IoT: Hype or get left behind

If you were at some of the conferences I attended recently, you couldn’t help but get hyped around the hype of IoT. Customers lined up session after session to speak about how their business had transformed and tried to convince others that the future is now.

Slides were displayed that showed some aggressive forecast numbers as well as positive project ROI outcomes to date, says Isabel Chapman of Machina Research. The message was “get into IoT now, or get left behind”.  Angst and soul searching were a common thread: customers that had not yet started their IoT journey felt the need to come up with some sort of magic pill called “IoT solution” that would solve a host of business issues.

Clearly, there is a role in mapping out exactly what others in industry are doing in order to decide on the best way forward.  This framework allows those on the procurement side – enterprise and public sector organizations, not the IoT vendors – to decide what they need. In our recent published Strategy Report called, simply, “IoT Procurement”, we have set out to map out the approach that buyers of IoT solutions need to take. In this article we share some of the key findings.

Based on historical and survey-based evidence, there is a process, or lifecycle if you will, that has been typically followed by enterprise wishing to get started with their IoT journey. Essentially, there are basic business drivers when considering a solution, and buyers tend to progress in different buying behaviours as their maturity/experience grows. These can be summarized under some standard principles of doing business:

  • Save money
  • Make money
  • Stay out of jail

Added to this, for IoT, are:

  • Be a rockstar
  • Don’t get left behind.

IoT and its predecessor M2M’s initial adoption has been in industries where ROI could be more easily proven to internal stakeholders: industrial production, transportation, and energy/utilities. Saving money, or proving increased internal efficiencies, made the case for implementation of an IoT solution. It is therefore not surprising that most case studies wheeled out at conferences tend to be provided by executives from these verticals.

As the concept and value of IoT started gaining momentum, it garnered the attention of companies and individuals that wanted to be perceived as “cutting edge innovators”.  Ego driven efforts by individuals and organizations that wanted to be seen as a rockstar in this new technology have come up with some spectacular proofs of concept, especially in utilities and smart cities.  Often there is the danger that these are siloed efforts.

As IoT started to prove itself, companies started to use it for external benefit, that is, to make money.  Both existing users of IoT, and newcomers, started to see the value of IoT for whole new business models, such as servitization.

Compliance, that is making sure that corporate executives stay out of jail, is also universally a strong motivator. The net result has been the use of M2M and IoT to facilitate and track business processes, especially in fleet and asset management. An example this year is a new piece of legislation from the US’ Food and Drug Administration (FDA) called the Food Safety Modernization Act, which ensures the safety of the US food supply by being proactive rather than reactive: the FDA puts the onus on food producer partners, from farm to retailer, to prove safety through real time auditing.

With all the efforts by various industries and players in the IoT space, all the media attention, and all the risk to share as a result of competitor’s new business models, another key variable influencing behavior is as simple as competitive survival.

The feeling of “not being left behind” was a theme voiced by various IoT solution vendors at conferences.  Vendors in various panels stated their befuddlement with customer after customer who would ask them for unspecified help “to do something in IoT”. These customers did not have a view as to what they wanted, but felt that there was increasing pressure to do something.

And so, a mention of what is starting to gain traction in various facets of the IoT: the network effect.  That is, the concept that a good or service becomes more valuable when more people use it.  This effect can be seen especially in the use of Big Data for the IoT: the more data is gathered from devices and people that use the device, the better it becomes; the better it becomes, the more people use it. Servitization, one of the new IoT business models, is a component of true product and customer lifecycle management envisaged and enabled by IoT. The more companies take advantage of the ability to monetize network effects through new business models, the greater the chance that those that don’t embrace the IoT hype will be left behind.


The Machina Research Strategy Report “IoT Procurement” was published in June 2016. For further information, contact us at [email protected]

The author of this blog is Isabel ChapmanPrincipal Analyst at Machina Research.


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