & editorial unit at The Fast Mode, focusing on latest technologies such as gigabit broadband, 5G, cloud-native networking, edge computing, virtualization, software-defined networking and network automation as well as broader telco segments such as IoT/M2M, CX, OTT services and network security. Tara holds a First Class Honours in BSc Accounting and Finance from The London School of Economics, UK and is a CFA charterholder from the CFA Institute, United States. Tara has over 22 years of experience in technology and business strategy, and has earlier served as project director for technology and economic development projects in various management consulting firms.

Follow Tara Neal on Twitter @taraneal11, LinkedIn @taraneal11, Facebook or email her at tara.neal@thefastmode.com.

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