If the concept known as the Internet of Things (IoT) were a person, you’d be able to buy it an adult beverage so let’s assume a full-fledged history of the term isn’t necessary.
That being said, let’s set a baseline description: The Internet of Things refers to the sensors and actuators embedded in physical objects linked through wired and wireless networks, typically using the same Internet Protocol (IP) that connects the Internet.
Some examples of Internet of Things applications include:
- Wearable devices/fitness trackers, such as an Apple Watch or Fitbit
- Home automation, such as Nest thermostats and Ring doorbells
- Industrial asset monitoring
- Smart energy meters
IoT solutions have moved beyond the hype phase to become a significant contributor to digital business initiatives with heightened expectations to deliver real business benefits. Recent findings from Gartner support a more keenly trained focus on impactful business outcomes for IoT, with 61% of enterprises showing a high level of IoT maturity. Along those lines, Gartner reports 63% of enterprises expect financial payoff in three years for their IoT projects.
With that in mind, let’s talk about why you’re reading about it here:
Four things to consider in monetizing and billing for IoT, naturally.
1. Your Billing System Decision Has Never Been More Important
The traditional world of one-time payments isn’t well suited to the world of IoT, especially when the main selling point is a service. Products offering GPS management trackers, security systems or metered equipment provide long-term services and, as a result, the companies offering such products should consider implementing hybrid billing systems. In this instance, one price can be charged for the device itself, with subscription-based billing instituted separately.
The more varied the types of recurring services a company provides equates to more attributes to be accounted for and computed within your chosen billing method. Take, for example, a home security system, in which product services such as video monitoring, sensor equipment and audio recording could each have different charges attached. A single billing plan should be capable of incorporating each associated fee, and allow for plan changes and service additions, as necessary.
The increasing reliance on usage-based billing in this sector should hardly come as a surprise. But all the same, it’s important to keep in mind the good and the so-so in going this route with IoT.
These devices have a built-in ability to track data, whether minutes, bandwidth or other necessary measurements that determine how much a device or service is used for this type of billing. This certainly benefits companies seeking to automate usage monitoring for consistent billing cycles with a frequency set to sync with your customer’s usage needs. This billing method has the added benefit of demonstrating your customer-first efforts bonafides by charging them only for what they use.
The usage-based billing option also, however, means a company providing associated services also offers the ability for its customers to pause or shut down services, depending on business needs. The yin and yang of usage billing flexibility.
2. There’s Money In That Data
Let’s say your car is chock full of IoT systems, from your brake pads to your cooling systems, engine indicators and door sensors. Those sensors and diagnostics can collect and send data details on the physical condition and health along with measurements on the wear and tear of each component, in comparison to parameters such as time, cycling, distance and energy. The manufacturer providing these connected devices can, with the right systems in place, properly tailor and apply gathered data to inform the customer when to replace or refill components. Additionally, the manufacturer could provide the customer with subscription opportunities for refillable products.
Additionally, by monitoring these customer needs and trends, a company has the opportunity to further monetize such data. Forward-thinking manufacturers will adjust their business models in accordance with these reported trends demonstrated by their customers.
For this, let’s leave the car in the driveway and look toward the glow emanating from the outside of your home.
You’ve decorated it with IoT-enabled holiday lights which give you the ability to automate usage and even time it to your equally IoT-enabled home music system. Manufacturer-gathered data can help determine when lights need to be replaced and provide the customer an opportunity to subscribe to services for replacements, and improved attachments and functionality upgrades when possible. These companies can also monitor subscription history and use records to determine the popularity of certain products over others, making product line, development and marketing decisions based on this data.
3. Your Legacy ERP and CRM Aren’t Equipped For These Needs
Think of this in simple terms, ERP solutions are good with one-time transactions where the key activities are pick, pack and ship. But factor in the element of time, such as a three-year subscription contract, and you’ve already thrown the struggling system for a loop. That’s just getting started when it comes to recurring revenue.
CRM systems, as well, weren’t built for similar monetization efforts, since those solutions were designed for a sales process focus to deal with customer management and CPQ, but not billing.
Shoehorning customizations onto these ill-equipped solutions is the software equivalent of slicing off the edges of the square peg to make it fit into the round hole. While it might make it through, it certainly won’t be a good fit.
Your digital and finance teams are tasked with setting up and maintaining a recurring revenue stream of business that can be modified as needed – say, additional products, pricing, packaging, bundles, upgrades, downgrades and more. When your company wants to monetize your IoT offering, your ultimate requirement should be for a backend system able to incorporate all these needs, at scale, and integrate with those ERP and CRM systems.
4. It’s All About Flexibility
When it comes to IoT devices and solutions, flexibility is the defining characteristic. Your billing functionality must be up to that challenge. The beauty is, for all the effort spent re-designing your billing requirements to handle these needs, IoT devices were built with automation and data-gathering capabilities in mind, so you’re already halfway there.
And if recent reports are correct, with an estimated 127 IoT-enabled devices brought online every second of every day, there’s no time to waste when it comes to making money with that IoT platform on a subscription basis.
To learn how flexibility played a key role in RecVue helping others, contact us and we’ll discuss our role as global car rental leader Hertz integrated its billing and partner payment processes across 43k franchise offices, in total handling over 4.5M rental agreements each month.