Commercial IoT: Maturation solves some problems but also creates challenges

The evolving IoT partner ecosystem

Because IoT solutions integrate the physical and informational aspects of business, almost all IoT solutions include diverse components from multiple vendors. TBR uses the term “component” to include all contributions: hardware, software, and professional and cloud services. When IoT started receiving a lot of attention more than three years ago, vendors attempted to gain first-mover advantage in the IoT market by vying for customer attention with claims of providing end-to-end IoT solutions, even though almost all of those solutions incorporated components from several vendors. Many vendors claimed all of IoT as their turf, leading to market confusion, channel conflict, and vendors’ failure to communicate their differentiating advantages.

The past year has seen many vendors dial back their claims of IoT dominance, while an increasing number of component vendors, including OT vendors, have more clearly communicated their specialized contributions to effective IoT solutions. As vendors have increasingly focused on their strengths, reducing the overlap of claimed expertise, it has become easier for them to partner to create complete solutions. At the same time, as vendors have gained experience and devoted resources to researching and cultivating their individual partner ecosystems, they have become more knowledgeable.

In delivering multiple-vendor solutions, component vendors are challenged to be recognized and compensated for their contributions. This is leading to an increase in “ingredient marketing,” where component vendors communicate to customers the value that their components contribute to solutions. Systems integrators, usually the vendors with the greatest exposure to customers, are facing a conflict between their claims of differentiating IoT intellectual property and the increasing visibility of components. Increasingly, solutions are delivered as bundles, sold by value-added resellers, ISVs and independent hardware vendors (IHVs), posing the same challenge to component vendors.

In 2Q19 TBR’s Commercial IoT Practice will be expanding its research into how the maturation of the IoT market is playing out for customers and vendors and how vendors can refine their go-to-market (GTM) strategies and tactics in light of the evolving market. The diversity of IoT solutions, the involvement of operations technology (OT) in both the purchase and delivery of solutions, and the enormous IoT ecosystems all pose challenges to predominately IT-oriented vendors.