Sean Rollings, Vice President of Product Marketing at Aria Systems, talked about recurring revenue streams and also encouraged CIOs to become innovation officers.
In his keynote address at the 2016 CIO Leadership Forum held in Washington, DC on February 2, Rollings began his comments with a focus on the challenge of recurring revenue. The Internet of Things leads your organization to the Monetization of Things, he pointed out. But to achieve this, CIOs need to see themselves differently. All too often CIOs aren’t focused on the innovation aspects of their work, said Rollings.
“What if CIOs could carve out time to focus on innovation and not on systems, implementations, upgrades, security, networks, etc.?” asked Rollings. Think in terms of “Information out” instead of “IT in.”
“What if CIOs could carve out time to focus on innovation and not on systems, implementations, upgrades, security, networks, etc.?”
The Internet of Things is producing a tidal wave of info and capabilities: 50 billion devices that will roll out as seeds in the form of wearables, machinery monitors, household appliances, etc., noted Rollings. The fruit is the monetization–in the form of an estimated $7.1 trillion in revenue. “It’s not about the devices, but the data from those devices that you store, manage, and transmit.”
“It’s not about the devices, but the data from those devices that you store, manage, and transmit.”
“Devices are the commodity. Value is in the data,” noted Rollings. We’re all familiar with the traditional transactional model: sign the customer up for service, acquire, and re-acquire them. All this was done at arms’ length.
In a recurring services model, there’s a much more direct relationship with the end user, said Rollings. “You acquire, retain, and delight the customer to create a close back-and-forth relationship. You’ll be able to watch their habits and improve your service.”
”How will you tend to the wave of data coming in from the seeds you’ve planted out there?” asked Rollings. “When you build both velocity and agility into the recurring revenue model, you acquire a nimbleness that allows you to adjust to shortening product lifecycles.”
”How will you tend to the wave of data coming in from the seeds you’ve planted out there?”
Rollings observed that we live in an age of ever-shortening product life cycles. “Look at what happened to Blackberry. Who would have thought that we’d no longer see them?” This is another reason why the the ‘I’ in CIO must be about innovation, said Rollings. “You’ll always be bringing technology in as a support but not so much as a foreground.”
Rollings gave the example of how Phillips Healthcare used recurring revenue to get into the MRI market. For the longest time, GE had the market on scanning machines, which cost millions per device. Only the biggest urban hospitals could afford them. Phillips adopted an operating expense model wherein they monitored utilization per scan or type of service. This allowed them to sell to medium and small hospitals, creating a stream of recurring revenue. In this way, Phillips expanded their market. Patients were able to get affordable scans without a trip to a big hospital. “A great win-win,” noted Rollings.
In another example, Rollings described a technology rarely seen as cutting edge: door locks in the home, which are now being used to create a security network that permeates the house. Data from door locks can be tied to law enforcement to form a continually monitored perimeter of security.
“Again we see the theme played out. We take the hardware from the older transactional model and turn it into a recurring service,” said Rollings. Yet, two issues remain: security and standards. “From the consumer point of view, we still have a lot of work to do in the area of privacy. End users entrust suppliers with a lot of personal information. So far the track record hasn’t been good,” said Rollings.
How will we create and lock down a vault for each of these 50 billion devices? Look for new innovation in CRM to better manage access, permissions, breaches, and cut-offs. “With respect to standards, still emerging is the exchange framework we can all agree upon for all these different nodes. We’ve yet to see the normalization of communication standards.”
Visit Argyle Executive Forum's 2019 CIO Leadership Forum: Embracing the Digital Revolution, from Information to Transformation in San Francisco, CA on Sep 10, 2019