The IoT (Internet of Things) continues to exceed growth projections and many intelligent device manufacturers are asking the same question – how will we monetize the IoT opportunities?
While there are many components to this question, software licensing is a key revenue driver for intelligent device manufacturers that are offering subscription- and usage-based software licensing with their hardware.
Specifically, many IoT vendors are debating if they’re going to put software licensing functionality on the endpoint – so Mathieu shares his observations and experiences over the last several years:
I always differentiate between “intelligent devices” and “sensors.” The reality is that sensor constraints are much tighter than intelligent devices due to factors like cost, size, power, and speed. For example, sensors have very little dynamic memory (30-60 KB), limited storage space (if any), require the least amount of power, and are firmware-driven to fit onto a small silicon footprint. Many sensors only have basic instructions necessary to run which makes trial or subscription licenses quite difficult.
Contrast that with intelligent devices which have a mature operating system (often Embedded Linux or Android), with storage in the hundreds of megs or gigs, dynamic memory in the megs or gigs, etc. So when discussing licensing and endpoints, it is important to keep the capability of the endpoints in mind. When possible – I recommend implementing licensing at the gateway level, not on the individual sensors:
This approach assumes some type of control software which receives data and input from sensors (and intelligent devices). For purposes of this conversation I’ll call that an “IoT Gateway” (gateway) but you may also hear terms like “management console”- at the end of the day we’re simply describing where edge devices/end-points, especially sensors, exchange data with bigger systems.
Several IoT vendors I’ve worked with have implemented the above. The sensors do not have a licensing client embedded on it. Instead, they talk to the gateway when they wake up and say “can I start” or “what ‘edition’ am I in.” The gateway will then use the software licensing component to check-out licenses from a local license server on behalf of that sensor and then reply with “sure-you can start” or “no-you cannot start” or “you can start as a standard sensor.”
Some advantages to implementing a gateway-based software licensing model are:
The disadvantages of this approach are that it requires an IoT gateway. If you cannot leverage a gateway then you can still deploy software licensing on the individual sensors - but you will need to increase space requirements as much as possible to meet the constraints of these sensors such as:
Want more on ways you can monetize the IoT opportunity?
Insights from Software Monetization industry leaders on how to secure new opportunities in the Internet of Things (IoT)
Flexera Software held a regional Soft Summit event in Boston, MA which brought together industry analysts, customers and other thought leaders in the field of Software Monetization. Several of these experts were interviewed about what they see with IoT - market trends, best practices, industry analysis, and more. Watch these brief videos to uncover your next opportunities by monetizing the software on your intelligent devices. Software Monetization processes covered in these videos include software licensing, entitlement management, software distribution and delivery, software updates, device security, in-product analytics and more!
1. Make More Money with Software Licensing Renewals
Flexera Software's SVP Products and Services, Richard Northing, discusses the possibilities for new revenue stream creation and increased customer value with software licensing renewals from embedded software.
2. Software Monetization Crucial for Network Equipment Success
Flexera Software's Principal Strategy Consultant, Cris Wendt, discusses how NFV (network function virtualization) is transforming the business models of telecommunication equipment providers as they shift their focus from selling hardware to software.
3. Why Device Makers are Shifting to Software Licensing
Flexera Software's SVP Products and Services, Richard Northing, discusses why device manufacturers are transforming themselves from being "pure play" hardware manufacturers to software companies as they're looking for new ways to improve margins and differentiate their products.
4. Is Your Supply Chain Prepared for Your Software Licensing Shift?
Flexera Software's Principal Strategy Consultant, Cris Wendt, discusses key supply chain considerations that device manufacturers should consider as they face as they shift their focus from selling hardware to software with Software Monetization strategies.
5. Device Manufacturers Transform with Software Monetization
Flexera Software's Principal Strategy Consultant, Cris Wendt, discusses both the opportunities and the challenges that intelligent device manufacturers face as they shift their focus from selling hardware to software with Software Monetization.
6. How are You Securing your IP in the IoT?
Flexera Software's Senior Vice President of Marketing, Randy Littleson, discusses what security means from a software monetization perspective for both software vendors and device manufacturers.
Richard Jenny, Director of Program Management and DevOps at Overture Networks, discusses why they decided to leverage Flexera Software for their Software Monetization needs instead of straying from their core competencies by building their own software licensing, entitlement management and software update functionality in a "homegrown" approach.
