Large enterprises have traditionally been the early adopters of Internet of Things (IoT) solutions in their businesses. From enterprise-scale complexity in Industrial IoT (IIoT) to fleet management, asset tracking, device management, EV enablement and more, the IoT has grown to support countless use cases across a wide range of large industries.
However, the explosive growth in IoT applications and connected devices in recent years has also enabled the development of solutions to small and medium businesses. MachNation defines a small and medium business (SMB) as a business with 499 or fewer employees. In general, SMBs represent 99% of all businesses in a country and approximately 50% of the total number of employees. That said, countries can define SMBs in different ways, so definitions are not consistent around the world.
MachNation forecasts predict 24 billion connected IoT devices worldwide by 2025; the majority of those devices will belong to or be sold by large enterprises. In fact, MachNation forecasts that only 25% of the connected devices by 2025 will belong to or be sold by SMBs.
SMBs have unique requirements for IoT solutions. In particular:
- SMB products must offer an end-to-end, fully enabled vertical solution.
- SMB pricing must adopt a model that allows the solution to grow with the business.
- SMB promotions and marketing must message the value of industry-specific solution bundled with other technology the SMB currently purchases.
- SMBs must buy their IoT solutions from trusted technology partners, likely partners that already sell other technology solutions to those same SMBs.
MachNation specializes in understanding the needs of large and small businesses for IoT solutions. For more information, feel free to contact us.
Drivers and Inhibitors to Adoption
There are two main reasons why IoT solutions are being adopted by SMBs today.
- Connected IoT products help drive additional revenue for SMBs. SMBs recognize the need to compete with larger enterprises. By adding connectivity to their core product offerings, SMBs help increase the potential for recurring revenues by enabling additional features. For example, a SMB can integrate a new sensor into a product it currently sells and then charge a monthly monitoring fee.
- Connected IoT assets help lower costs and reduce risks for SMBs. SMBs use IoT to proactively monitor their business and assets. Adding connectivity for security monitoring, regulatory compliance, energy management, inventory management and more enables SMBs to cut costs, assess risks, and be more competitive.
Conversely, there are two main reasons why IoT solutions are not being widely adopted by SMBs today.
- SMBs are unclear of the value proposition for IoT. SMBs in an emerging sector or with a very narrow use-case have little research as a basis for deciding whether or not to implement an IoT solution. For many SMBs with a limited budget, the expenses for a solution without a clear ROI is too great a risk.
- SMBs have security and data protection concerns. As the IoT continues to grow, it will also become increasingly fragmented. Fragmentation can lead to system compromises and open up SMBs to significant security risk. SMBs will need assurances that their data is being properly secured and transferred between their connected devices.
Successful traits of SMB IoT solutions
MachNation analysts have identified the successful traits of an SMB IoT solution. We summarize those traits below using a standard marketing framework.
An IoT solution-based offering is most viable for SMB customers. An end-to-end IoT platform enablement solution (PES) is the most accessible option for SMBs. MachNation defines an IoT PES as a solution-centric offering optimized to reduce the time to deliver a fully-enabled vertical IoT solution to customers. Characteristics of a fully optimized, end-to-end solution would include a number of device choices to fit the customer use case, a platform for device/data management with pre-built design and integration services, and an available application for end-users. The solution might also include a set of packaged consulting and technical services.
There are 3 reasons why an IoT solution-based offering is best for SMBs:
- SMBs do not have dedicated and experienced staff to implement a full technology stack using best-in-class components. PES offerings must include hardware and system support as a fully-enabled solution. A PES should provide options for managed services such as ongoing hardware maintenance and software updates.
- SMBs generally seek very short time-to-market for their solutions. PES enable efficient IoT adoption from POC to implementation with pre-tested device procurement, productized system integrations and developed applications.
- SMBs generally do not have multiple, complex product divisions each requiring their own customized IoT solutions. An optimized PES acts as a single point of authority for the SMB to monitor and manage multiple aspects of the business.
