Solution Provider CEO: The Real Moneymaker In IoT Is Not In The 'Things' -- It's In The Services

The real gold mine for solution providers in the Internet of Things is not the ’things’ themselves – it is the services on the back end, said Luis Alvarez, president and CEO of Alvarez Technology Group, a Salinas, Calif.-based IoT solution provider.

Alvarez, who spoke at XChange 2016, hosted by CRN parent The Channel Company, stressed that customers don’t talk about hardware or software while discussing IoT – instead, they talk about delivering something and the end results.

’The greatest opportunity is in the services side because that is really the differentiator for me in how IoT is going to be deployed in our clients’ world,’ he said. ’Whether you’re in the SMB space or the enterprise space, it will be all about services.’

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

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Solution providers are becoming more interested in the Internet of Things: According to a CRN survey, 49 percent of channel leaders see IoT as a meaningful opportunity.

Alvarez, for his part, has been working in the IoT space long before this year. Because his business is located in Salinas, where many agricultural businesses operate, the solution provider executive has been able to use IoT solutions to solve issues such as asset monitoring and operational efficiencies.

’The goal for most of my clients on the manufacturing side of agriculture is to reduce head counts by half, and increase the yields by 100 percent in those same plants over the next five years,’ he said.

For example, Alvarez Technology Group has been working with Netherlands-based Floricultura, which transports orchid seedlings to San Francisco to be grown in a greenhouse.

The solution provider has connected the greenhouse so that robots drop plants into larger cups as they grow and add more dirt – a process that Alvarez said is completely automated and controlled at the back end.

But one of the main money drivers in this application is the managed services agreements so that Alvarez Technology Group can maintain the system and make sure that nothing goes down.

Another growing part of IoT is data analytics, said Alvarez, and Alvarez Technology Group has actually spun up a data analytics unit he said will be ’one of the fastest-growing areas of the company.’

’[Data analytics] is a big opportunity – helping our clients make smarter decisions based on giving them more actionable intelligence,’ he said. ’We help them aggregate all that data that they’re collecting and doing something useful with it.’

Another big opportunity for solution providers is security – especially because many technology IoT startups who are trying to introduce their products to the agricultural community do not prioritize security, said Alvarez.

While many solution providers want to tap into the IoT opportunity, some are also stuck scratching their head and wondering where to even begin. According to the CRN survey, less than 10 percent of revenue that the channel is getting today is coming from IoT.

For those who want to break into IoT, Alvarez had a piece of advice : specialize in specific vertical markets and in really understanding what opportunities, challenges and trends customers are dealing with in those spaces.

Alvarez himself seemed acutely aware of the various aspects of agriculture – from the fact that strawberries are one of the fastest-growing produce markets in Salinas to how a big issue for the agricultural industry is labor costs.

’This isn’t like deploying a small- business server, where it didn’t matter where it was deployed … you need to understand your customer, you need to be able to talk their talk and understand the terms they use when talking among themselves,’ he said ’For that, you need to specialize at least at first. As you get bigger, you can add more components.’