Hardware to Services: The Recurring Revenue Revolution

Forward-thinking device manufacturers across multiple industries are taking advantage of always-on cellular connectivity to ensure frictionless customer experiences while offering integrated solutions and increasing their margins. With continuous connectivity everywhere, manufacturers of equipment as diverse as smart streetlights, to digital signage to autonomous vehicles can offer a continuum of value-added digital services. In the era of digitalization, how can device manufacturers leverage their current fleet of devices to develop high-margin services as a new growth engine?

From Products to Platforms for Recurring Revenue

There’s a seismic shift going on in manufacturing. Device makers are foregoing the one-time sale model. Instead, they're transforming products like smartphones (e.g., Apple) and cars (e.g., Tesla) into platforms for services – paid services.

Today, your iPhone offers a whole ecosystem beyond just calls. Consider Apple Music or iCloud storage. This "services-as-revenue" approach has been hugely successful for Apple, and their services segment has skyrocketed from 15% to 25% of total revenue in just five years. Tesla, too. Tesla's cars are the first software-defined vehicles. Tesla unlocks recurring revenue streams through subscriptions – from "must-have" connectivity packages through car insurance options and including premium features like self-driving. This transforms a one-time sale into a platform for ongoing revenue.

But this transition requires a strong foundation. Manufacturers need robust software to seamlessly deliver these services remotely and reliably. Yet, unlike Apple and Tesla, most manufacturers lack the expertise to develop such complex systems.

What Does Software-Defined Continuous Connectivity Have to Do with It?

Hardware makers are already leveraging continuous connectivity to transform their devices into platforms for ongoing services. Continuous connectivity allows manufacturers to deliver updates and manage devices remotely, saving time and creating opportunities for service fees. What’s more, by collecting data on how devices are used, manufacturers can develop new services like data plans or content subscriptions.

For some manufacturers, continuous connectivity enables a shift to a "Device-as-a-Service" (DaaS) model, which is another innovation. Here, customers pay a monthly fee for a device and related services. This spreads the manufacturer's revenue and potentially increases customer lifetime value.

Yet software-defined connectivity opens a whole new realm of possibilities, enabling connected devices to react in real-time to constantly changing situations. It allows devices to understand their context, like connection status, network type, user login, or exact user location. This real-time awareness enables automated actions - onboarding new devices, triggering campaigns, or initiating billing processes - all based on these contextual changes.

Use Case: Revenue Streams Powered by Connectivity in Digital Signage

Like many industries, digital signage is shifting from a one-time purchase to a service model. And continuous connectivity is key to unlocking recurring revenue streams.

Connectivity enables remote content delivery to digital signs – instant updates even across geographically dispersed deployments (think of a college campus). It enables marketers to avoid the hassle of IT integration and deploy independently-connected signs that don’t need to be connected to sensitive local networks. From a service point of view, connectivity allows instant software updates and patches, eliminating the need for on-site visits. It also allows for recurring revenue streams through value-added services - signage companies can offer high-margin content subscriptions or advertising packages that update automatically over the network.

Finally, connectivity allows for digital sign makers to sell data plans as an extension to the devices themselves. Selling data plans alongside digital signs creates a win-win for both sign makers and customers. Sign makers benefit from a recurring revenue stream - earning ongoing income through data used to deliver content updates. For customers, data plans eliminate the hassle of manually updating content. They can schedule promotions, display real-time information, and keep their signs fresh and engaging.

Use Case: How Continuous Connectivity Empowers Fleet Managers

Continuous connectivity, powered by a global network of cellular and eSim providers, is revolutionizing asset management - translating to improved efficiency, enhanced safety, and significant cost savings.

For fleets of vehicles traversing international borders, traditional single-network connectivity leaves frustrating blind spots in new territories. Continuous connectivity seamlessly switches between networks, ensuring constant communication with every vehicle, regardless of location.

This translates into real-time control for fleet managers. It enables them to track the location of their vehicles, diagnose problems remotely, and monitor performance – all from a centralized platform. It empowers them to identify issues early, enabling proactive maintenance, route optimization, and improved driver safety.

Previously, managing a fleet across borders required juggling multiple network providers and local contracts. A single, global connectivity solution streamlines operations, enabling fleet managers to focus on their core business - confident that their assets are connected and monitored seamlessly, no matter where they travel.

The Bottom Line

The landscape of hardware manufacturing is undergoing a seismic shift. Forward-thinking companies are abandoning the one-time sale model and embracing a future where devices are transformed into platforms for ongoing services. Fueled by software and continuous connectivity, this "Device-as-a-Service" (DaaS) approach unlocks a lucrative stream of recurring revenue.

The key lies in robust software. Gone are the days of simple hardware – manufacturers must now invest heavily in software development or adopt platforms that can seamlessly deliver remote updates, manage devices effectively, and collect valuable data that drives further service innovation. By embracing software, connectivity, and the as-a-service model, hardware manufacturers can unlock a new era of growth and customer satisfaction.