IoT: Device-Focused, or Service-Focused?

Everyone’s talking about the Internet of Things recently, but one topic I don’t see addressed much is the difference between Service-Focused IoT and Device-Focused IoT. The concept of “The Internet of Things” has always been about vast, heterogeneous networks of small, limited-purpose devices. However, there is a growing need to further differentiate IoT into the two delivery models.

In my previous blog, I discussed how hardware manufacturers are able to leverage IoT and recurring revenue to further lock in customers, increase lifetime value, and raise exit barriers around their services. However, these examples all require the service provider to also be some sort of hardware manufacturer. Nest (the popular smart thermostat company) is fantastic, but you must buy a Nest-branded device in order to leverage Nest cloud services. Canary (a home security camera) is great, but you must buy Canary cameras and subscribe to Canary cloud services in order to fully take advantage. If the manufacturer goes down (or worse, out of business), the devices become useless.

The other delivery model is service-focused. Netflix, Pandora, Facebook, and other companies are service-focused beneficiaries to the growing IoT revolution. These companies don’t require the purchase of a separate piece of hardware like Canary or Nest. Rather, they leverage IoT to make themselves ubiquitous in their customers’ lives. I counted recently: I have 14 Netflix-capable devices in my home (and if I used Facebook I’d have 8 Facebook-capable devices as well). That kind of convenience can never be beat by a company that forces a hardware purchase in order to use their service.

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That being said, it would be silly to accuse Nest and Canary of doing things incorrectly. What good is a home security system without cameras? How can Nest function without a Nest-branded thermostat on the wall? These initial Device-Focused companies are building out the first wave of IoT: The proprietary, incompatible phase. Recall the 60 different types of cell phone chargers in the early 90s, before the world (minus Apple) standardized on Micro-USB. As these device-focused companies continue to build out both IoT infrastructure and IoT acceptance, the service-focused IoT companies will continue spreading their influence. Eventually there will be a tipping point, probably one industry at a time. Home automation hardware manufacturers will decide on a common standard, so Philips light bulbs and Nest thermostats may eventually be controlled by a single app, just like how Samsung and Nokia phones are charged by the same cord.

These service-focused IoT-driven companies are the entities which will help drive those standards. Already I know people who make car purchasing decisions based on Pandora support, or who refuse to buy a set-top entertainment device without Youtube or Netflix. Personally, I’m still annoyed that my Playstation doesn’t have Pandora support after 18 months on the market. Those services will become the first wave of standards that eventually drive an overhaul of the device-focused portion of the industry. A smart refrigerator that gives me weather and news on a GE-branded service over which I have no control is neat. A smart refrigerator that runs Android, plays Netflix, streams Pandora, and can be used as a control panel for home automation and home security would be so much better.

Today’s Internet of Things commentary tend to focus on the devices, rather than the services. I believe that the IoT-driven service market will continue to grow rapidly, in conjunction with the growth of IoT-driven device manufacturers. Leveraging new technology for recurring revenue in both the service and device market is what Aria is all about, and the future of IoT looks bright for us.

About the Author

Dan McAloon
Dan spent his early career at SaaS startups around the country before coming to Aria in the Spring of 2011. Since then he has worked in four different departments and is currently Aria's Senior Sales Solution Architect and Subject Matter Expert.

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