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The Emergence of Managed IoT Services

By Jeffrey M. Kaplan
May 13, 2016 10:32 AM PT

With every market forecast predicting rapid growth of the overall Internet of Things, industry and investor focus shifts to specific market segments that will experience the quickest adoption. While most of the attention is on particular applications and technologies, I think managed IoT services will be one of the biggest market opportunities.

One of the greatest challenges standing in the way of widespread IoT adoption is the lack of skills and experience to evaluate, acquire and integrate all the piece parts necessary to assemble an IoT deployment.

Successfully building an IoT solution depends on a mixture of sensors, networks, systems and software from a variety of vendors. Given the rapidly expanding assortment IoT alternatives, selecting the right pieces for a specific use case and implementing them is no easy task, especially when only a few businesses have ventured down this path before. Finding experienced IoT professionals is often the first hurdle in pursuing an IoT strategy.

The Long Game

A growing number of IT consulting firms and systems integration companies are rushing to fill this skills gap, just like they've done with every new technology wave in the past. They were the first to profit from previous technology breakthroughs such as desktop and client-server computing. Most recently, those firms have been in the middle of many complicated cloud computing deployments.

The smart consultancies and systems integrators recognize that they can generate even more revenue and far more profits by extending their services beyond the upfront deployment work. Providing their customers with an additional set of back-end managed services to help them administer their operations has proved to be a lucrative business in the desktop, client-server and cloud computing environments.

Those managed services not only represent an additional revenue stream, they also give the managed service provider a significant competitive advantage because they can gain greater insights into their customers' evolving needs. This gives them an inside track to recommend additional investments and win additional business.

Beyond IT

The IoT phenomenon is even more conducive to a managed service solution because many of today's IoT initiatives are being driven by functional business units rather than IT.

IT was responsible for only a third of active IoT efforts at medium (100-999 employees) and large (1,000-plus employees) businesses, according to a survey of 620 U.S. professionals Technalysis Research conducted recently. Operations, facilities and manufacturing were responsible for 42 percent of the projects, and line-of-business and business strategy groups led the remaining 25 percent.

In most cases, these functional and business units are not equipped to deploy and manage IoT projects on their own. They need help not only designing and implementing their IoT solutions, but keeping them up and running at an optimal level. This represents an attractive opportunity for a new class of IoT MSPs to exploit.

Large and Small Players

One company that is attempting to capitalize on this opportunity is CloudOne. CloudOne offers a combination of cloud and IoT development and management solutions and services. The company recently announced that it had secured US$9 million in Series E venture funding, which will be used in part to build its managed IoT service capabilities.

Bigger players also are pursuing this opportunity. Last year, Tata Consultancy Services launched eight managed IoT services with Oracle.

As the IoT market gains momentum, you can expect to see more managed IoT service providers arise to help organizations administer their IoT deployments.

Jeff Kaplan is the managing director of THINKstrategies, founder of the Cloud Computing Showplace, and host of the Cloud Innovators Summit executive forum series. He can be reached at jkaplan@thinkstrategies.com.

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