Manufacturers must reinvent business models to profit from Internet of Things

In addition to selling more internet-connected devices, manufacturers will have to figure out how to make money from the software they develop that configures their products and powers functionality. They’ll also have to leverage software licensing and entitlement management (technology that grants, resolves, enforces, revokes and administers access to entitlements) as the mechanism to capture those additional revenues.

It seems the key to monetising the IoT is to use licensing to turn on and off product features and capacity in different combinations to create additional value in the intelligent devices themselves and in the software that runs within them. 

For instance, manufacturers could provide different product tiers – e.g. basic, premium and platinum – using software licensing to unlock the appropriate features – without having to manufacture separate models. They could then upsell customers later by leveraging software-driven control of the product and licensing to make it easy to upgrade to more expensive models.

Manufacturers can also use different licensing models – like metered or pay per use – to create demand from new types of customers or in new markets. For example, a hospital previously unable to afford an expensive MRI machine might be able to acquire one using a pay-per-scan licensing model.

“Once you build software licensing into your business model, the opportunities to flexibly configure your products and offer value added services is virtually infinite. And it doesn’t result in an increase in manufacturing costs because you control this all through software licensing and entitlement management,” explained Mathieu Baissaca, a software licensing expert on the IoT at Flexera Software. “That’s why Gartner’s report detailing the relationship between licensing and profiting from the Internet of Things is so significant. It’s the first of its kind to provide a roadmap connecting the vision of the Internet of Things with the monetisation process that manufacturers must adopt to profit from it.”

By using licensing and entitlement management to monetise the IoT, manufacturers also open up new hardware- and software-related revenue by making it easier to sell new products and services to existing customers on a regular basis, and upsell them as new product features and software versions are released.

“Licensing and entitlement management is a great way to make it easy for customers to quickly and easily access and pay for the latest and greatest capabilities a manufacturer has to offer,” said Baissac. “The Gartner report succinctly lays out the processes and systems manufacturers will need to adopt in order to successfully monetise the Internet of Things and reap the financial rewards that innovating in this area promise, as well as achieving competitive advantage.”

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