IoT installation costs scuppering ROI, hurting suppliers and customers, says Digi
Many ‘internet of things’ (IoT) providers are failing to factor installation costs into their business proposals, and both suppliers and customers are coming unstuck as a result. This is the view of IoT specialist Digi, which suggests the IoT market at large still takes a traditional product approach to sales, and struggles to achieve a sustainable return on investment (ROI) as a consequence.
“It’s not just about the hardware costs and the monthly recurring costs; you have to pay attention to the product lifecycle costs and the installation costs in particular, which is actually what we see people miss most often,” said Scott Nelson, chief product officer at the Minnesota-based company.
Speaking ahead of its global IoT customer event at its headquarters next week, Nelson said IoT products and services occupied a space between traditional one-shot hardware sales and newer software-as-a-service (SaaS) models, where the solutions are service over a longer period.
“It used to be, you make the sale, you take the money, and you deal with the warranty. In IoT you make the sale and then you step into an SaaS curve, where it’s all about how to acquire another customer, and how to prevent churn. The way the internet-based SaaS companies do that is with content. It’s the same in the IoT space, where content is value,” said Nelson.
Where deployments are so numerous, installation costs can quickly get out of hand, he said. “What doesn’t work is when you build an idea just because you can, and you don’t have any kind of business value to drive it into adoption; what doesn’t work is when you have a solution, but you forget about truck-rolls.
“Because it might be 150 bucks to roll a truck; if you’re deploying 30,000 IoT solutions, and paying $3 per month of connectivity costs on top, then that quickly racks up. If you start out in middle of that SaaS curve, then your installation could be 40-50 per cent of the total product cost.”
He added: “If don’t think about that upfront, then ROI is going to be a real challenge.”
Nelson is presenting ‘business fundamentals’ at the Minnesota meet, where the likes of Amazon Web Services, Kimberly Clark and Marriot Hotels, among others, will present “pragmatic” views on the state of the nascent IoT market.
He told Enterprise IoT Insights the failure of individual suppliers reverberates right through the IoT supply chain, and shakes the customer at the end of it.
“It’s the solution provider’s problem, ultimately. It is about design thinking; designers think about the lifecycle of a product. If a supplier isn’t dealing with the installation, and the process becomes complicated, then there are going to be problems downstream,” he said.
“If a supplier hasn’t paid attention to these fundamentals, then it’s not going to make any money – and that becomes a problem because they will wake up one day and the technology won’t work, because someone went out of business and the supply chain broke down.”
Digi splits it business in two parts, roughly. Its ‘smart sensing’ business, providing cold chain sensing solutions to the retail and logistics industries, offers what it calls a “full-stack” solution; its traditional IoT products and services, which contributes around 80 per cent of its sales, provides OEM embedded compute products and networking solutions.
Nelson notes even its own definition of a ‘full-stack’ service stretches things. “We talk about ‘full stack’, but actually no one provides a full stack in an integrated fashion. It takes many suppliers. We work with AWS, and we all kinds of companies for temperature sensors and other parts of the solution,” he said.