This is the final installment in a series of three on how to evolve your Internet of Things solution for Product as a Service and subscription business models.
In my previous post, I provided guidance on the key functions of an IoT solution for a PaaS business model, including device usage data collection and entitlement management.
Now here is a list of considerations when selecting an appropriate charging package for your PaaS-enabled IoT solution. These may not provide the answers straight away, but are a good starting point for the discussion.
The first point to address is industry alignment: Is the monetization engine able to support the smart, connected product’s industry in its native capability?
Most modern packages will have no problem adapting to the industry rather than forcing the manufacturer to compromise on the offering. However, some legacy ex-Telecom billing systems may struggle to cope without a large customization effort.
The cost of the charging engine will be a limiting factor and must be viewed in the context of the projected number of PaaS enabled products, and the forecasted revenue they will bring in over a period of time.
Pricing modeling capabilities
Pricing capabilities define if the package is able to build multiple product catalogs with support for multi-dimensional pricing. Usage qualifiers should be swappable in anticipation of the market situation changing and the charging should adopt quickly – i.e. move from charging per distance to charging per hours of use.
Also, when selecting the charging solution it is important to ensure the pricing capabilities support multiple charge types (one-offs, recurring subscriptions, and event based charges, discounts based on percentage or volume, various discount types, commitments, and adjustments, and so on). Support for different charge types will allow the manufacturer of the product to adapt to the market by applying flexible pricing rules.
Support for global deployments
With the global reach of the smart, connected product, the manufacturer offering their product in a PaaS model must consider the following aspects:
- Is it possible to build offerings with support for multiple currencies? How will the FX rates be maintained in the system (manual updates vs. automatic FX import)?
- What about various taxation models? Is this a native capability or is there a need to integrate with an external tax package system? How is the tax point being recognized (at the device, at the point of service delivery, or at the point of service agreement)?
The taxation topic will require a deeper discussion with the tax subject matter experts.
Support for post- and pre-paid models
Depending on geography and the product itself, there may be need for a pre-paid or post-paid charging solution. Typically, a pre-paid solution will require some sort of cut-off mechanism being put in place to ensure that the product is not (over)used once the pre-paid balance is consumed. This also calls for almost real time monitoring of the product usage.
Support for IoT data streams
The IoT industry is well known for producing a large amount of device-originating data. Volume and velocity of that data will only get bigger with the increase of IoT adoption.
The selected monetization engine must be capable of processing data which comes from IoT devices (device usage statistics) as well as from the IoT platform (consolidated and aggregated data, behavior patterns, etc.). Depending on the amount of products, users, and pricing qualifiers, this stream may have different velocity – the charging system must be capable of dealing with it.
Also, it is worth pointing out that there are complementary business opportunities on the horizon – for example Data as a Currency. Once the enterprise recognizes it is in possession of valuable information assets, these can also be monetized – by trading with other enterprises or providing them through big data exchange hubs. For many organizations this can be an opportunity for complete redesign of their business models – from being primarily a manufacturer of the tangible product to the vendor of big data traded with other companies or municipalities.
I will cover the topic of Data as a Currency in greater detail in a future post.
Support for multi-way settlements
Support for the multi-way settlements will be essential in a scenario where, for example, the product manufacturer and owner are not the same as the one who provides service, content or application to the product user.
Not every monetization engine is capable of dealing with settlements, especially when more complex concepts are introduced (like minimum revenue commitments, etc.).
Multi-way settlements will become an essential feature of a PaaS-enabled IoT solution with the rise of the app economy. In the app economy, the manufacturer is responsible for the product and content delivery; however value to the end user comes from the additional applications or extra content which is provided by third parties. In this case, the lessee (or end user) pays for use to the product owner but this revenue must be split with the application, content or service provider.
Alternatively, the end user enters into the monetization relationship directly with the service provider, but in such a case, the service provider will most likely have to pay to the infrastructure or product manufacturer to share the revenue.
There are many monetization models related to the app economy and I will cover them in a future post.
I do not believe that new business models will replace traditional ones. However, I strongly believe they can co-exist for the foreseeable future. By designing and building the products, and the IoT solutions, in such way that both models can be supported is the strategic way to stay in front of the competition.