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Pay-Per-Use IoT Brings Monetization Opportunities to Electronics

Potentially, 50 billion devices will be connected to the Internet by the year 2020, and the Internet of Things (IoT) could have a potential economic impact of up to $11.1 trillion by 2025, according to goTransverse, which provides cloud-based subscription and billing solutions. IoT devices inevitably contain electronic content, and in many emerging use cases, they present monetization opportunities for electronics companies willing provide services related to IoT-driven data.

Of course, these IoT monetization opportunities can also present challenges. For instance, how do electronics companies scale these new service offerings that are made possible by remote sensors in buildings, homes, vehicles, robots, and other industry and consumer applications to meet diverse sets of business cases and needs of customers? And in the process, how can electronics companies create value and monetize these services to facilitate new revenue streams? This is not just a matter of identifying new markets, productizing technologies, and developing pricing strategies. From an infrastructure standpoint, organizations also must be able to address back office functions such as invoicing and billing methods that are unique to IoT services.

“In many cases, the issue is going to be to arrive at more granularly based, per use billing for IoT services,” said Mike Beamer, an executive at goTransverse. Beamer, whose background originally was in telematics. He recalled a similar pricing, invoicing, and billing transformation that occurred in the telecommunications industry over a decade ago. “Telecommunications companies suddenly found themselves in a per use billing model that was linked to the number of minutes or the amount of data storage in the cloud that a consumer or a business consumed,” said Beamer. “They had to change the way they priced and they had to bill to reflect this.”

To a degree, this granular billing already occurs in some electronics-related businesses such as utilities that bill by kilowatt hours consumption in homes and businesses. However, when it comes to service offerings, electronics companies usually operate and bill on fixed rates that are priced for service calls or quarterly or monthly fixed subscription fees.

This is where traditional pricing and billing modes no longer match up with customer expectations.

What happens, for example, when a company doing advanced manufacturing or a hospital using robotics in the operating room only wants to pay for the sensor on the equipment when it is actually being used? Or when a logistics company only wants to be charged for the use of sensor-collected intelligence and monitoring for speed and braking when trucks are actually in motion? Or when a homeowner only wants to actuate sensor monitoring and alert functions that will control and even activate water valve shutoff in event of a malfunction/threat of flood when they are away on a vacation?

“These are the business cases that many companies are now mulling over,” said Beamer. “What happens in most instances is that there is some combination of hardware combined with software and various service levels. Companies in different industries and consumers with diverse needs all present their own unique usage scenarios. Pricing models must be developed for this, and once that is done, companies have to establish invoice and billing systems that are sophisticated and granular enough to execute the plan.” 

Beamer believes that traditional enterprise resource planning (ERP) systems are not agile enough to handle these diverse per use billing scenarios for IoT. This was a key premise behind goTransverse's development of a cloud-based adaptive billing system that companies can plug into their existing IT infrastructures to address these flexible-billing requirements

“We see this move to per use billing across many industries, because companies only want to pay for what they are using,” said Beamer. “Today, large ships come into ports. They deliver goods to yards, from where the goods are then loaded unto rail to be delivered to their ultimate destinations. While the goods are sitting in the yard, perhaps being stored in a container, these companies only want to pay for the amount of space that they are actually consuming, and not for the whole container.”

The tracking of consumption of containers and other analog devices is dependent on sensors and sensor-collected data that is transformed into security monitoring, environmental (temperature and humidity) and tampering monitoring, alert and status systems and yes, the amount of a container or a device that is being used. This and other new IoT per use cases are emerging across industries and consumers—and they are presenting new monetization opportunities for electronics companies and their business partners.

Electronics companies can capture two key takeaways:

  1. To understand the business problems and the usage concerns that businesses and consumers want to solve with IoT devices and services, so products are effectively designed and scaled to meet these needs—in pricing as well as in functionality.
  2. To make sure in advance of product rollout that your back office systems can flawlessly handle the invoice and billing processes, which if done well, will satisfy your customers and your bottom line.  

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