Spotlight On IoT: XChange Panel Talks Up Recurring Revenue, The 'Velocity' Of Opportunities Coming Their Way

Some in the industry may look at the Internet of Things as mere hype, but a growing number of solution providers are recognizing that recurring revenue opportunities make IoT a channel gold mine.

The Channel Company CEO Robert Faletra said IoT is "the next big wave" in technology for the channel during a keynote at XChange 2016, hosted by The Channel Company and being held this week in San Antonio.

"IoT is really something special, and it will increase the available market to all [solution providers] for what you can sell and how you can make money," he said in his keynote Tuesday. "Less than 10 percent of revenue that the channel is getting today is coming from IoT -- but it's growing."

[Related: Intel Developer Forum: 10 Internet of Things Applications Bringing In The Money]

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Solution providers say the Internet of Things market is lucrative: According to a CRN survey, 49 percent of channel leaders see IoT as a meaningful opportunity, and 44 percent of solution providers say their customers have a high interest in IoT.

The XChange session included a panel of solution providers whose companies have invested in IoT and are seeing success in different verticals.

Luis Alvarez, president and CEO of Alvarez Technology Group, a Salinas, Calif.-based solution provider, stressed that IoT is "happening today," and it is opening a big opportunity for traditional VARs to jump in.

Alvarez Technology Group is profiting from the Internet of Things by working with customers in the agriculture vertical to implement connected sensors, helping them monitor crops and water utilization.

"The IoT market is lucrative in the agricultural space… farmers are looking for solutions to increase yields and we bring the technology to enable that," he said. "We have conversations about the technology clients are using and integrating that into one IoT platform."

On the channel front, the Internet of Things is a "big business opportunity" not just because of the implementation process, but also because of the recurring revenue, said Lawrence Van Deusen, director of network integration at Dimension Data, a Raleigh, N.C.-based systems integrator.

"We've been surprised by the velocity of the opportunities coming to us now," said Van Deusen. "There is a significant amount of recurring revenue for IoT -- systems need to be monitored, data needs to be harvested, applications need to be continuously updated, new features need to be introduced. With IoT, we started by solving one problem, and it has led to bigger opportunities to go in and solve other issues."

Dimension Data, like many other solution providers, focuses on verticals for IoT, such as in education for implementing IoT-connected security systems in school districts and in health care for connecting hospitals and improving the patient experience.

Solution providers need to focus less on an IT discussion with clients and more on a line-of-business conversation that highlights how technology can improve business operations, said Dimension Data's Van Deusen.

"As a reseller you talk about getting into the line of business, and the reality is that there's no better opportunity than today to do that," he said. "The majority of the people we talk to are not IT professionals at all. They are health-care specialists, manufacturers … this market is growing exponentially."

Solution providers need to focus on this line-of-business conversation – which means they would be talking with CSOs as opposed to CIOs -- while they build out their IoT practice, Van Deusen said.

"There's a tremendous skills gap … we need to make sure we're bringing in new people with new ideas," he said. "This means making new partnerships to keep up with the rapid pace of change in IoT."

Michael Lomonaco, director of marketing and communications at Open Systems Technologies, a Grand Rapids, Mich.-based solution provider, said that one part of IoT the channel is still trying to figure out is whether it is "sales-led or principal-led."

"The conversations are different because who you are talking to is different," he said. "Do you have thought leadership and domain experts versus traditional sales folks out in the field?"

Looking forward, the Internet of Things opportunities will deepen for solution providers. Jason Waldrop, CEO of CWPS, a Chantilly, Va.-based managed service provider, said he anticipates his company will have new lines of business built around IoT.

"A few years ago … the channel was wondering how you would make money off IoT. … Now we're seeing new market opportunities, and it feels like we'd better race toward IoT," he said.