IoT Security Monetization: Do Your Pricing Models Serve Your Customers?

One of the most frequent questions asked by connectivity and digital security providers concerns the creation of new monetization and pricing models for IoT security. Many different pieces populate the chessboard and many conflicting technologies battle for dominance to carve out an adaptive ROI.

Silicon and hardware manufacturers are trying to break the standard one-time sale model and introduce more versatile monetization. Security vendors are trying to introduce more flexible value-added services across different price clusters (thus justifying upselling across tiers). Connectivity and cloud providers are focusing on sustainable growth and scalability, while also striving to prolong their dominance for cloud-based intelligence since the current trend is pushing toward a transition of more edge-based analytics for IoT. As mentioned in ABI Research’s recent webinar “Securing Digital IoT Identities in an IoT World,” the path toward versatile monetization is understandably complicated but also manageable—if the correct strategies are adopted.

What is your competitive advantage in a specific market or use case? Does it merit additional pricing tiers? If yes, do they actually serve the customer? If not, then deconstruct complexity and focus on one simple, streamlined model.

On a macro scale, most connectivity and security providers offer one or more solution clusters based on their key value proposition: connectivity, operational management, intelligence, or security. These can also be combined depending on the target IoT application market. For some of them (e.g., connectivity) pricing remains generally straightforward: account for number of connections, type of connections, target market, bandwidth allocation, and upload/download frequency/size of FOTA (firmware-over-the-air) updates. But for others, monetization is a more difficult path to tread.

For example, IoT security pricing models are being forced to follow a similar pattern, but unfortunately, sometimes they become either (a) straightforward, but lacking in key adjacent security services which may require other integrators; or (b) elaborate and complicated with a high chance for ARPUs to increase considerably, depending on how many services the customers choose to subscribe to (or sometimes are forced to subscribe to, due to lack of flexibility). However, despite the natural complexity of the IoT ecosystem, ABI Research recommends a few key strategies to assist in the security provider’s endeavor to forge their future pricing strategies.

First, core services must be complemented with other value-added offers which feed back to the standard security and operations depending on application needs. These can include predictive maintenance, gateway-specific services like virtualized multi-tenancy options, enforcing different security policies depending on regulations or IT playbooks, planned encryption key rotation (or obsolescence), attestation services, third-party cloud services available through online marketplaces, and many others. This will provide additional monetization tiers, but must not be used to lock customers into constantly upsized services.

Second, the evolution and digitization of security operations across different IoT applications must be tackled under one specific technological lens. This becomes more apparent when tackling problems like reliable intelligence and data security or the ever-raging IT‒OT convergence conundrum. Increased internet connectivity often comes at a high price for IoT markets that are unprepared to find their niche or address each application with a unique and different competitive offering.

Third, security vendors should understand that for every IoT connection out there, there must be a security price tag for it and all subsequent systems and services associated with it. This does not mean that companies should go on a rampage price-tagging everything without context. Rather, they should understand which applications, use cases, and devices deserve a higher ARPU, and for what reason. Then, they must work to create modular services to serve the customers both for the challenges they are already aware of as well as those they are not. Security providers must be able to harness all aforementioned points, demonstrate a clear ROI plan for IoT players, and transition digital security to operations to infrastructure investment and monetization.

The IoT hosts a quite diverse ecosystem of connected devices, systems, platforms, and users, each of which must adhere to a unique security profile and which require application-specific implementations. Proper IoT pricing, justifying value and ROI, is indeed quite a challenging task; however, it is an achievable one, and can lay the groundwork toward standardizing the IoT in the long term.