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The complexities of building a subscription IoT business

When OEMs are considering developing enterprise or consumer IoT technologies, the idea of charging end users for ongoing services can sometimes bring on a whole new list of challenges. It’s not uncommon to encounter the following questions:

  • What kinds of services would I offer customers?
  • How would I keep track of usage?
  • How do I bill end users?
  • What happens if data consumption is seasonal or periodical?
  • How can I measure this and control costs?

These are all valid questions — and they are topics that need to come up during the early stages of IoT development to ensure a successful business result.

‘Seeing the forest through the trees’

In some cases, OEMs may not fully understand the kinds of services they can offer simply because they are too close to the existing business and have been conditioned to stay within that paradigm. In these cases, it can help to bring in a team that has experience in offering ongoing services but may not be in the same industry. The fresh eyes can often see opportunities that the OEM may not have considered.

The trail camera market is a good example of an industry that had not changed for years until a seismic shift took place and Bushnell, the market leader, implemented its managed cellular trail cameras. Bushnell was able to offer a better customer experience, include new services that its customers valued and generate additional sources of revenue.

Keep a close eye on consumption and costs

In some cases, two identical devices can consume different amounts of data depending on how each device is being used. Therefore, it is important to analyze not just individual device data needs, but also the aggregate data needs of the entire potential market to determine what kinds of plans to offer and what to charge a customer. OEMs should identify and work with partners that understand how to optimize IoT technologies to maximize revenue while also managing costs.

Understand that end-user billing is complex

Cellular carriers figured out how to bill end users in the mobile phone and tablet market years ago. If you’ve ever bought a ringtone or a mobile game, you’ve seen this firsthand. However, the mobile market is fairly homogenous. IoT is, by nature, diverse and devices use disparate platforms, networks, software and hardware. This makes billing end users orders of magnitude more complex.

In practice, many carriers do not bill an OEM’s customers on their behalf for IoT products and services due to the complexity, and some carriers pull in specialists with IoT billing expertise to assist OEM customers in handling the billing of end users.

OEMs may want to keep this in mind and work collaboratively with these different parties to ensure their technologies are built on strong foundations but flexible enough to support future growth opportunities — possibly even on a global scale.

A new wrinkle: Periodic usage

Now, what happens if customers don’t use services 24/7? What if the IoT system is used seasonally or periodically — are customers on the hook for data they’re not using?

They don’t have to be if the billing platform is architected well and deeply integrated with the way carriers operate.

Going back to the trail camera example, hunting seasons are just that — seasonal, and if hunters are using their cameras to track game then they’re often turning devices on and off at different times of the year.

From a user standpoint that’s great, but from an OEM technical and business standpoint it can cause a lot of challenges. One of the OEM’s biggest priorities should be to ensure that end-user billing is tied to the device activation status to be able to easily handle unique seasonal usage models without incurring unnecessary expenses for themselves or their end users.

Successfully managing a growing IoT business

Typically, the ultimate goal for an OEM that is deploying IoT is to create successful business models — ones that reduces costs, increase device sales and/or create new recurring revenue streams. If they can get all of the pieces together and get the product in the hands of their customers, they’ve conquered half the battle. However, once the system is up and running, monitoring the metrics of the business and being able to make course corrections as needed is critical to meeting the business goals.

Implementing an IoT billing platform is one thing, but working with a partner that can provide a reliable billing service, help to assess revenue and cost drivers, assess customer usage and optimize data plans to match an OEM’s business model is another thing entirely.

To build successful subscription-based IoT businesses, OEMs should have a great go-to-market plan, but also ensure they don’t overlook the crucial need to monitor, manage and fully support technologies once they are out in the field.

All IoT Agenda network contributors are responsible for the content and accuracy of their posts. Opinions are of the writers and do not necessarily convey the thoughts of IoT Agenda.

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