By Tu Le
In part 1 of this Internet of Things (IoT) security series I reviewed how a four-layer approach can help reduce security anxiety for intelligent device manufacturers. The first post covered the device- and OS-layers, and now we'll cover the application and network security layers.
All IoT devices run software that provides service(s) to its users or other systems—and are often the weakest link in an IoT device stack. Traditional security practices do not apply when it comes to IoT devices. For example, you normally would not download an anti-virus app and try to run it in your Nest Thermostat device to protect against malware or viruses. Most IoT devices have limited resources and hardware vendors typically rely on physical security and as a result, designing security into software is usually an afterthought. Secure coding principles are one approach that will ensure application security is an integral part of the product design that will greatly minimize security vulnerability.
IoT devices are “always on” simply by definition and have a very high security risk as a result. Most IoT devices are purposely built to provide a few simple services that rely on data from other systems - perhaps other IoT devices. For example, with a SmartThings(r) hub, it can monitor whether doors, windows, and the garage are open or closed. Most IoT devices use simple traffic patterns that are predictable and can be impersonated in order to compromise a device. Authentication and secure communication are two common practices to protect data in motion to prevent eavesdropping and ensuring trust between one or more IoT devices.
So how can you get started today to improve the security of your devices?
As mentioned before, leveraging a tamper-resistant application can help you minimize piracy risk and strengthen IP (intellectual property) protection with additional security layers. Tamper resistance will help protect against hacking and software piracy through sophisticated detection and identification of unauthorized use. Additional benefits of tamper-resistant app include:
By applying security in layers in the above four areas you can be more assured that your IoT devices are secure.
More IoT Security Resources:
The Internet of Things (IoT) is experiencing exponential growth, connecting billions of devices throughout the world. Along with the growth comes hundreds of articles about IoT being posted every day, so we’ve provided a list of some of the articles that we thought were particularly insightful - especially as you think about how best to capitalize on the IoT from a general software, software licensing, software update and software monetization - perspective. Articles are below, grouped by general topic:
More Internet of Things Resources:
A recent article published by Forbes, “Why You Should Care about NFV,” provides an on overview of the differences between NFV (Network Function Virtualization) and SDN (Software Defined Networking), business drivers behind NFV and what it means to customers. Specific customer-centric benefits covered include how:
There’s no doubt that NFV is transforming the telco ecosystem – the question is, are you poised to take advantage of it? Read our previous blog post where we detailed the impact of NFV on network equipment manufacturers and how you can drive positive business outcomes from this transformative trend.
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In this blog post, Randy Littleson, Senior Vice President of Marketing at Flexera Software speaks with Rami Ahola – Global Electronics Center of Competence at IBM and Vikram Koka – Vice President Intelligent Devices and IoT at Flexera Software and asks them to about expense of connectivity as well as the licensing and entitlement lifecycle.
Randy: Will connectivity be priced based on subscription model, and applications on a consumption based model? Do you see that model happening?
Rami: Yes most of the connectivity that you have in the devices today is some sort of cellular network type of connectivity, which is subscription based not consumption based. For the cell phone or network companies it doesn’t make a whole lot of sense to provide consumption base connectivity pricing because often it’s very short bursts of data going relatively and frequently out of the device. The consumption price would need to be ridiculously high for them to make any money off of that.
Randy: What is this license lifecycle and why is it important to monetization?
Vikram: The notion of license lifecycle is primarily the result of an auditor, as devices get more intelligent there is more capabilities which have been either purchased or added on over a period of time. You need to have a record of what set of capabilities are actually deployed on this particular asset over the life time it’s been deployed in the field. Initially they’re being shipped with a certain set of applications on the endpoint. Over time, additional capabilities may have been added to it, from either the original manufacturer or a third party application provider, and this endpoint may actually be working with other parts of the ecosystem. One of the key things to remember is for an IoT provider, it’s an ecosystem play to a large part. The second key part is that the behavior of the device will change and grow over a period of time, and that’s powered based on additional capabilities added potentially as a license capabilities, but that record needs to be kept. There needs to be a consistent viewpoint of what that entire state of this particular asset is. In cases as such as a Returned Materials Authorization (RMA) because something changes and you need to replace it, you need to know what is running right at this point in time so you can replace it in its entirety. I’ve heard people refer to this as being the change from a physical supply chain towards a hybrid or digital supply chain. It’s a combination of what is originally shipped and things which have grown over a period of time, which is where the entire lifecycle comes into play. That leads to the license lifecycle or an entitlement lifecycle, but it’s fundamentally a reflection of the change in the supply chain. As devices get more sophisticated, things change over a period of time, how do you manage that? What is a central depository to keep that fulfillment lifecycle, what is the current state in hand to be able to replace it, and then to be able to upgrade it.
