Thought Leaders in Internet of Things: Flavio Gomes, CEO of LogiSense (Part 2)

Sramana Mitra: I’d like you to do some use cases for us. We understand how this plays out. Pick a customer or customer category and walk us through how this works.

Flavio Gomes: In the industrial IoT, we have a customer that is an IoT enabler. They do device management and connectivity solutions. They supply the infrastructure to different types of industry verticals such as mining or healthcare. They’ve started to think about, “How do we price this effectively in each one of these verticals?”

They start in a pretty straightforward way where they’ll charge you based on the number of sensors. Not all sensors are equal. Some sensors have greater impact or great value than others, depending on the location or department that uses them. They can apply different rates in real time. They can also do things like state-based pricing where if a sensor is mobile and the device has not been activated by a consumer, there’s a different price plan.

What they’ve uncovered is that their sales people would go into an opportunity, map out all of the IoT infrastructure to supply that customer with IoT capabilities. But then because it doesn’t fit into a neat mold with other customers, they’re forced to negotiate around perceived value propositions. They do this and they bring it back to finance. Finance goes, “Our current platforms and ecosystem environments can’t handle these new types of business models.”

What invariably happens is, they bring up spreadsheets and things get manual. You’re leaving money on the table. It’s like an all-you-can-eat environment. You can go to a buffet. You can pay one fee. But if you’re only having two slices of bread and a couple of slices of meat, you don’t think that you’ve got a lot of value. On the other hand, you have people who would eat a tremendous amount. They consume more resources than they’re paying for. In this instance, everyone is paying for what they use.

Sramana Mitra: So you’re saying that the real focus is in being able to handle differential pricing vis-à-vis differential consumption.

Flavio Gomes: That is correct.

Sramana Mitra: That’s really what you enable these IoT vendors to do.

Flavio Gomes: That is absolutely correct.

Sramana Mitra: Fascinating actually. What are the trends? Where is the industry in terms of implementing solutions like what you’re talking about?

Flavio Gomes: A significant trend that is starting to emerge is outcome-based pricing. For depreciating assets that have a certain shelf life, if you use them in the most efficient manner, they’ll have a longer shelf life. Organizations are pricing machinery based on how you use the device. If you are subscribed to a service and you use that machine in the most efficient way that elongates that value of that machine, you should, in theory, be able to realize less cost to the use of that component.

An example that I’ve heard of in the industry is jet engine manufacturers. The airlines subscribe to the jet engine. You don’t have to go full throttle every time that you take off. If you can reduce the throttle by 5% to 8%, you’re going to get a significant improvement in the lifespan of that device, which then should mean that you don’t have to pay for as much usage out of that.

This segment is part 2 in the series : Thought Leaders in Internet of Things: Flavio Gomes, CEO of LogiSense
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