Ann Bosche: Avoiding Common Pitfalls in the Internet of Things

Enthusiasm for the Internet of Things continues to grow—already, leading vendors have made $75 billion in M&A investments. While many customers are excited by the opportunities the IoT presents, they still struggle with early solutions from vendors. Ann Bosche, a partner with Bain's Technology practice, discusses the most common mistakes made by vendors and the critical opportunities that will position them to win.

Read the Bain Brief: How Providers Can Succeed in the Internet of Things

Read the transcript below.

ANN BOSCHE: Enthusiasm is really high for the Internet of Things. There's been $75 billion of M&A investment by leading vendors and $30 billion of venture capital funding in recent years. And this money is chasing after what we believe will be by 2020 $450 billion of annual revenues for vendors that are selling hardware, software and solutions into this space.

But it's still early days. And customers are still in planning and proof-of-concept phases. We've surveyed executives at both ends—customers and vendors—to get a better understanding of what was going on. We found that while customers were really excited about the opportunities both in cost reduction and in new revenue areas, they're struggling.

And they're struggling with things like security. They're struggling with integration with existing systems and really understanding the return on the investment for early solutions. And they're looking for vendors to help.

But vendors are making some common mistakes. First, they're spreading their investment too thin. 80% of executives and vendors that we interviewed were focused on four or more verticals. And that's just too many. By better focusing, they're going to be able to tailor solutions that actually customers can adopt.

Second, they don't necessarily understand where profits are going to come from. There's a lot of focus on consumer devices and solutions. But actually, we believe that most of the profits will actually accrue to vendors that are providing solutions to enterprises and industrial clients.

Finally, they're trying to deliver in a traditional horizontal ingredient model. And actually, to really get customers over the adoption barriers, they're going to have to provide more integrated end-to-end solutions, either themselves or with partners. So executives that understand both the opportunities and some of these common pitfalls are going to be in a much better position to win.

Read the Bain Brief: How Providers Can Succeed in the Internet of Things