How to generate new revenue streams through IoT

By 2025, it’s expected that more than 100 billion operational devices will be connected to the Internet of Things (IoT), generating a total revenue of nearly $10 trillion USD. This trend looks set to continue for many years of unprecedented growth. For example, the sensor market alone is expected to see an average annual growth rate of 26.91% by 2020.

This provides organizations with a tremendous opportunity for leveraging IoT applications to reshape their business models, fully optimize their performance, and create new revenue streams with intelligent solutions. Global IoT implementation is advancing in many sectors as companies look for new and innovative ways to manage and monetise their services.

Use of the “Everything-as-a-Service” model

With IoT technology, which offers new possibilities for fast and efficient delivery of applications over the Internet, the “Everything-as-a-Service” or “X-as-a-Service” (XaaS) business model has been gaining a lot of interest. XaaS offers companies a huge opportunity to transform their business models from selling products to selling business information. The information is generated by products that are made available for free or for a small nominal fee.

As more and more companies try to diversify their offerings in an increasingly competitive environment, the opportunity to profit from an XaaS business model continues to grow. The value of the traditional cloud-based SaaS market is expected to increase to over $132 billion by 2020. However, given the trend towards combining IoT with SaaS and PaaS services, this may still be undervalued.

Worldwide, rapid developments in various sectors are already being made in this area. This is changing the way these services are billed, giving companies greater continuity in revenue generation. For example, the Rolls-Royce Power-By-Hour model allows airlines to pay for engine usage by the hour. The cloud-based IoT approach also enables predictive maintenance, optimising resource efficiency, and reducing disruption.

These advances show a transformative shift. The trend is moving away from a pay-for-hardware model towards paying for the data and valuable business insights collected through analytics. This will enable smarter business decisions and improved cost efficiency. To successfully tap into new sources of revenue, many companies are now shifting their distribution models from a CAPEX, that is, to investment costs, to an OPEX-focused structure. As a result, they hope to better manage their operating costs.

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