By Ros Bulych, Lemberg Solutions
Keeping a keen eye on IoT startups development , I couldn’t but remember the old ‘holy war’ between Steve Jobs and Bill Gates on what is essentially more important: the hardware, or the software? Today as ever, this topic is very pressing for the IoT market.
Most of the time, an IoT project starts with a hardware innovation. But here’s the hard part: how does one turn an aspiring IoT project into a profitable venture? In other words, adopting a successful business model is where the challenge lies.
The IoT gameplayers of today have been quite resourceful in experimenting with different business models. But after all is said and done, there are two most common roads they may take (or variations thereof):
- One time charge model. A dvocates of this approach make it their ultimate goal to maximise profit on each sold unit, and to sell as many as possible while at it. The challenge is to strike the right balance between the manufacturer, the distributor, the end user, and your own revenue for that matter. The lifecycle of such product is short, and soon enough the product owner will find himself facing the need to create a new version of the product (and fast) hoping and praying that the users will love it as much as or even more than the previous one.
- Recurring or ongoing revenue model. This is about aiming to create long-term value that would in turn generate continuous revenue. As always, it starts with hardware innovation, but does not end there. An entire ecosystem with high added value is built on top of the innovative hardware product, which can encompass anything from a SAAS to a social network. Such model has more chance to attract investment.
As an explicit example of an IoT startup, LaMetric considers the sales of hardware for generation of short-term profit, and the development of LaMetric Apps Store as a long term model. Instant profit from hardware sales should help the product stay afloat while the Store reaches the breakeven point and beyond.
So when it comes to hardware versus software, I’ll be joining Team Steve. He had a point, in a sense that neither software nor hardware is more important. The entire product experience is important. To create this high-value experience and a long-term profitable business model, IoT startups should pay equal attention to both the Hardware and the Software.