Think Tank

Revenue Management in the Age of IoT

Your mom probably told you it’s polite to share, but did she tell you that the IoT (Internet of Things) won’t get off the ground if companies can’t split the bounty? Since the IoT is a lot younger than you, probably not, but it’s true nonetheless.

 In a hyper-connected world, everything is connected, including recurring revenue streams derived from the IoT. Keeping the records straight is a challenge for those who lack the digital prowess that IoT’s interconnected revenues require.

Revenue sharing isn’t exactly a new practice. It’s a staple of professional sports leagues and state and local governments. And it’s the business model behind roaming agreements between telecom carriers. But with the emergence of IoT, it’s becoming more commonplace—and complicated. The reason why is that in many IoT scenarios, revenues are not only recurring, they’re also shared across multiple parties.

How IoT drives recurring revenue

With IoT, products are no longer standalone entities. They connect to data services, and in many cases, those services are purchased on a recurring basis. For example, today’s new cloud-connected cars come with data plans and concierge services such as remote diagnostics and automated roadside assistance, which customers pay for by subscription. Consumption models are also a common aspect of many IoT services. For instance, access to IoT device management platforms are typically priced on a usage basis.

How IoT drives recurring revenue sharing

IoT services can be enormously complex. They often involve multitudes of interdependent elements that require highly specialized capabilities. Consider a hypothetical SaaS (software-as-a-service) company that offers an IoT service for brick and mortar retailers. The service alerts customers via mobile devices about the specific shelf location, quantities, and prices of items in their stores.

To make it happen, the SaaS provider has to deploy a broad scope of supporting services, many of which require partner expertise. For example, one partner might provide the deployment platform that manages the tiny smart chips that every item on the shelves must carry. Additional services from other partners might include mobile application development, big data storage, predictive and behavioral analytics, and cellular and Wi-Fi connectivity.

The kicker is that in many instances, these partner services are ongoing and therefore entail shared recurring payments.

Keep in mind, that as IoT deployments go, this location-based retail example is pretty basic. When you consider all the intertwined partner services involved in delivering IoT solutions for connected cars, commercial fleets, aircraft, telemedicine, manufacturing, and telecommunications, sharing revenues will become an extremely complex undertaking.

Revenue management implications

As you might imagine, managing recurring revenues in multi-party IoT engagements is not as easy as splitting a sandwich. The various parties must be able to keep things straight about who gets paid what for each service component. And they must do so while simultaneously handling the intricacies of recurring revenue—tracking subscriptions and consumption, overages, and one-time charges on a per-customer basis—and against a backdrop of high-volume transactions. And if that weren’t enough, they also must insure that billing is seamless, painless, and transparent to the end customer.

That’s a lot to pull off. And it’s well beyond the scope of traditional billing and fulfillment systems.

What it takes

To deliver IoT services involving multi-party revenue sharing, companies need to gain digital agility that most conventional revenue management systems don’t have. With digital capabilities, they’re able to:

  • Price, package, and launch new partner IoT services rapidly and dynamically
  • Support complex, multi-layered, many-to-many billing models
  • Automatically port realtime data from M2M systems to external business systems
  • Achieve truly automated, “lights out,” no-touch billing across customer management functions

Managing revenues from the cloud

Companies that wish to optimize IoT revenues in multi-party engagements will need to confront steep challenges. For many, cloud-based capabilities layered on top of their existing business and operational systems can provide the digital acumen they need to overcome the formidable complexities of sharing revenues in recurring monetization scenarios.

About the Author

Brendan O’Brien is co-founder of Aria Systems, a cloud-billing provider that helps enterprises monetize and grow recurring revenue at scale.

By |2017-02-13T15:15:29+00:002/13/2017|

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