Randy: Let’s take that one step further, you mentioned entitlement management, let’s talk about entitlement management specifically related to monetization and focus on the upsell and cross sell opportunities from having a good entitlement management system as well.
Vikram: Once you have a connected device and expect this ecosystem to grow through additional applications, you need to know what’s running on it. Customer and install based intelligence is absolutely essential for any device manufacturer to be able to do an upsell. We are used to this in the consumer space with smartphones. You have a record of exactly what’s on your phone and can wipe it clean, restore it, be able to get a new phone and get the same applications. You need that behavior with an IoT application and with an intelligent device. For an upsell opportunity you need to know what’s running on the device. In the industrial space a lot of these assets can grow over time. They can be renewed with newer algorithms in machine shops, as well as in additional capacity in the networking equipment and telecommunications or new manufacturing techniques for a factory floor system. Knowing what version of the software the device is running, knowing what the physical capabilities of that asset is, gives the opportunity to be able to upsell, upgrade, be able to then perform these diagnostic operations as Rami was talking about in the case with Rolls Royce, be able to extract additional value, an ongoing value from it. A good entitlement management system is absolutely critical for making these monetization’s options feasible and possible.
Share your perspectives— The importance of the licensing and entitlement lifecycle in IoT
Part 1 discussed Defining the IoT
Part 2 discussed Monetizing the IoT
Part 3 discussed Licensing the IoT
Part 4 discussed How Industries and bundling play roles in IoT
Up Next: Part 6: The roles cloud, virtualization, and security play in IoT
In Part 2 of this video series, Steve Schmidt, VP of Corporate Development with Flexera Software continues sharing his views on the Gartner research report -- Gartner Emerging Technology Analysis: Software Licensing and Entitlement Management Is the Key to Monetizing the Internet of Things, including the role of software licensing in not only monetization but also cost control and customer satisfaction, challenges that device manufactures are likely to face, the connection between software licensing and entitlement management, and Flexera Software’s impressions based on recent experiences.
View Part 1 in the Dissecting the Gartner Report on Monetizing the Internet of Things #IoT video series.
By Marty Bakal
A recent Forbes article “Don’t underestimate the impact of Internet of Things” did a great job explaining the benefits of IoT. Many people think IoT is also about any consumer device that connects to the internet. Basic consumer devices are simple to understand but IoT is larger and needs to be especially to achieve the growth analysts expect. The critical element is use cases that integrate devices into a complete solution. The thing that gets me excited about IoT is the fact that it crosses all industries and can integrate everything around us together. Sensors that monitor how we walk, the temperature inside a building, maintenance of medical devices all can be converted into a complete system. The Forbes article gives a few of these use cases and links to even more. Understanding what use cases are useful and which aren’t is critical.
Last week another Forbes article “Putting Business First in the Internet of Things” came out highlighting the need to put business first when building IoT solutions. The article makes the point that the Internet grew rapidly because it allowed people worldwide to connect much more easily but you still needed relevant scenarios for people to want to connect. #IoT is having the same effect on devices. The trick here will be making the solutions that occur be relevant to the end business needs. The article states “Our customers in the IoT market do not buy components“ confirms De La Mora of Cisco, “they buy solutions tied to business outcomes and results.” The issue is the solutions are quite complex and many times not even envisioned by the producer of the original product. So to achieve this result many companies are simply building IoT networking platforms to allow partners to develop their own solutions to offer to consumers.
In both articles one of the key points was figuring out a way to monetize the solution is important to keep investment on IoT into the future and achieve a good return on investment (#ROI). Without monetization how do you know the effort was worth the expense and whether to keep the development effort going? The typical solution mentioned is charging based on usage, i.e. data that passes through a network or time spent using software. There are many business models which can be helpful depending on the specific solution being provided.
For more blogs on how to profit from the business of IoT please take a look at these IoT related blogs:
Software Monetization: Talking Successful Software is a resource for application producers and intelligent device manufacturers looking to enable rapid adoption of new business models for on-premises, cloud, embedded and mobile applications, streamline quote-to-cash processes, ensure revenue recognition, deliver a positive customer experience and reduce operational costs and complexities.