Internet of Things (IoT) startups are smartly leveraging third-party service partnerships to support their growth. Done correctly, the benefits are significant: immediate access to personnel and capacity, reallocation and reduction of risk, lower costs and even higher quality. Let’s take a more detailed look.
Many IoT startups are entering into service partnerships in order to quickly scale their professional services (i.e., customer engineering) capacity. For some, their end-customers require customization and integration of the IoT solution, often involving both Web and mobile capabilities unique to that specific end-customer. Examples of end-customer requirements as part of taking on a cloud-based IoT solution include:
- Customizing a Web app in order to provide specific data access from a variety of devices
- Designing a native mode iOS or Android app UI that mimics the Web app UI
- Adding user login and authentication at different access levels of security
- Enabling performance and status notification
- Administrator configuration and initiation capabilities
- User metrics and history capture
- WiFi setup
As an IoT startup’s customer volume begins to scale, it’s important that the startup’s customer engineering function contains enough capacity to support that scale. Early on when bringing aboard initial customers internal IoT personnel can, and typically do, provide service provisioning using their own, non-partner personnel. The earliest of the early adopter end customers are critically important to proof of concept, building references and expanding visibility virally.
Once the first wave of customers is successfully up and running, though, the next wave of adopters can start to be serviced in partnership with third parties. Integrated tightly with the IoT startup’s internal professional services personnel, the right partner resources will provide the capacity needed for customization, integration and training for individual customers.
Partner resources needed by cloud-based IoT vendors are typically developers with experience across the related Web and mobile stacks — Java, Rails, iOS and Android native and even HTML5. They may also include QA engineers. Logically, service delivery project management is led by IoT startup personnel because that resource is local to the end-customer and can more easily be on-site. A typical co-delivery model creates a service “teamlet” consisting of a vendor project manager and technical lead combined with one or two developers and a QA engineer from the partner.
An important best practice when delivering the IoT service component to the end customer is leveraging a fixed price/fixed time model, regardless whether the IoT solution economic model is license or SaaS-based. IoT startup end customers are already taking on sizable risk as an early adopter of new, unproven technology in the new Internet of Things market.
Even if the decision to move forward with IoT capability has been made at the highest levels of the company, all the risks that come with production implementation trickle down to the end customer’s program manager. Knowing that, the IoT startup can help customers reduce financial risk — and job security — through solution customization, integration and training delivery minus time and cost variance.
A fixed price/time approach for IoT service delivers in parallel sales and marketing benefits to the IoT startup beyond the all-important high customer satisfaction metrics. Examples include:
- Proposals to potential new customers can be “templatized” with the service component content re-used across a growing customer base.
- Reduction in proposal delivery time and personnel costs to manage the process.
- Costs for solution customization, integration and training can be predicted, and budgeted.
- Subject matter experts can be established and train-the-trainer models employed as needed.
- Superior differentiation can be communicated vs. time and materials or estimated service delivery models proposed by the competition.
Realistically, not every new customer opportunity will require the same IoT solution customization, integration and training. However, the fixed price/time approach to IoT service delivery can be a game changer if executed correctly.
Consider the following example of how one IoT startup utilizes a third-party service partnership and fixed price/time model to deliver to its end-customer:
The company’s IoT service component called for the integration of remote, wireless access into a smart consumer device located in the home. The solution would leverage the cloud and deliver comprehensive user administration capability. Key deliverables were smartphone apps for iOS and Android and Web apps for both the device manufacturer and consumer. Integration of existing app libraries and product APIs were necessary. Specific listed service deliverables included:
- User login/ID
- Multiple in-home product support per consumer
- Visual schematic
- Alerts and forecasts
- Real-time updates
- Action recommendations
- Publish apps to mobile app stores
- Compatibility with future updates to mobile platforms, browsers
- “Push” notifications
- Consumer usage information / ability to see what the consumer is seeing on screen
- Product internal conditions
- Product on/off
- Data retention
The key areas of focus for the IoT startup were to rapidly deliver a proposal enabling their (consumer product) manufacturer end customer to accurately forecast total solution cost; apply a combined team with startup personnel as project manager and technical lead, and partner personnel providing development and testing. User training was provided by IoT professional services personnel. Solution maintenance and updates post-production deployment were provided by the partner.
IoT service partnerships vs. in-house professional services
Are IoT service partnerships vs. in-house professional services a zero sum game? Not at all. As mentioned earlier, the value to all parties is clearly in a combined team consisting of IoT professional service personnel collaborating closely with partner engineers.
Selecting a service partner with a history of successfully providing fixed price/time project billing to its customers is important. Given the reality of the new IoT market, there is very little direct IoT solution-related experience in the services industry. As a result, the partner selection process should prioritize those specializing in fixed price/time delivery.
There are a variety of third party service partner choices, including local, North America firms both large and small. Nearshore cloud, SaaS and mobile engineering service firms are also worth looking at. Unlike remote outsourcing companies in India or Eastern Europe, nearshore specialists offer the same North America time-zone alignment. An Agile delivery model, if needed, is possible.
The workability of the nearshore partner model is based on the IoT project manager handling the end-customer on-premises project requirements. Service partner engineers in Costa Rica, Peru or similar nearshore locations provide development and testing from those locations through close collaboration with the IoT project manager. As needed, nearshore resources can easily fly to the United States, perhaps at project kick-off with the end customer.
Today, many IoT startups are smartly leveraging third-party service partnerships to support rapid growth. As the IoT customer market rapidly expands in the years ahead, those partnerships will become even more important.
John Hitchcock has over 20 years of experience in the software industry. Currently a director at Avantica Technologies, one of Latin America’s largest cloud, SaaS and mobile app engineering services companies, for the past decade he managed teams in India, China, Europe and the United States. He held leadership positions at growth startups funded by Sequoia Capital, Norwest Venture Partners, Austin Ventures and the technology group at GE.