Where Internet of Things companies go wrong

Date: Saturday October 3, 2015

I was thinking about why so many IoT companies don’t deliver the promise of huge growth and profits but instead often soak up a lot of VC with modest exits or future exits which end up being an awful long way off.

I think it comes down to 3 major factors on the development side:

  1. There seems to be an overwhelming urge to develop ‘own’ hardware. Hardware is tricky. It takes really specialist know-how to do it in house AND the quality really only becomes cost effectively possible with volume. In the early days, volumes are small and so units tend to be batch produced or bench produced which is often a recipe for disaster.
  2. The ‘own hardware’ syndrome leads to ‘own firmware’ syndrome. This is another specialism which requires the dedication of an entire agile team of 8 developers to properly cope with. You don’t really dip in and out of device firmware.
  3. Own platform. There is often a belief that in order to be an eco-system player, you have to develop and own your own enterprise platform. Oh dear. So now we have 2-3 agile teams; designing, creating, coding, testing and releasing enormous chunks of PaaS architecture…and this is all before a single enabling control has been given to a customer or a file of data analytics has been Tivoli’d to a partner.

Let’s us not forget that it’s the controls and data analytics that IoT is supposed to deliver, not hardware boxes and enterprise platforms. Those are all valuable in their own right but they are supposedly somewhat commoditised and at the very least are not the high added value elements in the chain.

If home grown hardware, device firmware and enterprise platforms are best avoided – why do so many IoT companies fall into the trap?

I think the answer is a lack of faith.

  • No faith that an off the shelf box will give them at least 75% of what they are looking for
  • No faith that the firmware will allow them to develop the software that they want to develop
  • No faith that an enterprise PaaS from Azure or whomever will give them the power AND flexibility they crave
  • No faith that their product can be differentiated without owning their own hardware, firmware and enterprise platform
  • No faith in people who say that Apple is the exception!

If IoT is really going to deliver on its promises to customers, partners and investors then it needs to concentrate on the value adds and let others worry about the machinery which turns in the background.  How much faith will that take?

This blog was written by Alexandra Willard