January 31, 2017

Monetizing the Internet of things

Sandhiprakash Bhide
Visionary IOT Leader, CTO/CIO and Strategist

Sandhiprakash Bhide
Agenda
1. IOT opportunity and key growth areas

2. IOT value chain

3. IOT business Model and monetization opportunities

4. Challenges to monetization

5. Potential for M&A?

IOT Opportunity & Key Growth Areas

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 50B Devices 1T Sensors

Opportunity is in Homes, Buildings, Offices, Industrial, Infrastructure, Energy,

Healthcare, Automotive, Smart City, Retail, Lighting virtually everywhere and it
50B Devices +
is HUGE!

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

 IOT Market is huge

Analyst Prediction
Research Nester $724.2B by 2023 13.2% CAGR.
Juniper Connected IoT devices to reach 46B in 2021
Markets & Markets $883.55B by 2022, at 32.4% CAGR
Ericsson 28B connected IOT devices by 2021 at a CAGR of 23%
Cisco 26.3B devices/connections by 2020
IndustryARC Industrial IOT: $123.8B by 2021(CAGR of 21%)
Rockville Research IOT Transportation: Market growth at 18% CAGR by 2020.
Mind Commerce Smart Home: $133B by 2021 (CAGR of 27.2%)

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Source: http://www.postscapes.com/internet-of-things-market-size/
 IOT Market is huge

Analyst Prediction
Markets and Markets IOT agriculture: $18.45B by 2022 (13.% CAGR)
IOT healthcare: $136.8B by 2021 (12.% CAGR). Patient
monitoring application segment is expected to maintain its lead
Allied Market Research position with $72.7 billion by 2021
Markets & Markets IOT Buildings: $3.408B by 2022 (24.99% CAGR)
Markets & Markets IOT Security: $7.90B in 2016 to grow at 36.1% CAGR by 2021
Insight Partners: Global Smart Lighting: $51.05B by 2025 at CAGR of 17.1%.
Scalar Market Research Wearable: $71.23B by 2021 at 18.9% CAGR.

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Source: http://www.postscapes.com/internet-of-things-market-size/
 Key Growth Areas
1. 40% of the opportunity is in developing and remaining 60% in the developed
2. 2X more value from B2B than consumer
3. Interoperability is required to capture 40% of the value
4. <1% data is currently used, more can be used for optimization/prediction
5. $3.9 trillion11.1 trillion per year in 2025

Source: The Internet of Things: Mapping the value beyond the hype, McKinsey Global Institute, June 2015
Top 4 Key IOT Growth Areas
Industry 4.0
Operations management
Inventory control
Operator health hazard and safety
Warehouse management, material flow, fast
stock rotation, order systems, movement for
goods, understanding time in transit
Security, theft prevention
Prevention of rotting food, maintain
freshness
Monitoring, reporting, analysis, prediction,
and prevention
Cities:
Smart parking
Structural health of buildings, bridges and
monuments
Noise map of urban area, traffic congestion,
route optimization for vehicles/pedestrians
Weather/traffic adaptive smart lightning,
micro-weather mapping,
Waste management and route optimization
of trash collection routes
Public health/safety, resource management,
intelligent commuting
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Top 4 Key IOT Growth Areas
Healthcare Retail:
Improve wellness, monitoring/managing Self checkout
illness Safety, gas leak detection, fire detection,
Remote diagnosis/assistance and theft prevention
continuous monitoring Customer analysis, hot spots, providing
Hospital/Memory care patient monitoring connectivity to customers.
Visiting hours management Automatic stock ordering, food rotting
Early detection of critical signs, emergency prevention, stock rotation, removal of
911 calling expired items
Geriatric patient support - medicine Layout optimization
dosage/timing, Monitoring patient fall

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

IOT Value Chain

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.
 IOT Value Chain
$$$ - Increased Monetization Opportunity or Value

Component Comms Platform Equipment SW OEM, Service Systems Consultants End Users
OEM Module ODM, OEM App, MW, Providers Integrators Customer
OEM Gateways Analytics

Silicon: Telit Advantech Cisco MSFT AT&T Accenture IBM DHS

TI Sierra Kontron HP IBM Verizon CapGemini Accenture US DoD
QCOM Cinterion Radisys Dell Oracle Sprint Arrow BCG US DoE
Intel Huawei Asustek Lenovo SAP Orange GE Deloitte AmTrack
AMD ZTE, Eurotech IBM, VMWare Vodaphone Booz Allen Anderson GM
Broadcom Infineon Foxconn Siemens Axeda DT Boeing TCS BMW,
Freescale ABB Alibaba, BT Delphi McKinsey Olympics
Marvel Honeywell Amazon Swisscom ATS Bain GM
GE Google KT GE Bonneville
Sensors: NTT Power
STM OS: Docomo Station
Invensys Linux, Reliance PGE
Bosch Ostro, BSNL Indian
Murata Yocto Railways

~5-10% 15-20% 30-40%% 15-20% 10-15% 5-10% ?

