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Remember when software was sold, shipped and installed from boxes of disks and documentation? The shift to cloud, and specifically Software-as-a-Service (SaaS) delivery, changed that; it also changed the way software was designed, priced, sold, and licensed. While many software vendors fought the demand for cloud services, its disruption also came with unique benefits. Ultimately that cloud moment, the benefits of shifting to a SaaS business model, provides lessons for today’s industrial manufacturers in the Internet of Things (IoT) and Digital Twins.
“The job is no longer to sell as much software as possible. It’s to help the customer get as much out of the software as possible.”
-Brian Halligan, CEO of HubSpot ($271M Revenues / 2016)
Shelf-ware to log files: Finding value-add
In the past, CIOs and software firms were aware that lots of traditional software goes uninstalled (i.e shelf-ware). A study dating back to 2011 found, “United States and United Kingdom wasted $15.3 billion per year on unused software, including $12.3 billion in the United States alone.” Years after the boxes were delivered, those who bought and sold traditional software could seldom show any value add; use and outcomes were rather difficult to prove. Exchanging traditional installed software for SaaS allowed software providers to incorporate web log files that captured subscriber visits, duration, and measures which took the guess-work out of real-world use and users. This was significant for software providers who might learn that 64% of functionality was rarely used.
Lesson: Sensors are industrial ‘log files’ offering more than insights on maintenance of equipment but amount of use, the users experience and patterns you need to know for creating value-add and services. Don’t underestimate the upstarts ready to use this data to steal your cloud moment in manufacturing.
Aging to agile: Faster software delivery on the cloud
In the traditional world of installed software, firms often were going gold (producing a new release) at a rate of 1x per year; clients would then wait an additional 3-6 months before installing any upgrade. For the software vendor, racing to match a competitor, or tune-up features that missed-the-mark was always waiting until next year. The software providers, who embraced SaaS, had an opportunity to continuously deliver new features, publishing upgrades several times a year. In SaaS, providers deliver one code base to all clients making it easy to innovate, test, deploy, and repeat. Today’s SaaS providers became acutely aware of their software use and users so as to deliver new and innovative capabilities, on a bi-weekly or monthly basis, thereby creating almost custom client experiences.
Lesson: Use this opportunity to think and act like a software firm; you can continuously innovate and deliver on differentiated menus, user features, or/and customization. If you think the lessons software and agility do not apply to your in industry, consider lines of code in modern cars. Soon, it would no longer be accurate to label Ford, General Electric, General Motors, Boeing and others as just manufacturers; they’ll instead become software developers who also manufacture things.
Size was seniority: Creating equality of input
Seemingly unfair, traditional software centered upon the demands of large established clients, swaying engineers and their priorities away from innovation to stabilization. Clayton Christensen’s book The Innovator’s Dilemma put it as, “Customers of established firms can hold the organizations captive… to keep them from commercializing disruptive technologies.” Your smaller customers can easily be overlooked but they still need to be impressed. That means making sure they get the promised business benefits and outcomes they signed up for.
Lesson: Try to avoid being held captive and consider new technologies like Digital Twins as the equalizer, allowing engineers to see and compare the use and outcomes, in clients both large and small.
To learn more about the opportunity in IoT and Digital Twins, we encourage you to attend LIVE SLAM 17- Internet of Things Conference, June 21-22 where you can meet the experts and explore the opportunities so you can meet your cloud moment with confidence.