Plug Into MRR With IoT

By Art Wittmann

The Internet of Things (IoT) may not be quite the money machine suggested by some, but you’d better believe it’s a real, live opportunity. “We made $250,000 last year tracking colic in horses,” says Rickie Richey, CEO of Altaworx. “That sounds like a lot, but the average thoroughbred is worth $80,000.” Owners and breeders are happy to shell out monthly to head off health problems. Altaworx’s strategy is to develop custom machine-to-machine apps based on a customer’s need, then bundle the software with sensors, cameras or other asset-tracking hardware and bandwidth — a 1GB plan, in this case. Altaworx, a member of the AT&T Partner Exchange, splits margins 50/50 with its agents and has seen 2,000 percent revenue growth between the M2M practice and its traditional IP and SIP products and services.

Meanwhile Verizon, which estimated its 2015 revenue from IoT and telematics offerings at more than $495 million, launched ThingSpace, an IoT platform through which partners can connect with innovative developers to resell systems that do everything from conserve water at wineries to help pharma companies secure their supply chains. The company estimates that by 2020, IoT will result in 5.4 billion connected devices. Mike Lanman, senior vice president of enterprise and IoT products, says his division is seeing double-digit growth and has signed on more than 1,000 IoT partners.{ad}

Not that we’re in a hype-free zone: Cisco famously insists that he IoT’s eventual economic impact will top $19 trillion, more than the annual gross domestic product of the United States, and predicts that annual global data center IP traffic will reach 10.4 zettabytes by the end of 2019, up from 3.4 zettabytes in 2014, partly thanks to IoT devices. Juniper Research forecasts that 38.5 billion connected things will be in use worldwide in by 2020 — by an expected global population of 7.7 billion people. That’s a lot of Fitbits.

Listening to vendors wax poetic about IoT’s potential is like listening to one of those thoroughbred owners predict a Triple Crown — they have a vested stake in rosy predictions. But strip away the visions of roses and six-figure stud fees, and there’s plenty of reason to get into the IoT race, not least the possibility of healthy new monthly recurring revenue streams for you and your customers.

We’re seeing examples now. Avaya worked with Tesla to enable its cars to send alerts when sensors report low air pressure. “They’ll automatically alert a support guy to drive and meet the person and change their tire for them,” says Steve Biondi, vice president of Avaya’s Global Partner Organization. “Imagine other kinds of diagnostics like that. This is fantastic.”

The idea is that IoT can prevent waste, engage customers and enable new markets that, sensor by sensor, tire service by tire service, add up to pretty staggering sums. Getting to Cisco’s $19 trillion takes some leaps in cause-and-effect thinking, but the idea is right: We do a lot of things based on expected outcomes rather than actual measured needs.

Here’s what we mean. You have a customer that…

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… depends on fleets of delivery vehicles. They change fuel filters annually, no matter whether a van did 18,000 hard city miles or 8,000 on the highway. Is that optimal? Probably not. Sometimes they’re wasting money replacing a perfectly serviceable filter. Sometimes they’re wasting money on fuel. A better option is for a smart vehicle sensor to notify the fleet manager just in time for optimal replacement — better yet, with a list of other maintenance the mechanic should do while the vehicle is in the shop. What’s that efficiency worth on a monthly basis to a customer for whom mileage is money?

These are the sort of examples that get repeated over and over in IoT lore. Simply put, data lets us act in more timely ways and run systems — any systems — at peak capacity.

So without a doubt, there’s plenty to the IoT hype. If you’ve been delighted by your ability to catch the cloud computing wave, or you’ve managed to capitalize on the explosive growth in mobile device ownership, then it’s likely that you’ll find IoT at least as good a bet, maybe better. One thing that a lot of IoT technology has going for it, in a way that cloud and mobility didn’t, is an ability to calculate a real net present value of a project. In other words, you can predict and measure money saved or made by implementing many IoT technologies. That’s the notion that has Cisco excited enough to calculate (or miscalculate) numbers like $19 trillion.

So why aren’t agents already raking in revenue?

Verizon’s Lanman sums it up: complexity. “You have to select what connectivity you’re going to use to connect to the Internet,” he said. “That’s not an easy decision.” Then there’s device selection, software development, security, data analysis and ownership; the list goes on.

“It’s no wonder that people …

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… with great ideas for IoT don’t make it through all the barriers,” he said.

