Billions of new IoT devices, apps and services could transform our lives in ways we can only begin to imagine, thanks to the connectivity of the cloud, big data and mobile. While today’s most well recognized use cases are in home automation and security, there are significant advancements in areas such as industrial, smart cities, agriculture and retail as well. In my view, the real potential of the IoT requires a vision beyond an IoT app stitched around sensors and data.

Too many people are shortsighted and tend to think along the lines of traditional applications that solve specific problems. Instead, they should think of building ecosystems that drive incremental and recurring revenue by solving larger problems.

Early IoT work has centered around creating IoT apps, and perhaps improving the device experience. However, now it’s time to move past that. Instead of viewing themselves as a single solution provider, companies have to take an ecosystems approach to their business to foster a mix of products and services for their customers.

Ecosystems are significant revenue drivers because of two factors: added-value services and referrals. Apple is the master of ecosystems. They built iTunes, and they continue to rake in incremental sales through referrals by making iTunes purchases easy to embed everywhere.

You would be hard pressed to come across a song recognition app or a music review site that doesn’t offer to let you purchase the song from iTunes. The Apple App Store dramatically increased the usability of the iPhone with the added value of apps from an ecosystem of vendors, while generating significant revenue for Apple with a revenue split of app sales.

Home appliance manufacturers are doing some pretty interesting things beyond cooling food and cooking dinner. Samsung makes a refrigerator that lets you see inside your refrigerator from a mobile application. GE makes one that allows you to monitor and tweak settings from an application. But the closed nature of these applications limit the monetization possibilities to incremental sales of a few high end appliances.

Imagine if these applications had public interfaces with partner management and monetization built in. GE could allow appliance owners to order replacement filters from Amazon, or schedule a service appointment from a local authorized repair shop when something goes wrong with the appliance.

It is not only incremental revenue for GE, but higher customer satisfaction as well. To do this, the application should have an ecosystem API where various local authorized service centers can register, agree to standard pricing, schedule appointments, bill and get a revenue split from GE for the service through such an API.

On the industrial side, large HVAC systems are being built with applications to monitor their usage. What if the HVAC vendor were to offer an HVAC-API-as-a-service to their ecosystem? There could be local businesses that offer “cooling and heating as a service” to customers so they don’t have to bother with buying, installing and running HVAC systems.

A local HVAC-as-a-service vendor will install the HVAC system on the premises, look up HVAC usage through the API, and charge a monthly fee for cooling/heating, while ensuring that their equipment is running efficiently by monitoring for failures and scheduling local service calls. , By offering an ecosystem API, the HVAC vendor has given birth to a whole new line of businesses that brings in more sales for them.

Another example is parking lot sensors. Companies like Bosch have smart parking sensors that can monitor parking spaces and have applications that can be customized for parking lot owners or cities to better manage parking spaces. But if there were an ecosystem API around it, a parking lot in a mall could allow the shops in the mall to validate and pay for parking for their patrons directly through mobile applications.

Ecosystem APIs create possibilities that are endless by allowing others to participate in the creativity around a product that leads to incremental revenue, as well as increased customer satisfaction. While everyone is building IoT applications today, I think the market will be better served if vendors allow for ecosystems to be created around their products. Needs are more complex in the IoT world and IoT ecosystems are trickier to build than what standard API products found in the market today allow.

Think of what you want to do – not just with the application – but with the ecosystem before you design your application. Creating IoT applications that can share the enriched data from the cloud and create other apps and services that help customers that will lead to a far richer IoT experience!

(About the author: Nara Rajagopalan is the chief executive officer of Accelerite, a Silicon Valley software firm)

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