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Unleashing the power of recurring revenue in manufacturing

Digital initiatives have clearly reached a tipping point for manufacturers. In fact, 40% of manufacturers will have enterprise wide digital transformation initiatives in place by 2021, according to IDC. For many large enterprises, projects like digitally enabling manufacturing processes, automating a quality assurance program or rolling out more robotics are likely to be top of mind.

But there’s another emerging path that is showing immense promise: Subscriptions to cloud-based software — or subscription rights to cloud data — often bundled and sold with connected devices that can deliver data-driven benefits such as predictive maintenance.

Manufacturers with digital-first mindsets are wasting no time seizing this opportunity. Many are building subscription access to their existing products and opening up steady recurring revenue streams. Beyond that, an increasing number are working with third-party developers to create software ecosystems to deliver even more value.

Ecosystems are critical to success. Manufacturers such as ABB, Schneider Electric and Honeywell are already transforming their product companies into ecosystem-driven connected platform companies, fueling innovation and monetization with digital services.

For example, ABB first launched its ABB Ability suite in 2017, offering an ecosystem of digital solutions that support ABB’s base of millions of connected devices and thousands of control systems. Soon after, the company launched the ABB Ability Marketplace, a platform that connects its customers to these technologies. ABB created a subscription service around the data stream coming from their IoT hardware, such as a stick-on device that can measure vibration and temperature.

Working well with developers is the key

These next-generation subscription services are powered by software, which makes third-party developers a key component of the strategy for businesses. Simply put, products will sell better if third parties can build value-added services around them. But how can manufacturers attract developers to their ecosystems and keep them there?

There are a couple of critical aspects to working well with developers. First, you must provide them with access to your API and other tools they’ll need to build around your product, including an easy-to-use developer center with testing capabilities. Next, you have to give them a monetary reason to join and develop software for your products. That means creating a marketplace that can serve as a vehicle to sell to your customers.

And a marketplace initiative can only succeed if it is supported by strong technology that can seamlessly monetize and distribute your services. With this in mind, the question then becomes: What’s the fastest, lowest risk and most cost-effective way to launch a digital commerce platform?

This is where the build vs. buy question becomes important. Whichever path you choose, you should research and plan for your digital commerce platform initiative. Control, cost, time to market, lifecycle management and expertise are all aspects to consider.

There’s no doubt that the meteoric rise of the consumer subscription market is having an impact and influencing B2B industries, including manufacturing. As you think about expanding your own sales stream beyond just your own core products, embrace openness, partner well and ensure that you are solving real customer problems to make your subscription commerce efforts a success.

All IoT Agenda network contributors are responsible for the content and accuracy of their posts. Opinions are of the writers and do not necessarily convey the thoughts of IoT Agenda.

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