I love my job. IoT. Cutting edge technology. Sensors. Incredible software. New and unique business models. How many people get the opportunity to work with some of the largest companies and most amazing startups in the world?
And as we move along the path of IoT enablement, several common questions come my way. Questions on everything from “what technology should we use?” to “is my business model sound?”
Recently I moderated a series of focus groups on behalf of a large multinational company in the IoT space, and during the sessions that spanned 3 days and 2200 miles the connected device “great debate” emerged again during the discussions: What’s more important, hardware, software, or business model?
To answer that question, we first need to break it down, into its least common denominator. What do I mean by that? We need to deliberately simplify the question so the answer appeals to the largest possible number of people.
What do we mean by Hardware? Is it a widget mass manufactured (often in China) and sold through channel with a 30% margin? Where’s the value there?
And what do we mean by software? Are we talking about the RTOS? Are we talking about the applications run on the gateway?
Are we talking about combinations of the widget and the OS? The application? Are we talking about hardware companies masquerading as software companies so they can try to earn a software multiple. Companies who have added a small software or management component in the hopes of raising their valuation?
So back to the question What’s more important, hardware, software, or business model?
Let’s break things down.
Hardware. It’s a necessity. The internet of things requires things. Hardware is the enabler. Most times, it’s not a differentiator, it’s a commodity. It is often impacted by Moore’s Law and designed obsolescence is a challenge.
Software. Software is required to make hardware valuable. PC’s were just number crunching machines until the advent of the browser. Good software can make mediocre commodity hardware great.
Business model. You won’t believe how many times I’ve heard someone ask me if I could come up with a business model for their technology. Look at the IoT solutions brought forth on Kickstarter and Indigogo. Most are technology solutions looking for a business problem to solve. They hit their funding goals, and poof, they are gone. In creating a solid business model, a company needs to have partners and an ecosystem in addition to software and hardware.
With that in mind, what’s more important, hardware, software, or business model, the answer has to be “it’s a combination”.
Hardware is table stakes. Without it, there’s no solution. The hardware portion of any IoT gateway was born from a spec sheet. Having an operational gateway is the minimum requirement to have a credible competitive starting position. But hardware is not the differentiator.
A combination of software and ecosystem is where value is created and where transformation can occur. It extends itself above the API and becomes the differentiator.
It’s important to remember that we’re still infancy the of connected-hardware revolution.
This is not a fad or a trend, it’s a paradigm shift in how companies monetize their digital transformation, where services are constructed, and how users experience solutions and products. There are many more business models that connected hardware will enable and the entire IoT ecosystem is surely set to gain from them.
Edited by
Ken Briodagh
