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New Flexera Software/IDC Report: The Internet of Things, Intelligent Devices and Software Monetization Are Propelling the Third Industrial Revolution

Device makers are rolling out software-driven, Internet-connected devices and leveraging software licensing and entitlement management to increase revenues and profits

Itasca, IL - February 10, 2015 A new survey report, The Third Industrial Revolution: Intelligent Devices, Software, and the Internet of Things, prepared jointly by Flexera Software and IDC, provides unique insights into how the third industrial revolution sweeping the global economy is being fueled by device manufacturers - transforming their products, business models and revenue streams with intelligent and Internet-connected technology.

The report indicates that reality is catching up to the hype. Device manufacturers are significantly transforming their product and services lines through software-driven intelligent devices, Internet of Things devices and software licensing/entitlement management capabilities that enable monetization of products and services. Among the report's findings:

  • The Number of Internet of Things Makers Will More Than Double within Two Years: Only 30 percent of respondent device makers currently develop Internet of Things devices. But 34 percent more plan on doing so over the next two years.
  • Software-enabled Intelligent Devices Continue Strong Growth: Today 50 percent of respondents say they develop intelligent devices. Another 21 percent plan on making their devices intelligent over the next two years.
  • New Product/Services Categories Are Being Created: 79 percent of respondents say they are or plan on delivering remote monitoring and maintenance to their product/service mix; 66 percent will add Business Intelligence capabilities; 37 percent will improve their supply chains with new services, such as automatic replenishment of used goods (i.e. replenishment of empty water coolers).
  • Software Licensing/Entitlement Management is Key to Monetizing the Internet of Things: 60 percent of device makers use software licensing and entitlement management systems to monetize their intelligent and Internet-connected devices, allowing them to develop new offerings that bundle hardware, services and/or consulting.
  • Proportion of Revenues from Hardware Declining, Proportion from Services Rising: The number of device makers who say that 50 percent or more of revenues comes from hardware will decline by 5 percent over the next two years while the number of device makers who say that 50 percent or more of revenues comes from services will increase by 6 percent over the next two years.

"Hardware device makers are faced with a variety of challenges associated with thin margins, inflexible and costly supply chains, and limited revenue streams," said Amy Konary, Research Vice President - Software Licensing & Provisioning, IDC. "By transforming their business models via software, Internet connectivity and licensing capabilities, device makers can enter new markets, diversify and increase their revenue streams, improve margins, and differentiate from the competition. The survey data indicates that that is exactly what is happening now."

"The report supports a long-proven truism in the high-tech arena - that innovation, alone, isn't sufficient to transform an industry. There must also be a practical means to monetize new technology in order to profit from it," said Vikram Koka, Vice President of Intelligent Devices & Internet of Things at Flexera Software. "Software- and Internet- enabled products are spawning a vast new category of products and services previously unimaginable. The data from today's report shows that in conjunction with their new products and services, device makers are also beginning to transform their business models via flexible licensing and entitlement management - enabling them to turn their innovations into revenue."


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About This Report
This report is based on the 2015 Application Usage and Value survey, conducted by Flexera Software with input from IDC's Software Pricing and Licensing Research division under the direction of Amy Konary, Research Vice President - Software Licensing and Provisioning at IDC. The surveys were completed between November, 2014 and January, 2015, by more than 580 respondents from software vendors, intelligent device manufacturers and end-user enterprises. This annual research project looks at software licensing, compliance and installation trends and best practices.

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