A successful IoT ecosystem depends on three core elements: an IoT platform, market expectations, and network effects. APIs, partner communities, and revenue models serve as drivers that transform a connected product into a scalable ecosystem, as described by the Vodafone IoT Barometer framework.
What Is an IoT Ecosystem?
Clearly, no company has the capabilities and resources to do it all in the IoT. Instead, businesses targeting this opportunity will always be part of an ecosystem. This means that ecosystems are ultimately the competitive unit in the IoT – and that the battle will be between these ecosystems, not between individual companies. Moreover, there will not be single but many interlinked ecosystems. An ecosystem of ecosystems if you will.
Notably, an ecosystem is more than a set of arms-length partnerships. It is a network of independent contributors who interact closely to create mutual value. This, in turn, creates interdependency among partners in the ecosystem. All partners share the same fate – individual partners will be successful only if the ecosystem is successful. This complex dynamic presents a challenge for businesses trying to figure out an IoT strategy. A better understanding of how ecosystems are created is required.
What Are the Key Elements of an IoT Ecosystem?
As shown in Figure 1, there are three main elements that make up a successful IoT ecosystem: these are an IoT platform, the market expectation and the network effects.
Figure 1: Elements and enablers of an IoT ecosystem
The platform is a key building block of the ecosystem and the focus of much investment and commentary in the industry. Examples include Microsoft’s Azure IoT suite and AWS IoT. Whereas this element is key, it is the other two that are more nuanced and challenging for businesses to figure out. Indeed, building an IoT ecosystem is a complex undertaking with many interconnected factors that need to be juggled with. Supporting an ecosystem requires more than just having a platform and making APIs available to third parties. Companies offering platforms need to be able to create the right incentives (financial and other kinds), support systems for partners, and define how they – and not competing players – will create more value for their partners.
What Factors Drive IoT Ecosystem Growth?
Five drivers shape whether an IoT ecosystem attracts partners and scales: the IoT platform itself, APIs, partner communities, own branded services, and revenue models. Each driver interacts with the others, meaning a weak API strategy, for example, can directly suppress the network effects that the ecosystem depends on for growth.
Why Does the IoT Platform Matter?
The IoT platform serves as the foundation of the entire ecosystem, and businesses must deploy platforms that meet customer and partner expectations across functionality, reliability, security, and flexibility. A capable platform supports solutions and also a true marketplace for IoT products and services, so third parties can build on top of it.
How Do APIs Shape an IoT Ecosystem?
APIs are the basic building blocks of an IoT ecosystem, and a poorly designed API strategy can discourage the network effects the ecosystem needs. Businesses must build an API roadmap aligned with their overall IoT strategy, with pricing and support models matched to their ecosystem revenue model, keeping partner and market needs as the primary design criteria.
Why Are Partner Communities Essential in IoT?
Partner communities allow businesses to drive innovation without bearing every cost and risk alone, sharing both with ecosystem participants. Companies such as IBM, Amazon, and Microsoft actively support these communities by sponsoring hackathons, university research programs, and incubators, so external developers can build products and services on top of shared platform resources and APIs.
Own branded services
In many cases, it makes sense for businesses to offer complete IoT solutions, either with their own products or through integration with partners. This to signal commitment to market and to kick-start the ecosystem expansion. A good example is Digital Life from AT&T, a telco in the US – the company has developed an integrated home monitoring service together with partners, and markets the service as an AT&T-branded product. This branded service serves to signal AT&T’s commitment to the IoT and, as the service establishes itself in the market, AT&T is looking at opening it to a wider array of partners, thus further developing the initial ecosystem.
Which Revenue Models Work for IoT Ecosystems?
Revenue models are a critical factor in attracting and retaining ecosystem partners. The right model must incentivize partners to join, reduce their innovation risk, and fit their individual business structures. Some partners prefer revenue sharing arrangements, others favor licensing or fixed royalty models, and freemium models can encourage early experimentation and adoption before partners commit fully.
