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.

It’s time to stop calling IoT a technology

Yes, we all do it. Every analyst, vendor and customer has referred to Internet of Things (IoT) as a technology. I have done it countless times, and so have my extremely talented and informed peers. However, it’s a misnomer, a shortcut, and a cop out, and if we actually think of IoT as a technology, it’s ultimately harmful to the adoption of IoT. IoT is actually a technique for solving business problems using a combination of technology components and services, rather than a technology in and of itself.

No one vendor does IoT alone ― it’s not a deliverable, self-contained technology solution. Rather, it often involves a “leader” company, generally a consulting company or an ISV, assembling a solution sourced from software, services and hardware components from partner companies. My colleague Ezra Gottheil likes to use a construction analogy. A general contractor will shop at Home Depot (the wide and increasingly saturated IoT marketplace) for all the components he or she needs to build a structure. The general contractor will also hire subcontractors (partners and specialized vertical ISVs) who have certain expertise. Even as we move closer to prepackaged IoT or shrink-wrapped solutions, multiple vendors will continue to be involved in delivery.

Some of these components can be grouped into the “new technology” bucket. As TBR closely monitors use cases and fills our use-case database, which currently has more than 360 entries, IoT projects are increasingly linked with augmented reality/virtual reality, blockchain and analytics. All of these new components, including IoT, are enhanced when used in cohesion.

But many of the components, such as servers, routers, mobile devices, sensors, connectivity, IT services and business consulting, have existed for decades. IoT is a new shiny label slapped on a technique IT companies have been using for decades: pulling together IT components to build solutions and help customers achieve their goals.

TBR believes when a vendor tells a customer “you should adopt this new transformational technology,” it is usually met with eye-rolling. IoT is no different. As soon as the “new technology” discussion comes to the table, customers instinctively rock back on their heels. It sounds like a large and long-lasting commitment, which leads to rip-and-replace cost fears, technology lock-in consternation due to a rapidly evolving market, and a general lack of understanding about the benefits.

TBR believes vendors should change the message. Begin with discovering what a customer’s business problems are, then suggest using the technique of IoT to begin strategically solving them in a stepwise manner. It’s not a rip-and-replace approach; it’s seeing where improvements can be gradually made to increase connectivity throughout an organization and ultimately deliver improved insight. It might mean adding sensors to legacy equipment, using IoT components and new analytic tools to tie together legacy data and create new insight, or implementing tangential technologies such as blockchain to better inform customers on their supply chain. Eventually, it could mean all of these combined.

At a recent vendor event, the CEO of a Boston-based IoT solution vendor asserted that IoT is now passe. True customer evolution, including problem solving comes from the bigger picture ― using the technique of IoT, tangential technologies, and internal and external data sources to supercharge efficiency and gain insight.

IoT as a technology is a lazy oversimplification. Let’s start messaging how the technique of IoT ―a new way of thinking about and applying technology ― can help solve current business challenges in an agile and cost-effective manner.