Thursday, May 26, 2016
As they witness the proliferation of sensors, software, computing power, and connectivity embedded in everything from motor vehicles to home appliances, equipment manufacturers of all kinds are asking an existential question: is it time to stop thinking of themselves primarily as hardware and systems companies and instead to view themselves as providers of software solutions and services?
Consider automobiles. The electronic systems inside connected cars, which have Internet access and onboard computers, can process some 25 gigabytes of data each hour on the vehicle’s location, performance, and passengers. This data might create far more commercial value for vehicle manufacturers than those companies can gain by using the data merely as a source of information for better designing and servicing their products. Automakers could launch service businesses that provide detailed digital maps, help urban designers improve their management of traffic flows, and enable insurers to offer personalized policies based on the risk profiles of individual customers.
The steady expansion of the Internet of Things and the growth of connectivity open similar possibilities for a wide range of original equipment manufacturers (OEMs). Suppliers of medical devices, building and factory controls, and farm equipment are among the many traditional hardware companies that are investing in new software and analytics-driven solutions.
Thus far, however, the results of these endeavors have been mixed. While some hardware manufacturers are creating value with their software and data solutions, others are not meeting their revenue goals.