Manufacturer’s Dilemma – BUILD or BUY an IoT Platform?

63% of OEMs/ODMs globally want to introduce smart connected products by 2020
47% of OEMs/ODMs are unsure about an IoT strategy they should deploy
These are some statistics from a survey recently conducted by AutomationWorld. An approximate of 5000 manufacturers across the globe participated in this survey.

If we closely examine the figures above, it is very clear that Original Equipment Manufacturers (OEMs) and Original Device Manufacturers (ODMs) have recognized the need to move from a pure play hardware vendor to one, which wants to realize significant revenues from the software running in the devices. This is not only to stay ahead of competition but also for long term ‘Sustenance’. The real business value of IoT lies in the data generated by connected products: real-world feedback on how products are performing and how customers are using them.
While some manufacturers have already started rolling out Connected Intelligent products and monetizing them, others are still trying to figure out whether they should build the infrastructure within their internal R&D teams, or, should they partner with an external expert.

What factors are to be considered while making this decision?

The natural inclination for an OEM would be to go for an in-house development. The reasons why this is ‘natural’ and ‘obvious’ are because an OEM usually knows in and out of his product, has been in the business for a significant time, has some trade secrets, and hence, feels best positioned to solely own development of the connected product line.

However, the manufacturer should consider the following questions before making the decision

  • ‘Do we have a clear understanding of what our IoT strategy and roadmap should be’
    Internet of Things is NOT the ‘icing’ on the cake, rather, it has the potential to become a significant slice of the cake itself. So in order to leverage the maximum out of it. So it is critical to clearly comprehend the length, breadth and depth of what can be leveraged from a connected product.
  • ‘Do we have talent within our organization, with IoT development expertise
    Developing an IoT enabled product requires you to have access to resources who understand the intricacies involved in deploying such a solution. Knowledge of embedded systems, device connectivity, networking, cloud infrastructure, application development, software programming and integration, Data analytics, UI/UX design etc. are some of the skillsets you need to look for in your existing employees.
  • ‘What time frame are we looking at for a launch’
    Developing an IoT platform from scratch needs a significant investment in terms of time and effort. In case you are trying to make a prototype and launch a ‘smart’ product in the market at a rapid pace, you will need to rethink your strategy, and check out off the shelf solutions.
  • ‘Are we looking at a onetime ‘test the waters’ pilot or a ‘full-fledged’ integration into your product roadmap’
    Unlike traditionally manufactured products, IoT enabled products won’t necessarily attract incremental revenues from day one. They have a maturity phase and there lies a huge potential of a new revenue stream once data from the devices is analyzed and acted upon. Hence, a halfhearted pilot, although appropriate for getting early customer feedback might not be a reflection of the true potential of the product, and in most cases give ‘false negatives’.
  • ‘Do we have an understanding of short term and long term costs involved’
    There are number of moving pieces in a comprehensive IoT solution, and hence there are multiple short and long term costs associated with its integration. As an owner of the business, you need to be aware of all such costs, incurred both today as well recurring for a few years down the lane. We need to strategies whether some of these costs can be passed out external parties.
  • ‘How specific to our organization are the requirements
    A connected device, a cloud infrastructure, mobile/web application and security standards are the basics of any IoT solution. However, as a proprietor of your business, you will need to figure out what sort of customization do you need for specific use case. You will need to do research and gauge whether there is a comparable platform already available in the market, which can be customized (~25-30%) so that you won’t have to reinvent most of the wheel.
  • ‘Do I have the ecosystem for continuous support and upgrade’
    The ecosystem, which supports, enables and allows IoT solutions to thrive comprise of a number of entities – networking companies, infra as a support providers, hardware partners, application developers, data analysts, software programmers etc. Since the landscape, functionality, scope and durability of an IoT solution is dependent on external and internal factors, OEMs should be cognizant of how much it wants to leverage from outside and how much to retain inside.
  • ‘Can we continuously keep adapting to customer needs’
    In today’s world with the advancement of internet connectivity and exposure to new technologies, customer’s demands are on an all-time high. Less cost, more flexible, more number of integrations, low power usage, better application interface and designs, are some of the aspects of an IoT solution that needs to continuously polished and introduced in new releases of the platform.
  • ‘How much of a firm’s data am I ready to expose to an outsider’
    OEMs are paranoid whether their data will get compromised in case it is moved to the cloud. While local hosting can be an option, but highly secure servers and encryption standards in communication protocols have been designed recently to adhere to security concerns. Apart from NDA contracts, third party solutions adhere to several security standards (including oneM2M, https://) and even deploy a public-private key encryption


After closely contemplating, all these points, an OEM needs to make a choice whether it wants to buy the platform of an external vendor and fast-track launch OR prioritize development in-house.

This is definitely not a rocket science and between the management team consisting of CIO, CEO and VP Sales, I believe a sound decision can be made.
In either case, development of an IoT platform is essential to give digital identity to millions of devices, and derive insights from the connection. Let us to try to examine components of a fully functional platform.

Features of a functional IoT platform?

Is there an easy way out?

Of course there is. You can use the off the shelf IoT platforms to build virtual connected products and gauge business value before investing significant time and resources on developing custom software and a physical product.

If you are unsure as to what should be done, consultation with an expert in the field can always improve your chances of maximizing utility of an IoT solution.



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