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Internet of Things Will Change How Products are Monetized

By Mae Kowalke, TMCnet Contributor

Just as the Internet changed business in ways that most people did not initially predict, so too will the Internet of Things change business in ways that we are just starting to be understand.

While it is plainly obvious that connecting every device to the Internet will improve things like reporting, one area of the Internet of Things that many have not considered is what it will do to manufacturing and product development.

A new Gartner (News - Alert) report suggests that once more devices are connected to the Internet, revenue will be more tied to pushing paid software updates to devices than issuing entirely new devices themselves. The report, “Emerging Technology Analysis: Software Licensing & Entitlement Management Is the Key to Monetizing the Internet of Things,” stressed that companies need to change the way they do business to take advantage of the revenue opportunities from being able to change the behavior of a device by pushing new software to it through the Internet.

This is not news to Flexera Software, a software entitlement firm that has long been at the forefront of advocating more nimble software licensing.

“By unlocking the value of that software through licensing and entitlement management, manufacturers can simultaneously generate significant new value for their customers and higher revenue for the company, all while lowering manufacturing costs,” noted Mathieu Baissac, vice president of product management at Flexera.

One of the key changes that companies need to make to take advantage of the Internet of Things (and not lose out to competition) is to use licensing to turn on and off features and offer different combinations of services to create further revenue from devices already sold, according to Baissac.

Companies can offer different product tiers, for instance, using software to unlock the appropriate features. This way, upgrades can be a quick online purchase instead of having to go out and source new products from a store.

Software innovation also can extend existing products for a price, for instance, taking advantage of new standards or ways to use the product that didn’t exist when it first was released.

“Once you build software licensing into your business model, the opportunities to flexibly configure your products and offer value added services is virtually infinite,” noted  Baissac. “And it doesn't result in an increase in manufacturing costs because you control this all through software licensing and entitlement management.”

The Internet of Things is going to change the world. Just not always in the ways we expected.