monetizing the iot by sandhiprakash bhide generic-01-24-2017

© Sandhiprakash Bhide

January 31, 2017

Monetizing the Internet of things

Sandhiprakash Bhide

Visionary IOT Leader, CTO/CIO and Strategist

Agenda

1. IOT opportunity and key growth areas

2. IOT value chain

3. IOT business Model and monetization opportunities

4. Challenges to monetization

5. Potential for M&A?

©2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

IOT Opportunity & Key Growth Areas


Opportunity is in Homes, Buildings, Offices, Industrial, Infrastructure, Energy,

Healthcare, Automotive, Smart City, Retail, Lighting… virtually everywhere and it

is HUGE! 50B Devices

50B Devices 1T Sensors

+


IOT Market is huge

Source: http://www.postscapes.com/internet-of-things-market-size/

Analyst Prediction

Research Nester $724.2B by 2023 13.2% CAGR.

Juniper Connected IoT devices to reach 46B in 2021

Markets & Markets $883.55B by 2022, at 32.4% CAGR

Ericsson 28B connected IOT devices by 2021 at a CAGR of 23%

Cisco 26.3B devices/connections by 2020

IndustryARC Industrial IOT: $123.8B by 2021(CAGR of 21%)

Rockville Research IOT Transportation: Market growth at 18% CAGR by 2020.

Mind Commerce Smart Home: $133B by 2021 (CAGR of 27.2%)


IOT Market is huge

Source: http://www.postscapes.com/internet-of-things-market-size/

Analyst Prediction

Markets and Markets IOT agriculture: $18.45B by 2022 (13.% CAGR)

Allied Market Research

IOT healthcare: $136.8B by 2021 (12.% CAGR). Patient

monitoring application segment is expected to maintain its lead

position with $72.7 billion by 2021

Markets & Markets IOT Buildings: $3.408B by 2022 (24.99% CAGR)

Markets & Markets IOT Security: $7.90B in 2016 to grow at 36.1% CAGR by 2021

Insight Partners: Global Smart Lighting: $51.05B by 2025 at CAGR of 17.1%.

Scalar Market Research Wearable: $71.23B by 2021 at 18.9% CAGR.

Key Growth Areas 1. 40% of the opportunity is in developing and remaining 60% in the developed

2. 2X more value from B2B than consumer

3. Interoperability is required to capture 40% of the value

4. <1% data is currently used, more can be used for optimization/prediction

5. $3.9 trillion–11.1 trillion per year in 2025

Source: The Internet of Things: Mapping the value beyond the hype, McKinsey Global Institute, June 2015


Top 4 Key IOT Growth Areas

Industry 4.0

• Operations management

• Inventory control

• Operator health hazard and safety

• Warehouse management, material flow, fast

stock rotation, order systems, movement for

goods, understanding time in transit

• Security, theft prevention

• Prevention of rotting food, maintain

freshness

• Monitoring, reporting, analysis, prediction,

and prevention

Cities:

• Smart parking

• Structural health of buildings, bridges and

monuments

• Noise map of urban area, traffic congestion,

route optimization for vehicles/pedestrians

• Weather/traffic adaptive smart lightning,

micro-weather mapping,

• Waste management and route optimization

of trash collection routes

• Public health/safety, resource management,

intelligent commuting


Top 4 Key IOT Growth Areas

Healthcare

• Improve wellness, monitoring/managing

illness

• Remote diagnosis/assistance and

continuous monitoring

• Hospital/Memory care patient monitoring

• Visiting hours management

• Early detection of critical signs, emergency

911 calling

• Geriatric patient support - medicine

dosage/timing, Monitoring patient fall

Retail:

• Self checkout

• Safety, gas leak detection, fire detection,

theft prevention

• Customer analysis, hot spots, providing

connectivity to customers.

• Automatic stock ordering, food rotting

prevention, stock rotation, removal of

expired items

• Layout optimization


IOT Value Chain


IOT Value Chain

Accenture

CapGemini

Arrow

GE

Booz Allen

Boeing

Delphi

ATS…

DHS

US DoD

US DoE

AmTrack

GM

BMW,

Olympics

GM

Bonneville

Power

Station

PGE

Indian

Railways

Silicon:

TI

QCOM

Intel

AMD

Broadcom

Freescale

Marvel…

Sensors:

STM

Invensys

Bosch

Murata…

AT&T

Verizon

Sprint

Orange

Vodaphone

DT

BT

Swisscom

KT

NTT

Docomo

Reliance

BSNL…

MSFT

IBM

Oracle

SAP

VMWare

Axeda

Alibaba,

Amazon

Google…

OS:

Linux,

Ostro,

Yocto…

Cisco

HP

Dell

Lenovo

IBM,

Siemens

ABB

Honeywell

GE…

Advantech

Kontron

Radisys

Asustek

Eurotech

Foxconn…

Telit

Sierra

Cinterion

Huawei

ZTE,

Infineon…

IBM

Accenture

BCG

Deloitte

Anderson

TCS

McKinsey

Bain

GE…

Systems

Integrators

End Users

Customer

Component

OEM

Service

Providers

SW OEM,

App, MW,

Analytics

Equipment

OEM

Platform

ODM,

Gateways

Comms

Module

OEM

Consultants

Value chain is complex and symbiotic relationships can be integrated to monetize the IOT Market

~5-10% 15-20% 10-15% 15-20% 30-40%% 5-10% ?

$$$ - Increased Monetization Opportunity or Value


IOT Business Model and

Monetization Opportunities


Monetization Models 1. HW Premium

1. One time charge

2. Ecosystem Building

1. Fixed Fee Model

2. Transaction-based Fee

3. Revenue Share model

3. Data Revenue

4. Service Revenue

1. Subscription (flexibility to customize service options and duration of the service)

2. Pay as you go by usage

3. Pay for results

4. Freemium model (attract customers that are not convinced)

Source: Monetizing the Internet of Things: Extracting Value from the Connectivity Opportunity, CapGemini Consulting


Monetization: Smart End Node integration

….

