The Executive Guide to IoT Monetization: Moving Beyond the Box
For decades, the manufacturing business model was linear and finite: you built a product, you sold the product, and you shipped the product. The transaction and the revenue ended at the loading dock.
That model is obsolete today.
We’ve entered the era of servitization. The value of a connected device is no longer just in the hardware itself, but in the outcomes it delivers over time. A compressor is no longer just a machine; it is “compressed air-as-a-service.” A medical scanner is no longer a capital asset; it is “diagnostic uptime.”
For manufacturers and hardware companies, the Internet of Things (IoT) offers a massive opportunity to break free from the “commodity trap” and build resilient, recurring revenue streams. While connecting a device is engineering, monetizing it is a business strategy.
This guide outlines the strategic framework for IoT monetization, moving beyond simple billing to the total lifecycle management of connected revenue.
The 4 Core Business Models of Connected Devices
Successful IoT monetization is not one-size-fits-all. It requires selecting the right model that aligns your revenue goals with customer value. Leading manufacturers are deploying four distinct models today.
1. Connectivity & Maintenance
This is the entry point for many manufacturers. You sell the asset as a capital expenditure (CapEx) but charge a recurring subscription for remote monitoring, predictive maintenance, or digital dashboards.
- The Strategy: High margin, low risk. It adds a digital tail to a physical product.
- Real-World Success: Konecranes, a world-leading provider of heavy lifting solutions, digitized its equipment to provide data on usage and health. By shifting from rigid annual contracts to flexible monthly subscriptions for this data, they successfully scaled their connected service offering, reporting a 29% increase in active subscribers in the reported period.
- Read the Case Study: How Konecranes monetizes connected equipment
2. Consumption-Based or Usage-Based (Pay-per-Use)
Instead of charging for time (a monthly fee), you charge for the actual volume of service consumed, be it gigabytes, hours, API calls, or machine cycles.
- The Strategy: Removes barriers to entry. Customers only pay when they get value.
- The Challenge: This requires a sophisticated mediation engine to capture high-volume telemetry and convert it into a billable currency. Without this, you risk significant revenue leakage.
- Deep Dive: What is IoT Billing & Mediation?
3. Hardware-as-a-Service (HaaS)
This model fundamentally shifts the ownership risk. You bundle the physical device, the software, and the maintenance into a single recurring fee. The customer treats the equipment as an operating expense (OpEx) rather than a capital investment.
- The Strategy: Lock-in and lifecycle management. It deepens the relationship and allows for planned hardware refreshes.
- Real-World Success: Acer launched a Device-as-a-Service (DaaS) program targeting SMBs. By bundling cutting-edge hardware with software and support, they created a 100% digital customer journey that allows them to test new offers and receive immediate feedback.
- Read the Case Study: Powering Acer’s DaaS Business Transformation
4. Outcome-Based Pricing (The Holy Grail)
You stop charging for the machine or the usage, and start charging for the result.
- The Strategy: Total alignment. If your machine saves the customer energy, you take a percentage of the savings. If your robot increases throughput, you charge per unit produced.
- Real-World Success: Schneider Electric illustrates how manufacturers are evolving beyond one-time product sales toward recurring, data-driven services such as predictive analysis and remote monitoring, supported by flexible billing to tailor offerings to customer needs.
Read the Case Study: Schneider Electric’s shift
The "Manufacturing Gap": Why Transformations Fail
If the path to recurring revenue is clear, why do so many manufacturers fail to transition?
The answer lies in the “Manufacturing Gap.” Most hardware companies attempt to run a modern service business on legacy infrastructure built for shipping pallets.
Traditional ERPs (Enterprise Resource Planning) are designed for Orders. They understand SKU numbers, shipping addresses, and one-time payments. They do not understand Streams.
When you connect a fleet of 50,000 devices, they generate millions of usage events every day. A standard ERP can’t ingest this volume of data, nor can it handle the complexity of a contract that changes mid-month when a customer upgrades their firmware or adds a new sensor.
Trying to shoehorn IoT monetization into a legacy ERP leads to revenue leakage and stalled innovation. To fix this, leaders are adopting specialized Manufacturing & IoT Monetization Solutions that sit alongside the ERP, handling the complexity of streams while the ERP handles the books.