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.
Value chain is complex and symbiotic relationships can be integrated to monetize the IOT Market
 IOT Business Model and
Monetization Opportunities

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 Monetization Models
1. HW Premium
1. One time charge
2. Ecosystem Building
1. Fixed Fee Model
2. Transaction-based Fee
3. Revenue Share model
3. Data Revenue
4. Service Revenue
1. Subscription (flexibility to customize service options and duration of the service)
2. Pay as you go by usage
3. Pay for results
4. Freemium model (attract customers that are not convinced)

Source: Monetizing the Internet of Things: Extracting Value from the Connectivity Opportunity, CapGemini Consulting 2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.
 HW Premium
Monetization: Smart End Node integration

Sensor Sensing Signal Signal Transient Data

package element conditioning processing Storage
Sensor Data
. Processing
.
Communication
Security
Sensor Sensing Signal Signal
package element conditioning processing Info storage
Data Encryption
Sensor algorithms
Sensor Sensing Signal Signal Transient Data
package element conditioning processing Storage

Multi-Chip Package (MCP)

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 HW Premium

Monetization: Energy Harvesting

10nW 100nW 1W 10W 100W 1mW 10mW 100mW 1W 10W 100W

Standby 32 KHz quartz Electronic RFID Hearing Miniature FM Transceiver PALM,MP3 GSM P laptop Bicycle P desktop
oscillator watch or Tag aid Receiver Bluetooth lightning
calculator

Scope of Energy Harvesting is usually considered up to maximum power of 5W

Opportunities for integration:

1. CMOS Integrated PV, solar Cells
2. Thermal: Pyro-electric, thin film standard thermoelectric
3. Mechanical: Vibrational electrostatic/piezoelectric/electromagnetic, pulse
Source: http://www.iop.org/resources/energy/, Micropower scale: http://www.cymbet.com/pdfs/Cymbet-EH-Powering-for-WSN-Symposia-Sensors-Expo-2013.pdf
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 HW Premium and Ecosystem

Monetization: Horizontal/Interoperable Platform

1. Ensuring E2E Security
2. Provide QoS during critical events, e.g. fire, or a water leak
3. Self powered devices where possible
4. Redundancy/Failover to : Ensure reliable operation
5. Common HW/SW/Systems Architecture
6. Standard interfaces: MQTT, HTTPS, CoAP, REST, XMPP, etc.
7. Apps availability

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 Ecosystem Building
Monetization: Security

1. Data Protection: Data safe

from theft or alteration
2. Privacy: Release of
sensitive/ personal info
without consent
3. Identity: Person remains
anonymous unless opted-in
4. Safety: Does not cause any
harm to people

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 Data Revenue

Monetization: Data

Higher Monetization
Wisdom

Knowledge

Information

Sensors Data

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 Data Revenue

Monetization: Analytics

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Source: Big Data Analytics Predictive Analytics Gartner Glossary, www.gartner.com Source: Ray Solnik, Appnomic Systems , http://www.datacenterjournal.com/it/time-analytics-delivers-operations/
 Service Revenue

Monetization: Service Revenue

1. OTA OS, analytics, firmware updates
2. Ease of upgrade or failure notification
3. Device Manageability/Support: Recognize/fulfill support needs
4. Data Storage retention for future use
5. Use of best communication method to ensure uninterrupted service
6. Human Safety

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New Business Models for Services

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

 Service Revenue

Business Models for services

1. Shift from Selling capital goods to selling products as services (outcomes)
2. Charge by usage
3. Service and maintenance by hour or yearly contract
4. Periodic SW updates
5. High CapX/low OpX, or low/zero CapX and long a term contract provides
monthly recurring revenue
6. Finance upfront device costs
7. Deep customer relationships to sell additional products/services

Recurring revenue will be the dominant monetization model for the IoT, hence the
customer experience is of paramount importance.
2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.
Business Models for services
1. Build a single device model that contains all capabilities and capacity then
license those areas that customer wants, and enable/configure remotely
2. Monetize each part of the SW Stack
3. Device upgrades, OTA SW upgrades/licensing to produce recurring revenue.
4. Enter new markets by rearranging and reconfiguring IP blocks/features
5. Subsidize devices and recover through recurring revenue
6. Personalization of applications to users needs
7. Usage data to drive new service

Recurring revenue will be the dominant monetization model for the IoT, hence the
customer experience is of paramount importance.
2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.
Challenges for monetization

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Challenges to monetization in service creation
1. Need for a critical mass of connected devices
2. Need for a critical mass of devices with an open/standard API
3. The rules of open data are yet to be defined
4. Companies have to adapt to bottom-up value creation
5. System and platform interoperability (many Intranets of Things)
6. Industry standards
7. Mobile network capacity
8. Core hardware energy consumption

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Potential for M&A

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Potential for M&A
1. Analytics is specialized to solve a specific problem. It is highly unlikely
that two analytics companies will merge.
2. SIs solve similar problems for several customers. To gain efficiencies,
they may acquire analytics supplier in specific domains. Analytics
companies a small with PhDs. If acquired by a company, they are
likely to cash out and start another analytics company.
3. As small 5G winners with IP emerge, they will most likely be likely be
acquired by Silicon vendors.
4. Carrier/SPs with fat pipes need to offer value-added services, and may
see acquisition similar to Verizons acquisition of Sensity.

2014 GERSON LEHRMAN GROUP, INC. ALL RIGHTS RESERVED.

Thank you !

Sandhiprakash Bhide