As the IoT market is young, so are the solutions; plus, standards are rare. That doesn’t mean you can’t benefit from the latest embedded technology, but there are a few points to consider before starting your project.
With a mind-blowing market size predicted to be anywhere from $3 trillion to $11 trillion, and with estimates for total connected devices from over six billion to 13 billion in the next few years, creating an IoT strategy is a necessity.
According to Nathan Nuttall, Research Director, Gartner IoT Group, because of the immaturity of the market, companies are entering a "zone of disillusionment," in that they are realizing previous IoT implementations have not delivered as expected. But it’s not all bad news.
"It’s a positive sign in some ways," he says, "This means we are starting to head towards better productivity and more effective solutions."
Creating new business models
Even more, the real value of the IoT is its ability to enable business transformation - generating new use cases and opportunity and providing enhanced customer experiences. Take smart appliances; they now enable the manufacturer to become a service partner too. As sensors communicate maintenance needs, there’s a chance to provide proactive repairs and save on warranty agreements.
Similarly, in the automotive industry - and perhaps in a case of so-called disillusionment - OEMs originally thought they could sell services to their high-end customers, who pushed back on paying extra for anything. Instead, car makers instrumented additional sensors to realize hundreds of millions of dollars in warranty cost savings.
Nathan cites another case; if a refrigerator manufacturer could get even half of its consumers to automatically replace water filters - parts that sell at approximately 80 percent margin - it can make more money on these transactions than when selling more low-end refrigerators.
Usage-based models are also on the rise. "For instance," Nathan explains,"selling a water pump is no longer simply transactional. Companies are selling pressure as a service and monetizing based on gallons or hours."
Manufacturing, automotive, utilities and oil and gas are all "hot" verticals right now, directly benefitting from improved operations, reduced downtime and better asset utilization, according to Nathan.
In some verticals, like food and grocery, the IoT is tracking the entire product lifecycle. So, from production, warehouse and transport to in store, supermarkets can understand the conditions through the supply chain and know if a frozen product was subject to low temperatures--saving liability and spoilage.
Getting the most
To get the most out of the IoT, Nathan recommends aiming for a short payback timeframe."If you are scoping out an IoT implementation with payback of three to five years," he says, "odds are it’s not a good use case for you. Rethink how it’s being architected. The best IoT projects payback within 12 months."
He also suggests keeping it simple. "Make sure you can integrate into existing systems and infrastructure."
Additionally, be sure to understand where the payback actually comes from. With smart lighting, the revenue is primarily driven by the transition of the product itself, from florescent to LED, not necessarily from IoT intelligence.
Gartner estimates nearly 800 vendors with IoT platform capability, ranging from the mega, to medium to startups. Like any nascent tech market, consolidation is expected. In the meantime, Nathan says, there’s no one solution that can do it all.