The XaaS or X-as-a-service business model allows product and solution providers to deliver part or all of their core products and/or solutions through reoccurring rather than one-time engagement. Software as a service (SaaS) is the most well-known example; companies host software centrally and offer it on a subscription basis. This offers clients access to high-end cloud computing infrastructure that allows them to compensate for a lack of computing power and IT support on their end.
A similar XaaS trend is now becoming more popular among industrial IoT sensor companies. In our primary and secondary research, we have found that, among startups offering sensor-based IoT technologies, more than half either plan to adopt or have adopted the XaaS business model in the form of sensor-as-a-service (i.e., sensors and IoT platforms).
The XaaS business model offers benefits to both vendors and customers; for customers, the main benefits include ease of deployment and maintenance, lower costs, flexibility, and increased business agility. For vendors, embracing XaaS enables faster market penetration, stabler revenue, more upsell opportunities, and improved customer retention. For these reasons, XaaS business models are becoming increasingly prevalent among IoT technology providers. As more than 80% of stakeholders express interest in the sensor-as-a-service business model, we ask a fundamental question: Is the sensor-as-a-service business model a good fit for every IoT sensor vendor?
To be successful with sensor-as-a-service business models, vendors should strive to offer a greater number of as well as unique features. In addition to the general benefits highlighted above, vendors will have to go above and beyond to offer other incentives and adopt suitable strategies, such as:
1. Access to complex infrastructure
For many wireless IoT sensors, setting up and maintaining access to the network infrastructures on an ongoing basis can be challenging. For example, in logistics applications, sensors are frequently transported across international boundaries, which can be hard for clients to deploy, as multiple communication technologies and carriers are required. By offering these sensors as a service, vendors can significantly reduce the barriers to using these sensors for customers.
Nexxiot's sensors provide access to various communication protocols that allow for continuous data gathering on global assets. The company offers sensors as a service for global asset tracking, which helps clients obtain real-time insights into location, status, conditions, and events related to their assets. With pre-established access to global networks, Nexxiot's solution eliminates miscellaneous work for its clients.
2. Access to exhaustive analytics and computing power
While much of the sensor data is increasingly being processed at the edge, the volume, velocity, and complexity of data make cloud computing essential. By offering sensors as a service, clients can leverage powerful cloud computing to offer quicker insights to customers.
Breeze Technologies needs exhaustive cloud computing power to model city-level air quality and emissions. The company is an air quality sensor developer; it offers outdoor air quality sensors through its sensor-as-a-service business model. Its subscription-based service charges users recurring fees for using the sensors and access to insights from the cloud-based analytics platform. Breeze Technologies' solution eliminates the work of setting up local computing systems.
3. Avoid competing with incumbent IoT platforms
Sensor developers need to recognize that they also face competition from incumbent IoT platforms – a fairly crowded space – thereby creating a challenging environment for sensor developers to prevail through offering the sensors as a service. However, sensor companies embracing sensor as a service can target unique emerging use cases and thus differentiate themselves from the rest of the IoT platforms landscape.
Xandar Kardian's sensor solutions require unique IoT platforms. The company offers ultra-wideband radar sensors for continuous activity and vital sign monitoring applications as part of its subscription service. Its IoT platform uses proprietary algorithms to analyze the data, thereby revealing occupants' status (e.g., location, activity, and vital signs) within the monitored spaces. By targeting a unique and emerging application that none of the IoT platforms are tackling, Xadar Kardian has managed to prevail in the marketplace via its sensor-as-a-service business model.
The XaaS model has been gaining traction in multiple industries, and IoT sensing vendors are the latest stakeholders exploring the use of XaaS. However, those interested should be aware that, to be successful with XaaS business models in the IoT sensors space, they should offer additional incentives to customers and differentiate themselves from other established IoT platform providers.