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April 3, 2014

Why the key to Internet of Things profit lies in embedded apps

Providers cannot compete on price for IoT success.

By Amy-Jo Crowley

Manufacturers specialising in the Internet of Things (IoT) will not make money from the sales of their devices unless they unlock economic value from the software developed to power their devices, according to the latest research.

Analyst firm Gartner and Flexera Software, a software licencing expert, said this could be done by applying software licencing models and entitlement management technology to their products.

A metered or pay per use model, for example, could generate significant revenue for a companty’s customers as well as lower production costs.

Laurie Wurster, a research director at Gartner, told CBR that many manufacturers are tackling the IoT market but few have a clear idea how their solution can be monetised in the longterm.

"Many of the manufacturers haven’t begun to think about this yet so I think we’re on the bleeding edge. They want to be part of the IoT but they’re not thinking how to monetise beyond the thing itself," she explained.

"Licensing entitlement and entitlement management will protect your IP, so it’s the software running on your device that you’re trying to protect.

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"So your device will cost X amount of dollars and then the software that’s running on it will count an additional dollar figure, based on how much feature and functionality you want and whether or not you have multiple types of intellectual property."

Wurster added that the concept should be applied to medical robots, smart cars and other intelligent devices, and that manufacturers should never compete on price.

"If you keep lowering your price you lose out, especially if price goes below the cost of production," she said. "So you need to look for ways to differentiate your device from someone else and the way to do that is going to be with the intellectual property that’s going to be running on that device."

Mathieu Baissac, VP of product management at Flexera Software, added: "Once you build software licensing into your business model, the opportunities to flexibly configure your products and offer value added services is virtually infinite.

"And it doesn’t result in an increase in manufacturing costs because you control this all through software licensing and entitlement management."

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