Hardware Cos Shifting To Software Revenue Model: Gemalto

by CXOtoday News Desk    Dec 18, 2017

Software

The device manufacturing industry is embracing software over hardware as its primary business model, said a study by Gemalto.

According to the study, 94 percent of companies in the sector have increased their investment in software development in the last five years. 88 percent believe the Internet of Things (IoT) is driving growth within the manufacturing industry.

The change highlights how crucial software is becoming to device manufacturers, specifically in improving business performance and growing revenue. And, as end-users begin to demand more options and control of their devices and data, entire industries are being forced to change their business models and strategies to cater to their customers.

“Companies who adopt software-based revenue models will reap three main benefits: long-term relationships with their customers, predictable revenue streams, and a clear competitive advantage,” Shlomo Weiss, Senior Vice President, Software Monetisation at Gemalto, said in a statement. 

“From gaining insight into product usage, to pay-per-use payment structures and on to new market penetration - all the companies we surveyed identified a real need to transform how they do business,” added Weiss.

With businesses starting to see the potential of the IoT, software-based business models are generating commercial benefits. Around nine in 10 respondents (88percent) believe IoT is driving growth in the industry and that IoT itself is a chance to change their company’s business model (85percent). Enabling automated upgrades (61percent), remote support (57percent), collecting usage analytics (54percent) and gathering increased and higher quality customer insights (53percent) are the main benefits businesses see IoT enabling.

While it may bring substantial benefits and new opportunities, changing from a hardware to a software-based selling model isn’t without challenges, noted the study. When it comes to practicalities, almost all organizations (96percent) that have changed, or are changing, have experienced some difficulties in making the transition work.

 

Looking at the challenges faced in more detail, one in two (56percent) respondents reported that they needed to hire staff with different skills. Around one in three said solutions evolved organically without a central strategy (36percent) and managing new sales and operational methodologies with outdated legacy processes (34percent), caused challenges in the transition.