View All Blogs

IoT Platforms: Why are enterprise software vendors exiting IoT?

In the last few months, Google, SAP, IBM, and Ericsson exited IoT. While Ericsson sold its IoT business to Aeris, the other three have closed their IoT platforms. IBM sold its Watson Health business to a private equity player earlier, but this time it looks that IBM couldn't find a buyer for its Watson IoT business. It is reasonable to say other three software vendors couldn't find buyers for their IoT business.

So why are enterprise software vendors exiting their IoT businesses? Before answering that let's discuss what are not the reasons for exiting IoT by these enterprise software vendors.

What are not the reasons for exiting IoT?

  • Funding crisis: In the current environment, many start-ups are having funding crises and exiting businesses to save cash. But these enterprise software firms which are exiting IoT are not start-ups. They are mature firms with good cash flow and assets. So, the funding crisis cannot be the reason.
  • Experience in selling software: Sometimes, players from other industries enter IoT and struggle to sell software. There are examples from manufacturing firms that struggled to sell IoT. But these enterprise software firms are not from other industries entering enterprise software. They are enterprise software vendors, and selling enterprise software is their core business.

In light of the above points, it is even more significant that some enterprise software vendors are exiting IoT.

Why are some enterprise software vendors exiting IoT?

  • Unlikely road to profitability: Many enterprise software vendors have low revenue, low growth, and high losses in their IoT businesses. Ericsson's IoT business numbers came into the public domain with its sale to Aeris. Ericsson's IoT business is likely to post sales of $ 77 million in 2022. Its quarterly loss was about $24 million, so the annualized loss is about $96 million. Ericsson IoT platform is used in 9000 enterprises and connects 95 million devices. (Read here). So scalability and business viability are uncertain.
  • Gold rush, fragmentation, and consolidation: IoT platforms in the last few years were a kind of gold rush. A few years back, there were more than 500 IoT platforms. It resulted in fragmentation, and consolidation was long due. On top of it, the customer or device scalability didn't happen in IoT. It will happen in the future, but unless an IoT platform is among the top few, there is little chance of making it a viable business.
  • Uncertain differentiation with low entry barriers: Though there were more than 500 platforms, there was not much differentiation per se in the early phase of IoT adoption. On top of that, most engineering service providers have their own IoT platforms, which they offer even free to customers who don't want to pay licensing fees for enterprise IoT platforms in the early phase. Because of the lack of differentiation, IoT platforms became a commodity with low entry barriers.

Bottom Line: Does this mean that there is an end-of-the-road for IoT platforms? Far from it. In our view, IoT is practical and useful. What it highlights is that IoT is not profitable for so many enterprise software vendors to be in. It was like a gold rush earlier, which is not the case now. Many enterprise software vendors will move out of IoT now. Few will remain committed and drive IoT forward.

Pareekh Jain

Add comment

The mission of EIIR Trend is to help EIIR buyers in their journey with data, information, and knowledge.

Email Newsletter

Subscribe to receive inspiration, news, and ideas in your inbox.

Gridlove Pareekh Jain Founder of Pareekh Consulting & EIIRTrends