Aftermarket services are an IoT opportunity

  • Published: January 22, 2018
  • Categories: M2M/IoT, ICT, Enterprise Network
  • Share this article:

As the Internet of Things (IoT) continues to grow, aftermarket services for IoT-connected products are becoming an attractive opportunity for innovators and investors. 2018 is sure to see new business models emerge to create value from the estimated 15 billion "smart" devices connected to the IoT, from computer chips to industrial machines to medical devices to entire environments.

One of these promising business models is data analytics services that optimize the performance, availability and security of IoT-connected products. These solutions are attractive to IT Services companies because they are typically differentiated, high margin and recurring, secured by long-term contracts. Using remote monitoring and connectivity tools, service providers generate product performance metrics and, for example, spot the need for preventive maintenance and upgrades.

Opportunities for such aftermarket services can be found in many industries including power, transportation, construction, agriculture, oil and gas and healthcare. An example from the B2C world is the emerging niche in specialized weight sensors designed to measure usage from dispensing equipment like beer kegs. Beer distributors are starting to offer services that help restaurant owners track and benchmark their waste and shrinkage (some bar keepers can be quite thirsty!).  This process can also identify which beers are selling well, in real time.

Aftermarket services often generate higher margins than sales of new equipment. One analysis done across 30 industries showed that average profit margins were 25 percent, compared to 10 percent for new equipment. But creating profitable aftermarket services around IoT-enabled products requires more than simply installing IoT sensors and monitoring the data. To make themselves successful aftermarket services providers, manufacturing and traditional “break fix” companies will need to automate processes such as asset diagnostics, service order management, routing/scheduling and parts planning. They will need dedicated resources, including possibly adding a Chief Services Officer (CSO) to their leadership team.

It remains to be seen whether the winners in aftermarket services will be industrial Original Equipment Manufacturers (OEMs) that have channel partnerships and are positioned to capture operating data from their installed base. Or the winners may be third-party parts manufacturers and independent contractors that are more grounded in services. Many manufacturers still focus mainly on the design and production of their physical products, not on the software their equipment runs on. And it’s software that is the key to post-sale services. Many of these manufacturers don’t yet understand that offering aftermarket analytics is a way to get insights into customer needs.

Any way you look at it, the view of aftermarket services as a “low margin maintenance” business is completely out-of-date. Any IoT-connected product is in effect a service, and therefore a source of incremental revenue from existing and new customers. What’s changed? The powerful new world of IoT has arrived.  Aftermarket is just another example of the limitless potential it offers for business innovation.

Author: George Nistor Senior ICT Sales and Business Development Deutsche Telekom AG
0 Comments, be the first to leave a reply Write a comment

Leave a comment

Your e-mail address will not be published. Required fields are marked *

We are not robots, therefore please choose which symbol does not fit.
Cloud Backup eBook

The simple guide to avoid losing digital assets in the cloud age.

Download now
Narrowband IoT Whitepaper

Narrowband IoT opens up the Internet of Things for large-scale use. Find out why.

Download now

Read more:

Stay up to date with our recent blog articles

Which symbol does not fit?

Uups, something went wrong.

Schließen
Terms and conditions

The data provided by me can be used by Deutsche Telekom AG for general customer consultation, requirements-orientated design of the services I use, advertising and market research. Transferring this data for these purposes within the scope of my consent is to be done so solely within Deutsche Telekom AG. The use of my data for the above-listed purposes cannot be done so if I withdraw my consent. Withdrawing consent can be done so either in writing or electronically, e.g., via Email, at any time.