Of course, plenty of providers want to help, and we’re here to discuss a few ways you can cash in now. But first, a word on those dueling numbers. Carriers, IT vendors, pundits and device makers have wildly different outlooks, like Verizon’s 5.4 billion devices versus Juniper’s 38.5 billion. We’ve been through this with cloud predictions, and it’s easy to assume that if there isn’t agreement, even within an order of magnitude, on the size of the market, then essentially the pundits and vendors are full of crap. But in this case, it’s not nearly that simple.

Many Sensors, Fewer Connections

One example that’s been around a while is a freight train application. As you can imagine, it’s pretty easy to make the case that the faster a train goes, the more profitable it’ll be. One limiting factor on train speed is wear on the wheels of each car. Historically, freight companies did a lot of predictive analysis to figure out when wheels needed to be changed, and just how fast they could go before wear would make it likely that the wheel would malfunction, possibly causing a derailment.

In this instance, the worst-case scenario is really bad. Lots and lots of capital loss occurs if the train derails, not to mention possible human misery and a PR fiasco, so layers of safety controls and frequent (expensive) inspections are used to monitor wheel wear along with other train vitals. The result is that trains go substantially slower than they otherwise might — it’s all about margin of safety. This is a big enough deal that freight companies know they’ll be money ahead if they spend to put sensors on each and every wheel to measure vibration and heat, two leading indicators of failure. So a typical 100-car freight train amounts to 800 wheel sensors happily collecting data.

Now, probably the worst way to compile and analyze the data from these 800 sensors would be to hook each one up to a cellular network and send raw data back to HQ. First, there’s a lot of data being generated, so cellular connections would be wildly expensive, and second, trains frequently go where cell networks are sparse, so there’d be an unnecessary reliability issue. You want analysis done right there at the train, with just one or two uplinks to send crunched data to the company. So in Verizon’s view, the wheel management system needs one or two connections per train, whereas the sensor maker sees the job as selling a cool 800 units. Thus, wildly disparate estimates of just how many connected things there will be by the end of the decade. Cars will go the same way — lots and lots of sensors, with just a couple of uplinks to send data back to the manufacturer overlords.

The train example is a good one because it also illustrates how different IoT is from cloud. It’s pretty easy to put …

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… a dollar value on fewer inspections, better wear analysis and faster train speeds. The price of sensors and 4G links are predictable. You can readily figure out what the project costs and what it saves or makes without having to resort to the squishy science of “productivity improvements,” as is often the case with straight cloud computing projects. This is going to sound better to your customers than the song and dance about moving capex to opex.

But that’s a big-business example. Certainly Union Pacific didn’t call an agent to see about getting some train wheel sensors. So let’s talk plumbers. Why do their kids go to better colleges than your kids? Because most times when you call a plumber, it’s an emergency. There’s brown, nasty, smelly ooze backing up into your basement, and that’s about the least optimal time to go into haggling mode. You want it fixed ASAP, so shopping around for best price isn’t even on your mind.

For the last 30 years, septic systems only alerted when you had a problem. They’ve been failure-prone, and when they fail, they fail off — the one time you’d prefer a false positive, you don’t get one. The same is true for city folks with catch basins; when it’s full, you’re in trouble.

Would most homeowners pay $500 for sensor installation and $10 per month for smart monitoring? They will once their existing system has failed. Take it a step further and track water flow in and out of your house, and suddenly plumbers can be proactive friends (whose kids still get to go to good schools; let’s face it, they’ve got us). The positive side of this for plumbing companies is that data allows logistics apps to manage the efficient deployment of trucks and crews. They may not get to charge golden-time rates, but they should be able to consistently fully utilize their staff. Homeowners benefit from never dealing with a nasty seep of stench.

Companies with small fleets can enjoy other benefits. Insurance companies can now monitor driving patterns and adjust rates based on measured behavior. I’ve been on the receiving end of one of these devices for my personal car insurance. Being accident free and having just one speeding ticket in the last 15 years or so, I figured lower rates would be a sure thing — I’m a great driver.

Maybe not so much. I was told my rate could have gone down as much as 30 percent, but my insurer measured my performance for a month and said I rated just a 15 percent reduction. Too many fast starts and stops; they’ve labelled me safe, but aggressive. Guilty as charged. Fleet owners can get the same sort of analysis and, potentially, discounts.

