2014 is the “Year of Internet of Things” – Hype or Truth? Before 2014, many players have already embarked on building the IOT devices, developing middleware and some solutions. But why 2014 is named as the “Year of IOT”? I think one of the main reasons is because many big players have been in a “background mode” suddenly announced many initiatives which will shake the whole IOT industry. Some of the examples are shown below:
- Semiconductor manufacturer MediaTek today announced their latest processor platform [LinkIt] targeted at wearables and Internet of Things
- Vodafone announced plans to Cobra Automotive Technologies [strengthening] its hand in the M2M and connected cars.
- Samsung announced the launch of Samsung Smart Home. Home automation with a single app.
- Zebra acquires Motorola’s Enterprise business for $3.45Billion.
- Cisco made three investments in IoT [startups] Alchemist Accelerator, Ayla, and Evrythng.
- Google paid $3.2B for Nest Labs, maker of “smart home” appliances.
- Apple announced partners for its HomeKit developer platform: Texas Instruments, Philips, Haier, Netatmo, Withings, Honeywell, Marvell, Osram and Broadcom
- Nest —which
Google acquired in January — announced it was buying home-monitoring camera developer Dropcam.
In one glance, the above companies are targeting consumer market such as smart home applications. I recently posted a topic “IOT Business – B2B or B2C” in the M2M and IoT (Internet of Things) Communication Group. The question was well received, and many opinions were discussed.
Albert Hong, VP of Engineering, GCT Semiconductor agreed that B2C or consumer IoT gets more attentions from people. Various applications, Nest, connected home, wearable devices, etc. and B2B or industrial IoT already exists from a long time ago before IoT was coined such as GSM M2M modules.
Ivan Dragoev, President of HutGrip, have a strong opinion that B2B market is the-the right one for IoT for several reasons:
1) Businesses are for profit, which means they struggle to survive, grow, make profits. Therefore companies have the awareness and can define what problems they have, what is the pain point.
2) B2B understands the idea behind “investments”: companies know how to calculate RoI, and they know when to invest or not in IoT
3) Once you are in, you can stay forever if you provide quality products/services
4) Margins are bigger than in B2C
5) B2B can provide data for analysis to improve processes, products, services, etc. Automation and lowering costs are important part for B2B
6) People do not like to spend time dealing with electronics. Geeks do. For some people, they do not build a market on top of geeks if they want to scale.
Even though Marty Bakal, Senior Product Marketing Manager from Flexera Software agreed with Ivan that B2B is the bigger market, there is still a lot of money to be made in B2C, but the issue is how to pick a product that really will succeed given the hype around everything. The other trick is how to get people to pay for the extra IoT functionality.
In making comparisons between the advantages and disadvantages of B2C vs. B2B, Erich Jacobs, CEO of ONKOL stated that:
Advantage B2C: Visibility, potentially short sales cycles depending on the channel was chosen, lots of funding interest out there right now thanks to the big boys playing.
Disadvantage B2C: Marketing costs to attain that visibility, difficulty in choosing right channel (putting direct on website is easy but hard to get visibility, getting something on the floor of Best Buy really tough but gives you some upside), lots of folks jumping in competing for the funding dollars, generally higher inventory cost concerns as it’s hard to predict volumes early on.
Advantage B2B: Can tailor solution to a niche with fewer competitors. If you are willing to spend the time researching and listening, lots of niches to choose from. Lower customer churn and less chance of disruptive competitor taking you out by complete surprise. Inventory costs can be lower because sales cycles are typically longer, so you have better predictability.
Disadvantage B2B: Sales cycles can be a lot longer. If an enterprise sale that requires buy-in from multiple constituencies, plan on 12-18 months to close a deal as you have to get through one budget cycle, and you’ll probably need field sales folks to pull it off. If dealing with mid-market and SMB, then much shorter cycles and can go with inside sales. Since sales cycles are longer, it might be longer before cash flow break even, and funding can be harder depending on where you are located.
Personally, I have a similar question (like Ivan’s) that kept going in my mind – when I need to decide whether a product/service has a potential or not: Will it be used on a daily basis or not? Ivan said, “I am curious how many Nest users are playing with their Nest device a month later? Another example: iPhone is used every day, so it is a must have device (mobile phones as a whole), Nest – mount it, configure it, forget it. And also remember to charge users on a monthly basis for such services. These are the main differences between B2B vs. B2C: daily operations vs. initial interest and limited interest afterwards.”
I guess, it depends on where you are in the IOT value-chain, either as a hardware player (sensors, communications devices, gateways, etc.), IOT platform/middleware, Service Provider/Telco, Analytics, Applications, etc. – the target market can be very different.
Please do not hesitate to join and continue the Group discussion here.
About the Author:
Dr. Mazlan is ranked No. 20th Thought Leader in IoT by Onalytics Report – “The Internet of Things – Top 100 Thought Leaders” and ranked Top 100 in Smart Cities Top Experts by Agilience Authority Index May 2016. He is currently the CEO of REDtone IOT and is a public speaker at leading IoT events. You can get in touch with him on LinkedIn, Facebook, and Twitter.