How to maximise the revenue potential of the Internet of Things

Hardware manufacturers will increasingly have little choice, but to transform their products into Internet-connected, software driven intelligent devices – in the face of the rapidly expanding Internet of Things trend.

But to profit from this business model transformation, device makers require systems in place to monetise the software applications they develop to power their devices and to protect their IP investment. Licensing and entitlement management is crucial.

Autonomous vehicles, commonly referred to as driverless cars, are a good example of software-centric business models where licensing and entitlement management plays a crucial role, for both the car manufacturers and the software suppliers to the industry.

Recently, Harbrick, the maker of a universal operating system for autonomous vehicles, has implemented licensing and entitlement management automation capabilities in its Polysync software. PolySync offers a set of software tools and services that make it easier to build advanced autonomous vehicles. Driverless cars run in complex environments that require real-time control of device sensors, communications and control systems.

By incorporating licensing and entitlement functionality in Polysync, Harbrick has acquired the ability to ensure that it can deliver its software to its customers using the licensing models their market demands, and that the software is always up-to-date, secure and meets the individual requirements of its clients.

So what do we mean by a software-centric business model?

Connected systems

Taking a software-centric approach means manufacturers must re-design products from fixed-function, disconnected devices to flexible, seamlessly connected systems. A software-centric approach streamlines all aspects of supply chain, from manufacturing to monetisation.

For instance, let’s say a telecommunications company has developed a “connected” commercial video surveillance camera with 10 particular features. Using the software licensing-driven model, the telecommunications company need manufacture only one physical model. Using software and the power of licensing, the device maker then simply turns on features 1-3 to sell as the “basic” model. It could then turn on features 1-6 and sell that model as the “premium” model, or turn on features 1-10 and sell it as the “platinum” model.” Three models which previously required three separate manufacturing supply chains – now reduced to one.

A connected product with a back-end entitlement management system would also make it very easy for the device manufacturer to generate new revenue streams for the camera. For instance, the user of the “basic” camera could sign on to the device’s portal and purchase a 30-day trial for the “premium” model. Once the credit card data is provided, the system will unlock the premium features in the camera and without so much as a delay, our consumer has an upgraded device, and our manufacturer has generated a new revenue stream from the additional purchase.

The same principles apply to IoT manufacturers across the entire spectrum of industry. Markets as varied as building automation, telecommunications and gaming could benefit from adopting a software-centric business model, as could oil and gas equipment makers, test and measurement and medical equipment manufacturers – to name a few.

Some benefits of automated licensing and entitlement management systems to monetise Internet-connected devices:

  • Reduced manufacturing and supply chain costs. Companies reduce the number of models they must manufacture by controlling features, capacity, configurations and throughput via software, licensing and entitlement management – allowing them to build once and “package” functionality in any number of formats.
  • New markets and revenue streams. By using a software licensing model, manufacturers can easily offer product enhancements through software updates, and charge for the enhanced functionality based on a software maintenance and update model. Because software allows for flexible product configurations – manufacturers can quickly and inexpensively package and price their devices to uniquely address new, emerging or niche markets that would previously have been impractical or prohibitive due to costs.
  • Product life extension. With the functionality of devices managed and controlled using software, instead of being hard-coded into the device’s physical components, product upgrades and enhancements can be delivered using software commands communicated to the device over the internet. This enables the customer to derive more value from the device over a longer period of time; and the manufacturer benefits from more up-sell opportunities for new functionality at minimal expense and effort.

Software licensing and entitlement management is the enabling technology that helps intelligent device manufacturers make their products ready to leverage an all-pervasive Internet environment.

It lets manufacturers personalise offerings without having to manufacture multiple models. Simple changes to the software in the device enables manufacturers to customise the product based on customer needs by managing how it behaves – i.e. by activating or deactivating features, setting device capacity and otherwise controlling the behaviour of the product.

This greatly simplifies product lifecycle management, and facilitates supply chain management. Manufacturers must consider.

Steve Schmidt, Vice President of Corporate Development, Flexera Software