Market analysts expect businesses, governments and consumers and the way they interact with the world to change dramatically and companies are forecast to spend upwards of $5billion on the IoT over the next five years.
For Mike Bell, executive vice president at Canonical Group, the company behind open source software platform Obuntu, the opportunities going forward are enormous.
According to Bell, with embedded or cloud software being the only way to realistically deliver the services the IoT can bring, new business models are going to be required and these models will effectively turn hardware product into a ‘thing as a service’.
“We’re already seeing a massive shift in where value is derived and it is moving sharply towards software,” Bell suggests. “Software is an obvious and profitable route to take. Chipsets have dominated manufacturing costs when it comes to IoT devices and, with every generation, IoT hardware is getting faster, smaller and cheaper. In theory, this trend should bring with it potential reductions in the bill of materials that should see higher margins for hardware vendors.
“That, at least, was the theory, but the reality is very different,” he argues.
“The pressure of commoditisation that hardware manufacturers are confronted with means that without product differentiation, the downward pressure on price is stronger than the reducing cost of the bill of material. This leaves hardware vendors with little choice – they either have to choose more expensive custom components with a price premium and serve less price sensitive, niche markets, or they have to use commoditised components and try to differentiate.”
He believes that more and more IoT device manufacturers are choosing general-purpose single-board computers or SoCs. “As a result, what we’ll see,” he explains, “is the share of IoT revenues represented by hardware going into freefall.”
So, where can businesses look to differentiate and create revenue out of the opportunities coming from the IoT?
“It’s going to have to come from the monetisation of connected devices – by which I mean services. If businesses want to make money out of the IoT, they will have to create and then maintain value added services.”
Bell joined Canonical in 2016, having spent six years at Jaguar Land Rover (JLR) where he had held a number of senior roles including chief technology officer. Latterly, he was the company’s future infotainment and connected car director. In that role, he had responsibility for managing the company’s growing end-to-end connected car business.
“During the time I was with JLR, the car became an expensive IoT device,” Bell says, “and one requiring much greater connectivity, data integration and the deployment of hundreds of sensors. So much needs to be ‘knitted together’, with so many components and services, that I found it frustrating that the deployment of IoT technology wasn’t really being thought through from end-to-end.
“Canonical appealed because there’s more of a platform play in what it does.”
Founded 15 years ago, Canonical has been responsible for delivering the open source Ubuntu platform. “We work to ensure that Ubuntu is certified and can be used on PCs, servers and across cloud infrastructure,” Bell explains.
“The rise of the IoT brings with it data and opportunities to monetise that data and one thing we can be sure about is that unpredicted methods of monetisation are sure to emerge.”
Canonical’s approach to the IoT encourages the adoption of a single operating system and, crucially, one that can be upgradable over the air.
“The adoption of a single IoT operating system means that it will be easier to deliver future advances and new functionalities and our work has given rise to the Ubuntu Core, which uses the same kernel, libraries and system software as classic Ubuntu.”
According to Bell, Ubuntu Core has been ‘built for the IoT’. “It is a small, transactional version of the Ubuntu platform designed specifically for IoT devices and large container deployments.”
Ubuntu Core runs a new breed of super-secure, remotely upgradeable Linux app packages known as snaps. Bell says it’s intended for IoT players, from chipset vendors to device makers and system integrators. “Security should be a priority,” he suggests. “Make sure you think about security from day one. From my experience and understanding, the IoT has been running ahead of business needs and security, which has often been an afterthought, especially in the consumer space where it’s all about getting products to market, market share and volumes”
According to Bell, Canonical is focused on delivering cloud services to support Ubuntu. “As we deploy with more device makers, gaps will be filled and opportunities opened up. Ubuntu Core has opened the platform to new users unfamiliar with Ubuntu.
“As Ubuntu is open source, it is managed by a community ecosystem and that has certainly helped to encourage greater adoption. Working via a community, we get a lot of feedback in terms of how to build out the open source component and to develop a future road map.”
To succeed in the IoT companies need to better understand the needs of customers. “Understanding potential customers and the market you want to enter is crucial; focus on the business case, and be cost conscious in terms of what you are doing,” he suggests.
“While I take the huge market numbers with a large pinch of salt and while things can – and will – go very wrong, the IoT is immensely challenging, but very exciting,” Bell concludes.