Solving the Hybrid Complexity
The most profitable IoT models are rarely pure subscriptions or pure usage, but they are hybrids of the two.
Consider a “Smart Fleet” solution like Motive (formerly KeepTruckin). Their business model isn’t just software; it’s hardware (ELDs), connectivity, and compliance services. Managing this “three-legged stool” requires a platform capable of automating the entire lifecycle.
By automating billing and collections with Zuora, Motive saved 10 minutes per invoice and automated notifications for payment failures, managing spikes such as 3,000 credit card failures in a single quarter, allowing their team to focus on growth rather than manual collections.
Read the Case Study: How Motive Scaled Fleet Management Billing
The Sustainability Advantage: The Circular Economy
Monetization strategy is now inextricably linked to sustainability. The “make, take, dispose” model is being replaced by the Circular Economy, and subscription models are the engine driving it.
When a manufacturer retains ownership of the device (through HaaS or subscriptions), the economic incentive flips. Planned obsolescence is no longer profitable. Instead, the incentive is to build durable, modular, and repairable devices that stay in circulation longer.
Real-World Success: Recygo
Recygo, a waste management innovator, uses subscription models to manage the sorting and recycling of more than 100 tons of paper daily across almost 20,000 offices. By digitizing the relationship, they provide customers with data on their environmental impact, turning a utility service into a strategic ESG partnership.
Implementation Strategy: The "Thing-to-Revenue" Lifecycle
To successfully bridge the gap between the physical edge and the financial ledger, organizations must implement a “Thing-to-Revenue” lifecycle.
- Ingest (The Edge): Capture raw telemetry from your device cloud (AWS IoT, Azure IoT, etc.).
- Mediate (The Bridge): Use a purpose-built Mediation engine to extract, clean, and transform usage events and align them to Zuora‑recognized identifiers (account, subscription, or charge) included in the event data, so records can be rated and billed.
- Rate (The Price): Apply flexible logic(tiered, volume, or time-of-use rating) to convert data into currency.
- Recognize (The Ledger): Automate Revenue Recognition (ASC 606). Variable usage creates complex financial liabilities. You need a dedicated Revenue Automation solution to recognize revenue only as the service is consumed.
Stop giving away your value. Start monetizing it.
The transition from product to service is more than an operational upgrade; it is a strategic move for the manufacturing sector. Don’t let legacy infrastructure throttle your innovation. To succeed in the Internet of Things, you need a platform built for high-volume mediation and hybrid monetization.
Frequently Asked Questions (FAQ)
What is the difference between IoT billing and IoT monetization?
IoT Billing is the operational process of calculating charges based on usage data. IoT Monetization is the broader business strategy of packaging value, deciding whether to charge for the device, the connectivity, the usage, or the outcome, to maximize customer lifetime value and recurring revenue.
Why can’t I use my existing ERP for IoT subscription billing?
Legacy ERPs are built for “orders” (linear transactions), not “streams” (continuous usage data). They lack the Mediation capability to ingest millions of raw sensor events and cannot automate the complex amendments, suspensions, and usage-rating logic required for flexible IoT contracts.
How does Hardware-as-a-Service (HaaS) impact cash flow?
HaaS shifts revenue from a large upfront lump sum (CapEx) to smaller recurring payments (OpEx). While this initially dips immediate cash flow, it significantly increases Total Contract Value (TCV) and company valuation over time by creating predictable, high-margin recurring revenue streams.
What is the biggest risk in shifting to outcome-based pricing?
The primary risk is measurement. You must have 100% trust in the telemetry data proving the “outcome” (e.g., energy saved). This requires a robust “Thing-to-Revenue” tech stack that ensures data integrity from the sensor to the invoice, preventing disputes.
How does IoT monetization drive sustainability?
Subscription models align profit with longevity. When a manufacturer retains ownership of a device (via HaaS), the incentive shifts from “planned obsolescence” (selling more units) to “durability” (keeping units in circulation longer). This powers the Circular Economy by encouraging repair, reuse, and recycling.
- Deep Dive: Understand the Architecture: What is IoT Billing?
- Evaluate Vendors: Compare the Best IoT Billing Software
- Research: Read the IoT Subscription Impact Report