The internet of things (IoT), allied with data streams, is enabling suppliers to gain insights into parts of the business they were never able to tap into before.
It is a huge market, estimated to grow from 50bn connected devices in 2020, to 500bn by 2030, according to Cisco. An IoT economy of $1.9tr by 2020 has also been forecast.
With the appearance of new technologies and platforms to support development of connected solutions, business models are shifting and soon IoT-pay-as-you-go (IoT PAYG) could become a reality across industries.
So says Dr John Bates, current CEO of end-to-end IoT and M2M application platform company Plat.One and chairman of the board of patrons at Smart IoT London.
Talking to CBR, Dr Bates said that IoT PAYG "is possible because now we can remotely monitor usage, ensure compliance and predict failures – because things are smart and connected, it is possible to offer exciting new charging models."
Dr Bates believes this concept falls under the principles of "thinganomics" (an intersection of the words things and economics coined by Dr Bates himself), which is about "how to make money, save money and disrupt your competitors".
Thinganomics is the end-product of what is possible to achieve with thingalytics, another term coined by the CEO, which is smart big data analytics for the internet of things.
Dr John Bates, CEO of Plat.One
Behind pay-as-you-go (PAYG) is essentially aN everything-as-a-service (EaaS) concept, where by turning ‘objects’ into services both suppliers and buyers will see benefits.
"The number one principle of thinganomics is about services. It is not about the technology, it is about services, just like phones are now about apps. You can attract people to products. It is not about the commoditisation of products, it is about services that you can enable and so on.
"EaaS is more attractive for the seller. They get more money, attract more buyers, they can do OPEX and operating expenses, rather than CAPEX," Dr Bates said.
Further benefits to the supplier include a lower barrier to market entry, higher revenue overall and the opportunity to sell new services, such as big data analytics collected from devices, which then leads to new markets and higher revenues.
As for buyers, under the thinganomics principle, they will benefit from no capitalisation as they will be paying for services on a monthly basis and only for what they use.
In addition, users will also be able to use products that at full-ownership are not affordable by everyone and experience higher reliability as the supplier will be more incentivised to keep the product/service running.
Dr Bates said: "You can use the IoT to maximise the value from existing systems."
Also speaking to CBR, Dr. Kevin Curran, senior member of the IEEE, said that such business models are indeed a possibility.
"When all physical devices can be deployed with tracking abilities whether powered by a battery or not through passive RFID like capabilities, then companies can more easily incorporate leasing models into their business model so that they can capture all uses of a system."
He said: "Basically the IoT enables an end to end charge per use model that was previously unthinkable. In some ways however, it really can be seen as a welcome move as consumers only get charged per use. It is possible that we only end up paying what is proper in the end."
Putting IoT PAYG to work
As a PAYG service, the IoT would create a platform for more Uber-like business roadmaps to be created.
Dr Bates says the Uberisation of everything, from cities to even data centres, will highlight that everything is a dynamic market.
Just like Uber raises ride prices if there is a surge in demand, suppliers and operators can also benefit from such model.
"Uber maps dynamically people and has concepts such as if there is a high demand for rides, it has surge pricing. What if you apply that to a city?
"For example, traffic gates in smart cities: if it is really busy, controllers might increase the price of certain roads based on the smart traffic gates and the same goes with parking. You might adjust parking prices based on demand."
Another example, is what Dr Bates calls Coffee-as-a-Service. "We are working with a coffee machine maker whose coffee machines are completely connected so you can do remote diagnosis, predictive maintenance and you can completely control it.
"But if you can monitor how the machine is being used by the market, you can do this coffee-as-a-service model. Instead of selling the machine, you can lease it based on the number of cups of coffee sold.
"You can have an end to end service where you can monitor how many cups are being filled up, when it is going to go wrong, so you can maximise uptime and arrange someone to fix it, make sure people are not putting the wrong beans, etc."
The same could happen with tires, where instead of buying new ones, people could lease them.
This Tyres-as-a-Service model also comes with big data analytics services "so the thinganomical principal is, sensor-enable the products that you sell, extract the data from the channel and then sell them as analytics services".
"All these are ways of making money, saving money, making it more attractive for customers," Dr Bates said.
Dr Curran also said that there is nothing to stop this model of IoT PAYG being copied in for instance, door mats (counting people), smart radiators (charge per heating use), smart sofas (charge per person sitting down and how long), fish tanks (charge per person looking at the fish with camera scanning for faces), headphones (charge per use), and so on.
Ultimately, such business models of PAYG are a reality and are already being used by companies like high street chain Costa Coffee.
Dr Bates said: "Those that are being disrupted need to adapt as well [to the new digital circumstances].
"If you do not have a strategy in the next year to 18 months, you are dead. You have to have your approach or you will be dead in the same way Blockbuster video was."