Ecosystem support functions
The final (and perhaps most overlooked) enabler is the internal organization and the related support functions. A critical function here is partner management, which not only means being able to recruit but to incentivize and support ecosystem partners throughout the partnership lifecycle. This is a capability that goes beyond basic reseller agreements. Businesses will also require dedicated teams to support the ecosystem. This support includes technical (e.g. how to use an API) but also marketing (e.g. sell your apps on our marketplace) and operational (e.g. “fulfilled by Amazon”).
Moreover, a governance model that establishes clear ‘ecosystem rules’ is critical in order to maintain harmony among members and a healthy cooperative ecosystem.
The High Potency of Low Power in the IoT Ecosystem
The network characteristics of IoT ecosystems based on wireless technologies are quite different from those for traditional wired or wireless networks because the number of devices participating in communication is very large. Also, traffic per IoT device is typically not so big because each IoT device senses and transfers a small amount of data to a corresponding IoT server. Although data generated from a huge number of objects may collectively have some impact on the network performance. Furthermore, IoT networks should operate stably and sustainably for a longer period without any need for human intervention.
The driver of Low Power in the IoT Ecosystem
Although the backbone architecture of networks hogs the limelight in a typical IoT program, the actual driver to a successful deployment of the network hinges on the devices at the edge.
This “edge effect” is amplified given the numbers, and the challenge is exacerbated when the connectivity and computing being wireless. Just imagine if these have to be kept charged, imagine the form factor of the devices and the energy bills to the boot. More about Enabling a New Era of Industrial IoT with Free-Use Wireless Spectrum
So these “edge devices” or the “IoT end points” need to be extremely inexpensive, with minimal form factor with low or no demands for power, and the need to be autonomous (untouched by human command). The ideal situation would be to make these edge devices run on any electricity (or provide access to foraged electrical energy from heat, motion, light that could be converted to electrical energy.
So the device should have the capability to may be work for a decade powered by a small battery and/or through the energy foraged from the ambiance it is operating in as mentioned above
The impact of Low Power in the IoT Ecosystem
Here the aggressive R&D on Low Power or No Power devices (LO-NO-PO) makes a grand entry to address this conundrum smartly.
When the operating voltage decreases, the similar power consumed drops and so also the performance. While this may adversely impact one’s music system, but this is what is required precisely for an “edge device.”
Exploiting this has led to the emergence of “subthreshold “processing. This technique allows the IoT microcontroller to run from a voltage supply lower than the transistor’s switching voltage. The solution which is being perfected is Sub Threshold Power Optimised Technology (SPOT) which has been pioneered by companies like Ambiq and Minima aided by university led the academic research.
While these products are getting ready to come to a mainstream, they are addressing some of the challenges of making the devices less sensitive to factors like temperature, noise, and other environmental factors.
Conclusions
In the battle to establish leadership in the IoT, ecosystem will ultimately be the competitive unit. At the same time, building an IoT ecosystem is a complex undertaking that requires many interconnected factors to be balanced. The challenge for businesses is to establish an IoT ecosystem strategy that is holistic, taking into account all the elements described above and adopt a smart manufacturing ecosystem mindset that moves away from vertical value chains with one set of customers at the end of it. Indeed, when it comes to developing an IoT ecosystem, businesses need to take the view that they have customers not only in the form of end-customers, but intermediate customers in the form of partners who need attracting, supporting and delighting just as much as an end customer.
The article was written by Omar Valdez-de-Leon who is a Principal Consultant in Ericsson’s Consulting & Systems Integration organization. Additionally, he provides independent advisory services and lectures on digital transformation. His experience in IoT ranges from advising utility companies on smart grid strategies to devising IoT plans for large Telecom operators and smaller start-ups. He has also built, launched and managed IoT solution portfolios in utilities, transportation and retail. Originally the article was published here.
