Does IoT Matter in a World of Open Innovation?

In a previous post, I emphasised how a lack of common standards and infrastructure is holding up the IoT ecosystem and prevent the technology of reaching its full potential as an innovation, with the effects of creating high barriers to entry for applications focused on niche markets, and thus probably delaying user adoption.

I now would like to consider a fundamental question for companies heavily investing in IoT solutions:

Is IoT Inconsequential to Business Strategy in the Long-Run or a Source of Sustainable Competitive Advantage?

Let’s go back to 2003 with Nicholas Carr’s article IT Doesn’t Matter, and his prediction about how the software industry was doomed to become irrelevant to business strategy just like any other infrastructural technology (e.g. electricity, railroad, etc.).

Offering little more than a short window of opportunity for firms willing to leverage their position as innovators and early adopters, Carr argued that it does not make economic sense for individual organisations to invest too much in proprietary IT as state-of-the-art software from third party providers emerge at a fraction of the cost.

The real price to pay for using such solutions, however, is to be tied to standardisation and accept the widespread availability of those solutions to anybody in the industry, thus leading to competitive parity at best.

Assuming that it is possible to predict the trajectory of IoT by looking at the software industry, you may wonder whether businesses around the world may set the bar too high about the innovation as a source of competitive advantage. Hence, wouldn’t corporations be better off by moderating investments and avoiding the risk to overspend in IoT platforms and related technologies?

There are several reasons why Carr’s argument may no longer hold in today’s IT landscape, as well as unique contextual factors shaping IoT beyond the software industry.

1. Progressive Domination of Open-Source Software

In his line of thought, Carr made no mention of companies that favoured open-source software rather than closed standardised licenses or company-specific proprietary developments, and the implications this may have on business strategy and the potential for building a competitive advantage.

The open-source movement originated from the software industry and took off around 1991, 12 years before Carr published his article, with Linux adoption growing among enterprises and government ever since. In 2008, Gartner stated that 85% of businesses were using some form of open-source IT. Somewhat more conservatively, Black Duck (a software development company) estimated that the percentage of enterprises using open-source almost doubled between 2010 and 2015 (42 vs. 78% respectively), and expects this number to climb to 88% within the next 2–3 years in sectors that include IoT among others.

Some of my past projects grew really popular and were even used to send data from Mars back to Earth.

As a result of this trend, even the technology giant Microsoft is in the process of evolving into an open company by enabling developers to write code for Ubuntu on the Azure cloud, as well as open-sourcing the software development kit of its recently acquired multiplatform mobile app development program called Xamarin.

2. Breaking the Wall Between Open-Source and Commercial Software

A recent post on TechCrunch.com caught my attention for highlighting the convergence of business models between commercial and open-source software. In a process facilitated by the emergence of cloud computing, expensive one-off commercial licenses have been replaced by a charging philosophy derived directly from open-source, illustrating one major point:

Free open-source in an enterprise world was nothing but a mere myth. In fact, while open-source is cheaper to adopt initially, it relies on usage-based fees following which companies pay for support, patches, security releases, etc.

In a world where commercial software migrated towards open-source, it is interesting to note that Carr’s argument is both weakened and reinforced. On the one hand, companies now have the possibility to rely on customisable code that enables the differentiation of business processes and thus opens the door for achieving competitive advantage through IT. On the other hand, Carr rested his case and correctly anticipated that standardised closed licenses were not future-proof in serving enterprises’ needs.

3. Public Sector Driving the Adoption for Open-Source IoT

Carr briefly assessed how IT is meant to influence competition at the macroeconomic level (rather than between individual companies) with gains notably achievable in the public sector.

However, the involvement of the government in developing an open-source ecosystem and how it impacts whether IT ‘matters’ is another element that Carr did not touch upon in his article, but is relevant to consider for IoT.

Indeed, IoT applications extend to strategic sectors such as transport, healthcare, the environment and other public services. That is certainly why governments (e.g. Smart Nation Singapore) around the world have built closed partnerships with startups and heavily invested in projects to speed up the adoption of IoT as an infrastructural technology and support competitiveness.

After having spent more than a decade providing Enterprise Software solutions based on Open Source technologies, I understand why governments should adopt such frameworks to avoid vendor lock-ins and test ideas quickly. Interestingly enough, Open Source is also now invading the hardware world enabling the next disruption (see a next article for it).

Conclusion

In the article IT Doesn’t Matter, Carr famously argued that state-of-the-art software was inconsequential to business strategy as those solutions had the effect of standardising business processes.

Commercial software has since migrated to an open-source model, in which a robust common platform is made available to enterprises to customise code and thus allow for differentiation through IT.

Bringing this fundamental shift to the context of the internet of things, I want to highlight how relevant such convergence is for an IoT ecosystem that shall be counting on open source and cloud computing for the rise of specialist players as key enablers for value creation and capture at each step of the supply chain. Open Source platforms are already available like Kaa, or ThingSpeak.

In turn, a specialised and customisable offering should enable enterprises investing in IoT to differentiate themselves from competition and build a sustainable competitive advantage.

What do you think? How should we leverage Open Source in IoT? Did you have experience with it?

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