The Device Data Landscape and the Challenges IoT Device Manufacturers Face to Monetize It

Manufacturers of IoT devices will have to navigate a difficult and fast changing technology and business landscape in the next few years that will present them with tough challenges, as well as excellent opportunities for those with the right strategic technology, product, and business plans. These challenges include pressures to absorb the incremental cost of adding additional IoT capabilities into their devices without a clear ROI and market forces that threaten to commoditize their products. The opportunities include the potential for some to wrap their product offerings into a more lucrative Product-as-a-Service offerings or to transform themselves into Outcome as a Service (OaaS) partners with their customers. Before they meet the challenges and seize the opportunities of IoT however all, device manufacturers will have to answer the central questions of whether to open access to the data generated by their devices, if it is not already open, and whether and how they can or cannot monetize this data directly or indirectly?

The answer to these questions will be different for each manufacturer and will depend not only on their technology and products but also, and perhaps more importantly, on market fragmentation, market share, the prevalence and expectation of open standards, as well as other characteristics that will determine the competitive environment and the strength of the commoditization pressures their products will face. In addition, the options available to monetize the device data collectable by today’s and by future more capable IoT devices will vary significantly based on the market forces that shape the competitive environment. The different classes of data include:

  • Functional Device Data that is part of delivering or extending the device main function and/or that is personal and private in nature. This data can reasonably be assumed to be owned/controlled by the device owner/user and any third party access to it will likely require the consent and perhaps some sort of compensation and/or consideration to the device owner.
  • Anonymous Use Pattern Data that the device owner may or may not be aware of and that has no stand-alone value in the owner/user domain. This type data can generate value to the device manufacturer or some third party IoT product or service provider, but only when aggregated and analyzed with data outside the device owner’s domain.
  • Non-functional Device Data that captures the internal states of the proprietary design and implementation of the device that is not expected or explicitly owned by the device owner/user. This kind of data may have standalone value as well as value when aggregated and analyzed with data outside the device owner domain. The value that can be generated by this kind of data usually accrues to the device manufacturer (guidance for future design for example) but can also have value to a third party IoT product and service provider. The Table 1 below shows this data domain classification in more detail.

Table 1: Data Type and Monetization Leverage for the Device Manufacturer

Data Class Data Type Data Collection Domain Data Aggregation & Analysis Domain Domain of Accrued Value Primary Data Ownership Primary Monetization Leverage
1 Functional Device Data Device Owner Only Device Owner Only Device Owner

Device Manufacturer

Third Parties

Device Owner Owns and/or Controls Access to Data Device Owner
2 Anonymous Device Use Data Multiple Device Owners

AND/OR

Other External Sources

Device Manufacturer

AND/OR

Third Party

Device Owner(s)

Device Manufacturer

Third Parties

Device Manufacturer

Owns and Controls access to Data

Device Manufacturer
3 Non-Functional Device Data Multiple Device Owners

AND/OR

Other External Sources

Device Manufacturer

AND/OR

Third Party

Device Owner(s)

Device Manufacturer

Third Parties

Device Manufacturer

Owns and Controls Access to Data

Device Manufacturer

 

Despite the fact that the manufacturers of IoT devices control the type and quality of the embedded device data that the entire IoT value proposition is built upon,  in many cases, there is no clear place or mechanism for them to participate in the upstream recurring revenues that result from the aggregation and analysis of the data unless they are willing to monetize it directly. An even more strategic challenge to the device manufacturers’ ability to monetize their data is the tug of war underway with third party data aggregation and analysis product and service vendors, many of whom have built their business cases on the assumption that most of the functional device data owned by the device owner and the anonymous use data owned by the device manufacturers (Class 1 and 2 Device Data above) will somehow be available to them for free. These analytics service providers, in the absence of clear and easy to use federated licensing mechanisms, are increasing puttingly  pressure on device manufacturers to adopt open standards and interfaces in the hope of gaining free access to device data. That said, given, that the “Thing” in the Internet of Things (IoT) is a very broad term that encompasses everything from a simple analog sensor that costs a few cents to jet engines that costs tens of millions of dollars, and given that device manufacturers will have to make the significant investments needed to support IoT applications, the assumption that device manufacturers will simply and voluntarily adopt open standards and interfaces that turns their products into commoditized data sources to allow third parties to monetize their data without an ROI is in many cases unrealistic and unlikely.

The options available to each individual device manufacturer to meet these challenges and capitalize on the opportunities will vary considerably based on a number of factors that not only include the nature of the specific vendor offering but also, and perhaps more importantly, on the specific market conditions for that offering, including the degree of market fragmentation, the manufacturer’s market share, and whether the market is historically built on proprietary or open standard products and interfaces. These factors more than anything will determine the degree of leverage each manufacturer will have in monetizing the data generated by its devices. But that is a much more complex and lengthy analysis perhaps for a future blog.