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IoT in Business: from Cost Reduction to Revenue Growth

Although the Internet of Things’ potential economic impact can top $ 11 trillion by 2025, early IoT projects were largely focused on effective asset monitoring and management. Today, the adoption of IoT solutions in business is no longer driven by cost reduction. What are the current IoT business applications and how could you possibly turn sensor data into a lucrative source of revenue? Read on to find out!

The current state of the Internet of Things in business

According to Gartner, the number of connected gadgets in use will reach 8.7 billion this year. Although consumer IoT solutions comprise 63% of the global market, experts registered a steady growth in the enterprise IoT-related spending last year.

What are the key Internet of Things use cases in business right now?

  • Manufacturing. In 2016, the world’s leading manufacturing companies including General Electric and Bosch invested $ 178 billion in IoT projects dealing with manufacturing operations, predictive maintenance and asset management. General Electric, for example, uses Cisco’s networking infrastructure to securely store, transmit and analyze equipment performance data collected through GE Brilliant Manufacturing Suite. The company has recently employed the Brilliant solution at a Californian factory and increased its productivity by 25%. The Motley Fool claims even a 1% increase in manufacturing companies’ productivity can result in a $ 10-15 trillion global GDP growth. You can’t underestimate the impact of the Internet of Things on business, right?
  • Transportation. Transportation companies’ IoT spending reached $ 78 billion last year; where did the money go (and was it worth it)? $ 55.9 billion (or 72% of the total sum) was spent on smart freight monitoring solutions. By enhancing “dumb” objects (including vehicles, refrigerators and even goods items) with RFID tags and ZegBee sensors, enterprises are able to collect machinery, personnel and cargo data, identify inefficiencies and subsequently reduce operating expenses. 70% of logistics companies that have already initiated IoT projects register a 30% increase in productivity and order processing efficiency. Cisco believes the Internet of Things’ impact on logistics and supply chain business can reach $ 1.9 trillion by 2025;
  • Utilities. The global utilities IoT sector ($ 69 billion) is dominated by Smart Grid solutions ($ 57.8 billion). Here’s another example from General Electric. The company’s Digital Power Plant solution enables wind farms and power plants to generate electricity with real-time control – and little to no environmental impact. According to GE’s estimates, the system can help gas-powered plants reduce operating costs by at least $ 50 million a year. By switching to smart grids, the USA can save up to $ 42 billion in energy costs during the first year – and that’s not to mention such IoT benefits as the real-time control over energy bills, broad-scale usage of electric vehicles and growing utilization of renewable energy.

Other sectors that display a strong interest in IoT solutions include healthcare, retail, banking, insurance and consumer electronics. Consumer spending on Smart Home solutions, for instance, will top $ 63 billion by 2020 (up 50% from 2016).

IoT in Business: from Cost Reduction to Revenue Growth

However, building another Home Automation system won’t necessarily bring you millions.

According to Pavel Shylenok, CTO at R-Style Lab, 90% of modern Smart Home systems are all about connecting air conditioning and lighting systems to a smartphone app – and it doesn’t really make them smart. A true Smart Home system should incorporate Artificial Intelligence algorithms and be able to learn a home’s owner habits, thus requiring little management on his part. Wearables, baby monitors and smart refrigerators also show insignificant traction; what is the IoT-related revenue growth we’ve been talking about?

Recent MIT and Deloitte surveys prove IoT’s potential currently comes from enterprise-scale projects – and the analysis of sensor data.

The Internet of Things business opportunities: turning data into money

Back in November we published a curious article on Predictive Maintenance, citing the Equipment as a Service model as the future of the Industrial Internet of Things. Original equipment manufacturers (OEMs) that enhance agriculture, construction and mining equipment with sensors and provide the associate services including remote diagnostics and prompt repair get a significant advantage over their competitors.

Provided you learn to collect and process user-generated data, the model (let’s call it IoT as a Service) can be applied to any connected solution.

In order to develop an effective IoT monetization strategy, companies should:

  • Collect data on a connected gadget’s usage, analyze it and make the findings available to the end customer;
  • Study user feedback and adjust product structure at the feature level (configurable offerings is a plus);
  • Offer flexible consumption of an IoT solution.

IoT in Business: from Cost Reduction to Revenue Growth

Monetization should be taken into account during the Proof of Concept stage – that is, the very start of an IoT journey. You need to create multiple use cases for your product, evaluate its potential impact on revenue growth and the investments required for putting the solution to work – from a customer’s perspective, of course. If you don’t have the required expertise and R&D facilities, you can always trust the task to a reliable software vendor. Provided your product stands the feasibility test, feel free to embark on an IoT project ASAP (since market windows for innovative solutions are usually tight).

FYI: IoT’s business value is particularly evident in the manufacturing sector. Back in 2015, 79% of manufacturers that were using IoT solutions in the workplace reported a 28.5% IoT-driven revenue growth (compared to a 15.6% revenue increase across other industries). In 2017, enterprise IoT-related technology spending will reach $ 273 billion. If you want to get a share of the pie, there’s no better time to act than now.

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