Menu
Is the Internet of Things creating new software vendors?

Is the Internet of Things creating new software vendors?

“The IoT is creating a new type of software vendor."

The Internet of Things (IoT) is turning many manufacturers of "things" into first-time software vendors that need licensing and entitlement management (LEM) solutions, according to Gartner.

By shifting product value from device hardware to the software running on the device and applying an appropriate licensing strategy, manufacturing product strategists can maximise revenue potential.

“The IoT is creating a new type of software vendor for whom LEM is vital to protect, differentiate and monetise their offerings," says Laurie Wurster, research director, Gartner.

“We expect that by 2020, a failure to put in place a LEM system will result in a 20 percent drop in potential revenue generated from software for device manufacturers connecting to the IoT.”

The issue is that many makers of "things" still apply a traditional "box" mentality to products and do not consider the extra revenue opportunities of licensing-controlled embedded software and applications.

Most of these companies are first-time software providers, mainly device manufacturers and OEMs that can now monetise their software as well as the devices via the IoT. For these companies, the IoT represents a significant market opportunity.

“By monetising the software on their devices, these vendors will be able to increase and drive recurring revenue streams, creating billions of dollars of additional value,” Wurster adds.

“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.”

For the foreseeable future, Wurster believes the IoT will drive business transformation for many device manufacturers, enabling them to use software on the device to differentiate product and solution offerings.

Read more: Microsoft celebrates a massive customer and Cloud win

Like vendors in the traditional software industry, device manufacturers need to protect and monetise the intellectual property (IP) contained in applications.

For Wurster, they can do this by adopting LEM systems that control access to the Internet-connected device, its functions and its features.

LEM also enables flexible pricing and packaging, allowing manufacturers to bundle product features, capabilities and capacities, ensure payment, provide verified upgrade paths and create new revenue streams.

“By controlling product functionality and the features and capacities of Internet-connected devices via flexible licensing, device manufacturers will be better able to compete in current and new markets,” Wurster adds.

Read more: Microsoft acquires FieldOne, adds to services in the field play

“They will also be able to come to market quicker with new products, new feature combinations and product enhancements.

“Moreover, software-controlled configuration gives manufacturers more flexibility to regionalise their offerings and develop niche solutions for specific markets without having to manufacture separate product stock keeping units (SKUs).

“Overall, this reduces the number of SKUs produced, lowering overall manufacturing costs while enhancing manufacturers' ability to customise and regionalise products.”

Gartner research indicates that the vast majority of device manufacturers do not have, or have yet to implement, commercial LEM systems to monetise the IoT.

Wurster believes that this is because, historically, they had little or no software IP to protect.

Initially, they will look to build LEM capabilities in-house as they already have a technical and engineering background that developed the hardware, and they often believe that these internal resources can also build an efficient LEM system.

“For some, recognising the need for a LEM solution is a viable first step,” Wurster adds. “However, manufacturers are starting to question the wisdom of diverting high-value resources to developing and maintaining LEM systems.

“As the need to scale and react quickly to changing market conditions increases, manufacturers may eventually start to buy packaged solutions.

“Providers of commercial products continue to broaden their set of capabilities and invest in support for new licensing models.

“This makes these solutions an attractive alternative for device manufacturers that do not want to build and maintain in-house LEM software.”

Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Tags GartnerInternet of Thingssoftware

Featured

Slideshows

Arrow exclusively introduces Tenable Network Security to A/NZ channel

Arrow exclusively introduces Tenable Network Security to A/NZ channel

Arrow Electronics introduced Tenable Network Security to local resellers in Sydney last week, officially launching the distributor's latest security partnership across Australia and New Zealand. Representing the first direct distribution agreement locally for Tenable specifically, the deal sees Arrow deliver security solutions directly to mid-market and enterprise channel partners on both sides of the Tasman.

Arrow exclusively introduces Tenable Network Security to A/NZ channel
Examining the changing job scene in the Kiwi channel

Examining the changing job scene in the Kiwi channel

Typically, the New Year brings new opportunities for personnel within the Kiwi channel. 2017 started no differently, with a host of appointments, departures and reshuffles across vendor, distributor and reseller businesses. As a result, the job scene across New Zealand has changed - here’s a run down of who is working where in the year ahead…

Examining the changing job scene in the Kiwi channel
​What are the top 10 tech trends for New Zealand in 2017?

​What are the top 10 tech trends for New Zealand in 2017?

Digital Transformation (DX) has been a critical topic for business over the last few years and IDC is now predicting a step change as DX reaches macroeconomic levels. By 2020 a DX economy will emerge and it will become the core of what New Zealand industries focus on. From the board level through to the C-Suite, Kiwi organisations must be prepared to think and act digital when the DX economy emerges in 2017.

​What are the top 10 tech trends for New Zealand in 2017?
Show Comments