5 IoT pricing trends to watch in 2021
Alexis Susset of Soracom
Every IoT project starts with a plan. As IoT deployments scale up in 2021, it’s become clear that the plans that consider the cost and flexibility of connectivity up front will be the ones that don’t end up with big “gotchas” when the bills come due, says, Alexis Susset, VP global product & EU sales, Soracom.
Even when the finance department is included early in IoT planning, product managers may need to make connectivity decisions with long-term repercussions. In addition to basic pricing, PMs need to consider connectivity and operational challenges both for where the product will actually be developed and for all the locations in the world where it might actually be deployed.
Meanwhile, the finance department is always looking for cost predictability to support accurate monthly and annual budgets. The problem, Many IoT pricing plans require long-term commitments and a static rate for each device connected.
Fortunately, IoT connectivity providers face the same challenges, and 2021 is bringing the industry closer to alignment with real customer needs. Below are five upcoming trends the industry should expect for cellular IoT connectivity pricing in the coming year:
1.Regional pricing plans. When a business begins to think about who they are building products for and where they will be used, they rarely get it right the first time. Not every product is intended for every market, and global connectivity may not always be needed. Regional pricing plans are now emerging to support products that will be developed, tested and rolled out in a single geographic region. This enables businesses to receive pricing for their main markets or an extended pricing plan for all countries.
One recent trend, Companies are no longer interested in which IoT connectivity provider has the most geographic coverage they want the coverage that’s right for them. Nonetheless, it is important not to underestimate the advantages of a single SKU that can efficiently support different regions. Truly global providers offer a SIM card that can be remotely upgraded with regional connectivity options, which leans into the second trend below.
2. Multicarrier service. Along the same lines, IoT projects in industries such as real estate, construction, agriculture and transportation can benefit from multi-carrier coverage to ensure maximum connectivity in remote areas. There are two key reasons service from multiple carriers is attractive:
- Carrier redundancy. Where providers can perform the upgrade on the network rather than SIM side, this is especially valuable as emerging cellular technologies roll out at different speeds. Multicarrier service brings an extra layer of redundancy when needed and also helps when new generations of technology like 5G emerge.
- Geographic manufacturing. Multicarrier service means the devices can be manufactured and tested in one geography and then shipped to their destination with the same SIM cards still in place.
3. Commitment-free billing. At the start of IoT projects, some businesses may seek to lock in a low price that comes with a long-term commitment of as much as 10 years. A year or two later, many are looking to get out of these contracts, either because a proof of concept (PoC) didn’t pan out or the product evolved more quickly than expected. Technical innovators need a pricing plan that aligns better with their speed of innovation. Minimum monthly data rates for individual SIMs just don’t make sense, and long-term commitments can stop a project in its tracks during prototyping and testing. Commitment-free billing can help alleviate these pain points, and some MVNOs are starting to move in this direction.
4. Built-in volume discounts. Built-in volume discounts let IoT initiatives scale freely without going back to the negotiating table every few months. Some customers are becoming increasingly sophisticated with their IoT implementations and as they get deeper into a project, they might need to connect more devices than originally forecast. They want to understand not only how easy billing is to set up, but how it improves the value of their product or service overall. Some know to ask their connectivity provider about built-in volume discounts, but others need a simplified approach.
Until recently, many IoT service providers have been offering per-device billing, but an emerging trend is per-account pricing. This “data pooling” allows users to work with devices that require different data usage and incorporate total cost across devices instead of assigning a static data rate for each device. For example, if one device is using 10MB of data per month and another 30MB per month, the user would pay for 40MB in total. This data pooling can drastically reduce cost, increase flexibility and help to ensure predictable monthly data bills.
5. Predictability. Not knowing what your IoT pricing will be from day to day or month to month can throw the economics of IoT deployments into a tailspin. Pay-as-you-go pricing can cause a rift between the product development team and the financial team that is paying the bills. Product teams are simply looking at getting a PoC out the door, while the financial team wants more of a fixed rate price for IoT connectivity so they have a known cost. Flat rate and pay-as-you-go pricing with automated alerting and management capabilities can help IoT project owners better ensure they are always within budget.
The major theme driving the trends we’ll see in 2021 is flexibility is your IoT connectivity provider expecting you to conform to their way of doing business, or are they working to provide the flexibility you need to accelerate your product or solution without worrying about the cost of scaling? Providing a simplified approach to IoT pricing will go a long way to driving more IoT products to market successfully.
The author is Alexis Susset, VP global product & EU sales, Soracom.
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