How software will create new revenue stream in the IoT era?

BANGALORE, INDIA: The Internet of Things (IoT) is turning many manufacturers of "things" into first-time software vendors that need licensing and entitlement management (LEM) solutions to protect, differentiate and monetize their offerings, according to Gartner, Inc.

"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," said Laurie Wurster, research director at Gartner.

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.

"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," estimates Wurster.

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

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

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

"Moreover, software-controlled configuration gives manufacturers more flexibility to regionalize 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 customize and regionalize products."