IoT Business Models

An IoT business model outlines how an IoT service provider, creates and provides value to its customers. With regards to IoT, business models utilize the unique benefits of IoT products and services to create unique value for their customers. IoT hardware is network-enabled by definition. This creates new opportunities for IoT hardware manufacturers to adopt business models that were typically exclusively used by SaaS companies.

Who benefits from increasing IoT adoption?

IoT is continuously changing the way most verticals conduct their day to day operations. Amongst others, this fuels innovation and creates business opportunities for the following stakeholders:

  • IoT and M2M SIM Card providers
  • Developers of communication protocols, such as Sigfox or LoRa
  • Hardware manufacturers
  • IoT Cloud platforms
  • Network operators
  • Engineers
  • IT Security

The most game-changing IoT business models

Outcome-based IoT solutions

Outcome-based business models are a relatively new addition to the general business landscape. Before IoT, it was hard to reliably and easily measure the value of a specific device, like a sensor, water pump, etc. actually delivers. Having devices that are IoT-enabled, means both the customer and the manufacturer can gain insights on the value created by the incorporation of the product. This means the product does not have to be sold for an upfront price or rented, but customers can be charged based on what the device delivers. The customer only pays for what the product actually achieves. This business model could be compared to a plumber, who only gets paid if he actually fixes the malfunction, rather than charging an hourly rate. This can elevate the relationship between a service provider and its customer and increase customers’ loyalty.

Subscription-based IoT solutions

IoT products are network-enabled devices. This means they are likely connected to the customer 24 hours a day. This can be leveraged to provide a transparent subscription model to customers. While up until recently, subscription models were mainly exclusive to SaaS (Software as a Service) businesses, the “as a Service” portion can now also be used for hardware, thanks to IoT.

This opens up the doors to new, innovative ways of monetizing the value you provide. A subscription-based IoT business model creates an active relationship between a service provider and their customers, whereas a one time purchase of a product or service rarely results in continuous interaction between service provider and customer. An active relationship creates a continuous opportunity for cross-selling new services and products to existing customers.

Another often-overlooked benefit of subscription-based IoT models is that the data gathered by IoT products can be used to gain new valuable insights into customers’ behavior and their needs. This knowledge can be leveraged to develop new features, that create added value for customers, thereby increasing the likelihood of a long-lasting business relationship.

Asset sharing models

Some ISPs and other network providers are starting to use neutral host networks to increase their capacity (Particularly in urban, network-traffic-dense environments where 5G is being rolled out). In a neutral host, multiple operators share the same network infrastructure, which is owned by a third party. This reduces deployment and operating costs for each provider, which improves their scalability. Neutral host networks are one example of an asset sharing model.

Some customers of IoT hardware may not like the idea of buying expensive hardware, which they can’t fully use to its maximum capacity anyway. This is where the main benefit of asset sharing comes in. The upfront costs are lowered, and the operation and maintenance of hardware can be better streamlined. Another prominent example of this, is car-, bike- or scooter-sharing start-ups, popping up in cities across the globe.

The asset sharing business model focuses on selling additional capacity as an IoT service provider to other clients. This maximizes the utilization of your products and services. Capacity (and therefore revenue) is maxed out by several customers.

  • An IoT business model outlines the way in which an IoT business creates and delivers value to customers
  • With end-nodes being network-enabled, IoT service providers and IoT hardware developers can deploy new business models.
  • Many of these new business models drastically lower the customer’s barrier of entry by reducing upfront costs.
  • Some of these business models also promote an active, loyal relationship with customers.
  • Data gathered through the customer’s use of products can be used to identify their needs, which is a valuable asset in the continuous development of products and services.