IoT device vendors need to better understand software models

Guy Daniels
By Guy Daniels

Apr 4, 2014

The Internet of Things (IoT) is not just about connected hardware; it’s also about embedded software. According to research firm Gartner, hardware and appliance OEMs will be transformed into software providers. As such, licencing and entitlement management technology are key to unlocking capabilities that allow manufacturers to protect and monetise the embedded software IP.

If the IoT is to grow to 26 billion units installed by 2020 (which would be an impressive 30-fold increase from 0.9 billion devices in 2009), then manufacturers need to rethink their business models and supply chain, and understand the critical role that software plays in development and revenue.

“Similar to the traditional software industry, device manufacturers need to protect the intellectual property contained in applications and monetise it through the adoption of licensing and entitlement management systems that control access to the Internet-connected device, its functions and features,” said Laurie Wurster, research director at Gartner.

Licencing and entitlement management also enables flexible pricing and packaging, enabling the manufacturer to bundle product features, capabilities and capacities, ensure payment, provide upgrade paths, as well as new revenue streams. By controlling product functionality, features and capacities of Internet-connected devices via flexible licensing, Gartner argues that device manufacturers will better be able to compete with shorter time to market for new products and features.

However, the adoption of licensing and entitlement management may be restricted by the relative inexperience of many device manufacturers with the software business.

“Many manufacturers still apply a traditional ‘box’ mentality to their products, and fail to take into account additional revenue opportunities that licencing-controlled embedded software and software applications deliver,” said Wurster. “Additional complications can arise as manufacturers navigate the transition to software-driven, internet-connected solutions.”

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