The pricing strategy for SMB IoT solutions should be similar to bundled SaaS offerings with a few packages to select. Since SMB IoT solutions will be end-to-end bundles, pricing should be per user, tiered user, pay as you go, or some simple “a la carte” packages. These types of SaaS pricing models are both flexible and scalable to SMB use cases while providing enough choice to meet particular SMB implementation requirements.
There are 3 reasons why a SaaS pricing model is best for SMBs:
- Up-front costs for an IoT solution can be prohibitive to SMBs. Traditional IoT solutions require significant hardware and systems integration costs to stand-up. By making infrastructure needs into an operating expense, many SMBs can now afford technology that was previously unavailable to them.
- SMBs prefer scalable operational expenses to big purchases. Implementing a tiered or per-user pricing model enables SMBs to “pay-as-you-grow” and scale the IoT solution to their internal capabilities.
- SMBs need cost flexibility in their IoT solution. SMBs have less room for error than large enterprises and need the flexibility to adjust their services and costs to fit with internal changes. Staff turnover, business expansion, acquisitions and more, are all factors that can have a significant impact on a SMBs ability to realize an ROI in their IoT solution.
SMB IoT should be marketed as industry-specific, low risk solutions bundled with other technology the SMB currently purchases. Promotions should emphasize the relevance of the solution and the channel partner to the SMB’s industry vertical and IoT use case. And SMBs should be offered a try-before-you-buy guarantee or some form of freemium model to build confidence in the solution and partner.
There are 3 reasons why marketing SMB IoT as bundled industry-specific solutions are best for SMBs:
- SMBs want easy to use solutions that can be implemented into their existing technology. SMBs generally do not have the stability to disrupt regular business to learn new programs or restructure their architecture. SMB IoT should be marketed as a seamless integration into preexisting systems.
- SMBs purchase technology to solve business challenges. SMBs expect a very short payback period — less than 6 months in most cases — for any technology they implement. This requires that anyone deploying an IoT solution for an SMB will be highly knowledgeable about the SMB’s industry sector, the IoT use case being deployed, and the potential for return on investment.
- SMBs value partners that understand SMBs’ operational challenges. These challenges are often industry-related and use case specific. SMBs will want to find technology partners that can present IoT solutions with a high level of relevancy to their businesses.
IoT vendors should engage in partnerships with trusted 3rd parties to distribute solutions B2B. SMBs are accustomed to working with trusted technology partners, often relying on value-added resellers (VARs), agents, managed service providers, communication service providers (CSPs), and others to procure technology. These same indirect selling partners are also responsible for providing design, testing, installation, and ongoing maintenance of an SMB’s technology. MachNation believes that these trusted technology partners are most suitable for selling and supporting IoT solutions for SMBs.
There are 3 reasons why B2B distribution is best for SMBs:
- SMBs generally rely on 3rd-party IT firms for their technology needs to reduce time to market. SMBs do not have on-staff, dedicated technology experience with building and supporting IoT solutions. By relying on indirect technology partners, SMBs can minimize time to market.
- SMBs rely on indirect partners to minimize the risk of IoT solution deployment. Indirect channel partners have specialties in selling particular technology solutions to targeted industry verticals or use cases. This brings a high level of project experience to each SMB customer, thereby lowering the risks of implementation failure and cost overruns.
- SMBs benefit from the training offered through 3rd parties. Knowledge of best-practices by end-users is critical for achieving operational efficiency when introducing a new technology into the business architecture. Trusted 3rd parties will often offer training and support as part of their services when deploying an IoT solution.
This is the first in a series of articles that MachNation will be publishing on SMB IoT solutions. Future articles will include: designing exceptional UX in SMB-centric IoT platforms, a deeper dive into SMB IoT use cases with highlights and things to consider, vendor profiles for SMB IoT platforms, and more. Please contact us for more information.