Strategically Using IoT to Build B2B Recurring Revenue Streams

When we meet with device manufacturers we often hear that they struggle with their ROI of Internet-of-Thing (IoT) initiatives. Usually the cost of IoT enabling their devices cannot be passed along in the purchase price of the devices, so many companies focus their IoT efforts instead on saving costs through efficiency, predictive efforts, or other areas focused on reducing maintenance and support. Those are certainly laudable business efforts, but if a company wants to use IoT to grow top line revenue, a different approach is needed.

Fortunately, there is an approach that works across different industries and across different product sets. We call it generating “B2B IoT Recurring Revenue Streams”. For most device manufacturers, they sell either direct or through an OEM relationship. Their devices are then installed and utilized at multiple locations distributed over a wide geographic or even global area. For a segment of their business, they have customers who buy multiple of the devices in question, and then install them throughout their offices, buildings, warehouses or other physical locations. The challenge for those B2B customer is how do they monitor, maintain, upgrade/patch, and replenish any consumables for all those purchased devices across their geographically dispersed set of facilities? Usually the answer today is they have people assigned to do all these tasks, often in multiple departments, and usually executed with limited visibility of whether any of these processes are working…until something breaks, when management finds out the processes were not working.

We suggest device manufacturers adopt a completely different model that brings real value to these types of B2B customers. Instead of just selling multiple devices to a given customer, instead sell them the devices combined with a full suite of software and IoT connectivity that allows the device manufacturer to handle all the monitoring, maintenance, upgrade/patching, and replenishment of any consumables for all the companies purchased devices, regardless of where they are located. In return the customer can reduce their own labor costs through either reductions, or re-alignment of workload towards more productive tasks.

How can this be accomplished? As an example, a hardware manufacturer out of Los Angeles saw an opportunity like this. This company saw that home automation was becoming more mainstream but selling individual home automation sensors and devices is incredibly competitive and rapidly moving towards commodity status. However, when they looked at their customer opportunity, they noticed that one type of B2B customer had a need to manage all the home automation devices across their portfolio of locations distributed geographically across the U.S.A for the thousands of rental properties they owned. When they looked even closer, they realized their customer was using expensive labor to visit the homes for tasks such as locking/unlocking doors to show potential tenants, checking on HVAC problems/status, responding to reported water-leaks, reacting to break-ins, and many other high cost labor incidents. So, like any good customer-centric business, this hardware manufacturer built a solution to help these B2B customers. The solution involved outfitting their home sensors and home automation devices with IoT capabilities, and then building a scalable cloud-based software solution that allowed the customer to centrally monitor and manage these devices across thousands of homes. The hardware manufacturer then charged a monthly fee related to the volume of devices deployed and the number of houses supported, allowing revenue to grow as home installations were completed and homes became connected.

Amazingly, this hardware manufacturer designed and built this solution in just 3 months. They were able to accomplish this because they partnered with our firm, ThingLogix, and utilized our Foundry platform to configure, not code, their way to a solution that handled their thousands of devices installed in thousands of rental properties. Even better, their costs to run Foundry started off small, and increased in-line with their rollout of additional homes, coinciding with the increase in revenue they saw for bringing online each rental property. Lastly, they didn’t have to worry about scalability and quality since Foundry was built on AWS as a serverless architected platform solution, so almost unlimited scalability was available from AWS without requiring the complexity of managing virtual or physical servers, storage and networks.

The key piece of this puzzle was figuring out how to bring a centralized B2B solution to the market that helped their customers manage something that was previously de-centralized and costly to monitor and manage by the customer. Their centralized IoT cloud enabled system could be deployed at low cost to the customer, saving them money, while also generating new incremental monthly revenue to grow the top line of the hardware manufacturer. Additionally, this created vendor-lock-in, since once deployed, it would be very costly for the customer to switch to a new vendor, especially since most any other device manufacturer couldn’t offer the fully managed service for the thousands of rental properties.

We have now seen that this kind of B2B model can be replicated across different industries and different types of devices. If you need help crafting a similar solution, we hope you will consider ThingLogix and our Foundry platform, so that you can bring something to market extremely quickly, that you know is high quality, and that scales for low cost. It’s a win-win-win and, most importantly, it generates top line revenue growth by bringing incremental solutions to your existing devices you already sell.

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