Large enterprises always have their eye on the next greatest thing in order to remain at the forefront of their respective industries. This idea is especially prevalent in technology and engineering. Many businesses, such as General Electric and Hitachi, are restructuring to focus on the Internet of Things (IoT).
GE announced it doubled its number of IoT products using If This Then That channels, The Motley Fool reported. IFTTT connects two or more IoT products and uses the status of one to signal a change in the other. The Fool used the example of an IoT washing machine that causes the lights inside a person's connected home to flash once the laundry is finished. The publication also questioned whether GE is making the right move in selling its appliance business when the IoT market seems ready to explode.
"The IoT market is expected to grow at a rate of 33 percent."
According to forecasting from MarketsandMarkets, the IoT market will grow at a compound annual growth rate of 33 percent from 2016 to 2021, rising from from $157.1 billion to $661.7 billion during that time. This prediction comes from the rapid pace at which smartphones and connected devices are produced and purchased. Rising incomes stemming from the recovering economy paved the way for more consumers to buy IoT products. Although North America will likely dominate the IoT market this year, India, China and Japan will likely overtake the western continent by 2021. Consumers and businesses in these countries are quickly increasing their use of new technology.
Companies moving to the world of IoT products
As The Fool mentioned, GE tried to shed its appliance division since 2014 and announced it will sell the business to Haier for $5.4 billion. Still, the sale doesn't mean GE will exit the IoT industry entirely. The two will work together to provide Internet solutions for industrial businesses and other organizations. The company is instead getting rid of a nonessential aspect of its organization to focus on an area where it expects to see tremendous growth.
GE isn't the only enterprise with its eye on the IoT market. According to Computer Business Review, Hitachi recently formed Hitachi Insight Group to unite the company's IoT division and spread it across the globe. Hitachi Insight Group is currently working with Intel, AT&T, Microsoft, Eurotech and others to increase its share and believes it has the foundation to become a global leader.
"Although the market is still nascent, digitalization is already disrupting traditional product-based business models, driving demand for solutions and an everything-as-a-service approach," said Vernon Turner, senior vice president of enterprise systems and research fellow for IDC, according to Hitachi's press release. "Few companies possess the expertise and breadth of resources required to deliver IoT solutions and services, and drive real business value at scale."
"Billing practices could make or break businesses in the IoT market."
Succeeding with IoT
Turner isn't exactly wrong. Hitachi's multiple business segments make it well-equipped to provide IoT devices for businesses and consumers. However, there's another critical aspect of developing such products that should be addressed. Hitachi and GE are both skilled in engineering and technology, but it's their billing practices that could make or break each organization.
As Turner indicated, the nature of IoT devices is changing the way businesses operate. Different revenue models such as subscription billing practices are necessary for businesses to not only succeed in the IoT market but to continue to innovate their solutions. GE, Hitachi and other organizations delivering IoT products need a method of funding their devices that is able to sustain their product. They must combine their expertise in technology and engineering with a subscription business model that maximizes company profits and customer values.