….

Sensor

package

Sensing

element

Signal

conditioning

Signal

processing

Sensor

package

Sensing

element

Signal

conditioning

Signal

processing

Transient Data

Storage

Transient Data

Storage

Sensor Data

Processing

Sensor

package

Sensing

element

Signal

conditioning

Signal

processing

Communication

Security

Info storage

Data Encryption

Sensor algorithms

Multi-Chip Package (MCP)

HW Premium


Monetization: Energy Harvesting

1mW 100nW 1µW 10µW 100µW 10mW 100mW 1W 10W 100W 10nW

Standby 32 KHz quartz

oscillator Electronic

watch or

calculator

RFID

Tag

Hearing

aid

Miniature FM

Receiver

Transceiver

Bluetooth

PALM,MP3 GSM µP laptop Bicycle

lightning

µP desktop

Scope of Energy Harvesting is usually considered up to maximum power of 5W

Source: http://www.iop.org/resources/energy/, Micropower scale: http://www.cymbet.com/pdfs/Cymbet-EH-Powering-for-WSN-Symposia-Sensors-Expo-2013.pdf

Opportunities for integration:

1. CMOS Integrated PV, solar Cells

2. Thermal: Pyro-electric, thin film standard thermoelectric

3. Mechanical: Vibrational electrostatic/piezoelectric/electromagnetic, pulse

HW Premium

http://www.iop.org/resources/energy/


Monetization: Horizontal/Interoperable Platform

1. Ensuring E2E Security

2. Provide QoS during critical events, e.g. fire, or a water leak

3. Self powered devices where possible

4. Redundancy/Failover to : Ensure reliable operation

5. Common HW/SW/Systems Architecture

6. Standard interfaces: MQTT, HTTPS, CoAP, REST, XMPP, etc.

7. Apps availability

HW Premium and Ecosystem


Monetization: Security

1. Data Protection: Data safe

from theft or alteration

2. Privacy: Release of

sensitive/ personal info

without consent

3. Identity: Person remains

anonymous unless opted-in

4. Safety: Does not cause any

harm to people

Ecosystem Building


Monetization: Data

Sensors Data

Information

Knowledge

Wisdom

Hig

her

Mon

etiza

tio

n

Data Revenue


Monetization: Analytics

Source: Ray Solnik, Appnomic Systems , http://www.datacenterjournal.com/it/time-analytics-delivers-operations/ Source: Big Data Analytics – Predictive Analytics – Gartner Glossary, www.gartner.com

Data Revenue


Monetization: Service Revenue

1. OTA OS, analytics, firmware updates

2. Ease of upgrade or failure notification

3. Device Manageability/Support: Recognize/fulfill support needs

4. Data Storage retention for future use

5. Use of best communication method to ensure uninterrupted service

6. Human Safety

Service Revenue


New Business Models for Services


Business Models for services 1. Shift from Selling capital goods to selling products as services (outcomes)

2. Charge by usage

3. Service and maintenance by hour or yearly contract

4. Periodic SW updates

5. High CapX/low OpX, or low/zero CapX and long a term contract provides

monthly recurring revenue

6. Finance upfront device costs

7. Deep customer relationships to sell additional products/services

Recurring revenue will be the dominant monetization model for the IoT, hence the

customer experience is of paramount importance.

Service Revenue


Business Models for services 1. Build a single device model that contains all capabilities and capacity then

license those areas that customer wants, and enable/configure remotely

2. Monetize each part of the SW Stack

3. Device upgrades, OTA SW upgrades/licensing to produce recurring revenue.

4. Enter new markets by rearranging and reconfiguring IP blocks/features

5. Subsidize devices and recover through recurring revenue

6. Personalization of applications to user’s needs

7. Usage data to drive new service

Recurring revenue will be the dominant monetization model for the IoT, hence the

customer experience is of paramount importance.


Challenges for monetization


Challenges to monetization in service creation

1. Need for a critical mass of connected devices

2. Need for a critical mass of devices with an open/standard API

3. The rules of ”open data” are yet to be defined

4. Companies have to adapt to bottom-up value creation

5. System and platform interoperability (many Intranets of Things)

6. Industry standards

7. Mobile network capacity

8. Core hardware energy consumption


Potential for M&A


Potential for M&A

1. Analytics is specialized to solve a specific problem. It is highly unlikely

that two analytics companies will merge.

2. SIs solve similar problems for several customers. To gain efficiencies,

they may acquire analytics supplier in specific domains. Analytics

companies a small with PhDs. If acquired by a company, they are

likely to cash out and start another analytics company.

3. As small 5G winners with IP emerge, they will most likely be likely be

acquired by Silicon vendors.

4. Carrier/SPs with fat pipes need to offer value-added services, and may

see acquisition similar to Verizon’s acquisition of Sensity.