It’s also pretty easy to set up GPS tracking on vehicles. On the extreme side, companies like FedEx configure routes so that drivers almost never make left turns. Insurance companies like that, since left turns are much more accident prone, and they can take more …

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… time to complete. For small companies, simple route planning can save fuel and help monitor what employees to do with company vehicles. Municipalities can track snowplow drivers to see which streets are clear and make sure contractors aren’t parked somewhere drinking coffee while on the clock. This is certainly the sort of thing agents can help with. As always, you just need to know what’s possible and with whom to partner. You set the project up, and application experts take it from there.

Make no mistake, plenty of vendors are in this hunt. Your small-business customers will soon find that almost every capital item they buy wants to phone home. That way, manufacturers not only make the big one-time sale, they also get some recurring revenue along with invaluable data on how their products are used. The benefit to the buyer should be smoother operation of important equipment and just-in-time maintenance. Who wouldn’t pay $20 a month per system for that? 

The main challenge, of course, is that as businesses grow over time they’ll be under multiple contacts, sometimes with the same provider, paying different rates and possibly shelling out for maintenance monitoring on systems no longer in use.

Sound familiar? Billing rationalization is a business as old as the channel, and it’ll be an important service as IoT goes mainstream.

What’s Missing?

If you take a few minutes with Google to explore IoT, you’ll see those dollar figures in the trillions tossed around regularly. The other thing you’ll find are scads of articles talking about what’s holding IoT back. The big answer, in a word, is standards. Take beacons, a very cool technology that’s all the rage in retail. A report from BI Intelligence estimates that beacon-triggered messages from platforms like Freckle IoT directly influenced up to $4.1 billion in U.S. store sales in 2015, with that figure growing tenfold this year. Beacons, in concept, are as simple as can be. They use a somewhat recent variant of the Bluetooth standard that draws less power and is suitable only for data transmissions, not voice. That means battery-powered beacons can run unattended for months.

The idea is elegant and powerful: A shopper walk into a store, restaurant or medical office, and her smartphone picks up the beacon signal. The beacon gives a basic “welcome to the establishment” message and offers some Web links to do relevant stuff. In a doctor’s office, it could take patients to a portal where they enter insurance data and the reason for their visit, rather than using the ubiquitous germ-coated clipboard. At a retail shop, the beacon could tell a shopper about specials or offer other details about products for easier comparison. 

The idea is to bring interactivity to the process of entering a brick-and-mortar store that’s at least a little bit comparable to what a consumer could get shopping online — hopefully for the benefit of customer and business owner alike. Sounds like a pretty good opportunity for agents, right? Help businesses that aren’t …

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… tech savvy jump into the latest and greatest way to interact with potential customers. It’s what agents do.

The challenge is that, beyond low-power Bluetooth, there’s no agreed-on standard for how a beacon does its thing. Patients or retail customers need to have already downloaded an app that knows the language of the beacon, and the app needs to be running. Sort of defeats the purpose, doesn’t it? If you’re Starbucks or The Gap or some other huge retailer, maybe your customers will download an app just for your store. If you’re a local retailer, it’s tough to get that sort of behavior. And even if you’re a willing consumer, keeping 20 or 30 of these apps sounds like a space waster at best.

IoT is replete with examples where standards would make sense. It’s also thick with vendors who can’t see past their parochial interests, and so standards work is painfully slow. From the IEEE to the IETF to ITU, there are working groups set up, but with limited outcomes expected.

A path seen by many as a better bet: Create a standard for doing something that needs doing, then throw it into the public domain. By making a specification free and open, the hope is that it will become a de facto standard — altBeacon is one such effort. Radius wrote and published the standard; now all it needs is adoption.

Sounds great until you run into some behemoth that prefers its own way of doing things — say, Apple and its iBeacon.

The trick for channel partners is to realize when an IoT technology has gotten to the point where standards are solid enough that there’s money to be made with little risk to customers, but not so solid that competition is rampant. We’re focusing on that effort with our IoT track at this year’s Channel Partners Conference & Expo, and plenty of your vendor partners also have packaged offerings.

Some advice:

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Let’s close with a few more numbers. An Economist report says business executives recognize the potential of the IoT to deliver long-term revenue growth, but just 38 percent think their companies’ senior leaders fully understand the technology. Most, 84 percent, say the IoT could represent new, service-based income streams, but just 7 percent have developed a comprehensive strategy. Time to go sell.

Art Wittmann is vice president of the Business Technology Network for Informa Exhibitions.
LinkedIn: linkedin.com/in/artwittmann
Twitter:  @artwittmann