IDC: What Solution Providers Should Do To Seize Growing IoT Opportunity

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Solution providers should gain experience in business strategy consulting, focus on specific use cases, invest in key platforms and offer flexible pricing models to seize upon the growing Internet of Things services opportunity.

That's according to Rebecca Segal, IDC's lead researcher on IT and business services, who discussed, among other things, what IT buyers are looking for in IoT services providers in a Wednesday morning keynote at The Channel Company's IoTConnex virtual conference.

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"IoT is exciting for services providers because the use cases for IoT allow for the delivery of true business value. Things like greater productivity of expensive industrial machines or aeronautics, less waste and higher quality in health care, and greater safety and security in areas like food production or water resources," Segal said in her keynote.

Segal highlighted IDC research pointing to the increasing amount of money businesses are spending on IoT services, which was more than $21 billion in 2016 and is estimated to reach more than $50 billion by 2021. She said the greatest demand right now is project-based services, but IDC sees managed services growing faster, at a compound annual growth rate of 26 percent. Other services include consulting, implementation, support and training services.

The opportunities presented by IoT fit well with the challenges IT buyers face today, Segal said, which includes an increasing need for automation, a shift in the buying centers, an imperative to pursue digital transformation initiatives and a demand for more flexible pricing models.

"Automation is a big part of IoT. IoT must be sold to the business—it requires a significant transformation of business processes, and customers are not only going to pay for the IoT business as a service or per device or per outcome, they'll be able to in many cases transform their businesses to offer their own customers an 'as-a-service' approach," Segal said.

As the center of IT buying moves away from the IT department and to lines of businesses, it's important for solution providers to speak the language of what business value IoT projects can bring, Segal said.

More than 50 percent of businesses say they plan to spend on IoT strategy and assessment services, according to IDC research, which Segal said means that solution providers should adopt a strategy consulting element to improve their ability to talk about business value.

"That's why we feel that strategy capability is super important," she said.

Bacem Moussa, CEO of Boston-based TSP, one of CRN’s 2018 IoT Innovators, said he thinks Segal’s overall message hits the mark, especially when it comes to gaining strategic capabilities to help customers with planning.

“The folks who invest in business analysis and consulting in the IoT space are essentially mapmakers of this new field,” he said.

However, Moussa noted, adding a consulting capability is a nontrivial endeavor that may be difficult for solution providers that have fewer resources.

“Other than the largest VARs, most of the VARs need to consolidate their efforts to make a dent into the space,” he said, adding that it may come down to either partnering with independent consultancies or pooling existing resources to build new practices.

Segal said vendors she's spoken to have pivoted from very broad-based IoT practices to focusing on specific use cases where they can bring value. The need to provide more flexible pricing options means that solution providers should find ways to reuse assets they've developed for other projects and shop around proofs of concept with multiple customers, she added.

Solution providers with IoT practices now represent an array of go-to-market approaches, where some focus on certain industries or capabilities while others focus on certain parts of the IoT life cycle, such as strategy or support, Segal said. But what's becoming more popular is what she called the "use case tower approach," where they're focused on certain assets or use cases.

Overall, Segal said, it's important that solution providers are deliberate with their IoT strategy because the needs of customers are maturing.

"This is not a market where services providers go in with a clean sheet of paper and say, ‘What do you want?’" Segal said in closing. "The market is moving too fast and expectations are high. Services firms need to come in with pre-established platforms, use cases and the right relationships to fully address customer needs."