Editor’s Note: Welcome to our weekly Reality Check column where C-level executives and advisory firms from across the mobile industry share unique insights and experiences.
There’s a lot of buzz these days surrounding the “Internet of things.” Unfortunately the term itself is fuzzy, leading to ambiguity and misunderstanding of what it actually means. A shame, because the underlying concept is one that promises to revolutionize the way we measure, consume and track so much of what we do in our daily lives. I prefer the term “universal mobility” to describe this phenomenon.
A thorough definition of the Internet of things is available on Wikipedia, but here’s my quick-and-dirty version:
The Internet of things is an umbrella term that refers to the ongoing trend of making almost every conceivable device able to connect directly to the Internet.
Simple enough when it’s stated that way, right? The other not so simple aspect of it – beyond the “connection” aspect of the Internet of things, is the monetization of all those various kinds of ordinary devices directly to the Internet. This is turning out to be the next big thing in terms of the potential to disrupt current and future business models.
We’re not talking science fiction
It is pretty mind-blowing when you ponder it for just a little bit. Virtually any physical thing you can imagine, from your sunglasses to the soda machine in your employee lounge to your lawnmower, all of them connected directly to the Internet with no need for an intermediary device to do so. And this is not sci-fi – the technology is pretty well-seasoned and already in play.
Machine-to-machine technology is at the crux of these capabilities. Embedded sensors and software allows businesses to create highly-efficient distributed monitoring systems that can communicate with other integrated systems. Welcome to the odd, but burgeoning world of M2M communications. To put things in perspective, in 2010, there were more than 10 billion connected devices, and now they outnumber the actual number of people. The Internet of things tipping point is expected to come to fruition this year in 2014.
How does it work? There are three basic aspects of M2M when it relates to recurring revenue business models. Let’s use the examples above to illustrate each one:
1. Location – Being able to quickly determine the exact position of any physical thing. Lost your sunglasses for the umpteenth time? Open an app on your phone and find them instantly. And don’t be embarrassed if they’re still on your head – we’ve all done that.
2. Status – Devices that immediately report changes in their status to a system that can send a notification. You just bought the last can of Mr. Pibb from the soda machine? Don’t worry – even if you are the only person in the office who actually drinks Mr. Pibb. More will be in tomorrow’s delivery; the soda machine will alert the supplier when low on a particular soft drink.
3. Consumption – Devices that immediately report how much of them you use. Just drained your bank account buying your first house and don’t want to drop another $500 to buy a lawnmower? What if, instead, you could just borrow one from Home Depot and simply have your credit charged $10 each time you mow?
Pretty radical stuff, but it only takes a moment to realize that the examples above aren’t that far-fetched and similar capabilities already surround us. What inspires us is the ease with which the benefits of universal mobility or the Internet of things lend themselves to recurring revenue models. Let me try to wrap this up with a hypothetical business model that encompasses all three.
Imagine a “smart” ski lift ticket which could:
— Offer an optional add-on service that pinpoints your location on the mountain and allows you and your ski-mates to find one another instantly. No problem even if you’re position at the fourth-seat-from-the-left at the lodge bar.
— Trigger a camera that snaps a picture of you as you shred the steepest slope of that black diamond, and by the time you reach the bottom of the hill sends an alert to your phone with a link to purchase that great shot for you to show off on Facebook. Don’t worry if the camera caught you in the middle of a “yard sale” you can just delete the picture instead of buying it.
— Grant you the option of “paying-per-ski-run” by just scanning you each time you get on a lift and hitting your card for a small fee, as an alternative to paying full freight for an all-day pass. The ideal option for those days when you’re feeling a bit less ambitious than your bruised and sunburned friends, and that fourth-seat-from-the-left at the lodge bar looks oh-so-inviting.
But here’s what’s really cool, even if you don’t love the idea above as much as I do (hint-hint Vail Resorts), the technology and monetization engines needed to accomplish all of this are here right now, and all that is needed to make these things a reality (or whatever similar crazy stuff you can dream up) is creativity.
A billing frenzy come-th
With all advancements there are also challenges and there is no exception to that rule regarding the monetization of the Internet of things. As more machines are connected to the Internet, subscribers to the various services that emerge will want to see some sort of consolidation of the billing processes.
It’s going to become unwieldy for people to have so many subscriptions. It’s very attractive, but it’s a different story when one has seven subscriptions versus 48 for example. This coalescing will be “difficult” in terms of billing, because all of the bills will have to go through a central source to benefit subscribers as well as providers, but then the revenue must be allocated back to the original vendors.
Nevertheless, these new self-reporting information systems will continue to create new business models while improving the processes involved and lowering costs at the same time.
The bottom line is people like being “connected,” businesses like repeat customers and consumers like flexibility in how they pay for products or services. And I am thrilled to be sitting at the nexus of universal mobility and the recurring revenue revolution and addressing those big challenges.
Brendan O’Brien, an Aria Systems co-founder and cloud billing inventor, has been in the subscription services business for over 20 years. O’Brien is at the forefront of the recurring revenue revolution that is empowering enterprises – and specifically enabling information systems and new business models to reduce costs and risks and improve business processes and profits. Aria Systems recently raised $40 million in funding to continue to provide recurring revenue management solutions that are at the forefront of this seismic trend. See an interview with Brendan O’Brien.
