Putting together all the different components necessary to provide an efficient machine-to machine (M2M) or Internet of Things (IoT) service is not easy. A number of different elements, generally all supplied by different commercial entities in the IoT stack, all have to be found and then correctly aligned.
Quite apart from having to develop the M2M/IoT device itself, including finding the right modules (with chips and modems optimised for the particular product) and sensors best suited for that application, and the right gateway to link the device to the Internet, you also have to find the right application and data management platform - and the right connectivity provider – and all at a price that makes commercial sense to everyone in the chain.
Masanari Arai, co-founder and CEO of Japan’s Kii Corporation (pictured), which offers a specialist IoT Cloud service platform, has been keenly aware of these difficulties for some time. Kii’s goal is to make the implementation of IoT applications easier, both through its Cloud services, but also by putting together an IoT ecosystem of partners that will make the deployment of IoT applications quicker, easier and cheaper – of which more later.
Developing the IoT Cloud
Speaking to Wireless in late September, Arai explained how he arrived at this concept.
His entire career has been spent in wireless technology and the mobile industry. He was IBM’s project manager for the ThinkPad – perhaps the first real notebook PC. He quit IBM after 10 years and joined Intellisync Corporation – a data synch software company, which supplied data synch technology for Palm Pilots and similar devices.
‘In 2006, we were acquired by Nokia. However, Nokia wasn’t doing that well in Korea and Japan, so it decided to get out in 2007. I saw my chance and bought my original business back from Nokia and that’s when I spun Kii out of it,’ he recalls.
Arai explains that the company was providing Cloud services for mobile carriers at that point, including things like phone backup and data synchronisation to the likes of AT&T, NTT Docomo and China Mobile.
‘The portion I brought back from Nokia was the Japanese business. We had contracts with Softbank, NTT Docomo and a lot of device makers, mostly feature phone makers at that stage. That’s how the company was born. 10 of us went with the buy-out and now we have about 80 people working for Kii.’
Kii’s knowledge base centred on understanding mobile phone operating systems, such as Cymbian, and it also knew how to deal with device manufacturers and businesses in the IoT space generally. Its expertise lay in moving mobile data to the cloud and back out to device – data synchronisation in other words. ‘This was just before the iPhone launch in 2007, and we knew smartphones were coming. We had two goals: to expand outside of Japan; and get hold of smartphone technology,’ says Arai.
‘We found a Silicon Valley company, which was providing smartphone client side technology to the developer community; it was also supplying technology to China Mobile. That provided an interesting combination; we had cloud technology; they had device/client technology.’
Cloud and mobile application services
In 2001, the two companies merged to provide Cloud mobile and IoT backend services for developers, device manufacturers and also application developers. ‘The basic idea we had was this,’ explains Arai.
‘Device manufacturers understand hardware, but they have very little idea about software. They don’t know how to create mobile applications for the Cloud. But to create an IoT application you have to have Cloud and you have to have mobile applications. But they have no idea about this side of it.’
This is where Kii comes in providing all the heavy lifting on the mobile application and Cloud device and data management side. ‘This means device manufacturers don’t have to do any server side recording, they can just focus on the device.
‘Yes, they do need to create a mobile application user interface on the device, but not on the cloud side. But they don’t have to hire a server engineer and they don’t have to develop a server board - we provide this,’ says Arai.
If a start-up company wants to develop an IoT solution they need to build three things, explains Arai: device development, cloud side and mobile application.
A start-up developing a camera device, for example, might have $300,000 in funding and spend around half of that developing the Cloud side, explains Arai, only to find they then don’t have enough money to work on the device itself or the mobile application – the very areas that are going to differentiate them in the market and which therefore need the most attention.
‘For the Cloud side you need to develop user management, user ID password, storing data, analytics, push notification, geo-location services and those kinds of functionalities. What Kii is saying to device manufacturers is: you don’t need to develop these functions yourself – find us before you spend $150,000! We can supply all this for you,’ says Arai. ‘So, what Kii does is provide a platform to help develop IoT solutions.’
One of the strengths Arai inherited from his previous company was that he had developed a lot of connections with device manufactures in China, Taiwan and Japan. ‘We contacted a lot of device manufacturers and signed a lot of deals from the middle of 2014,’ he reports.
Customers include Omron, the largest healthcare device manufacturer in Japan, and a manufacturer of IoT based LED lighting products, which produces around 80 million LEDs a year. It is connected to the Kii cloud to enable consumer smart lighting applications.
Toshiba is another customer, as is China’s e-Commerce giant Alibaba, which has deployed the Kii IoT cloud on top of its Aliyun cloud service. This enables Alibaba to provide IoT specific solutions to device manufacturers in China, and to a lot of start-ups and middle-sized technology firms in Taiwan producing electronic devices.
Bringing in system integrators
After establishing contacts with device manufacturers Kii turned its attention to system integrators. ‘There are so many requirements for IoT solutions these days and system integrators find they have to keep repeating the same back end developments for different clients,’ he says.
‘But our Kii cloud product is very efficient at developing IoT solutions, as you don’t have to do anything on the server side. So, the system integrators saw they could make a short cut using our solution no matter what the application was. Whether it is smart parking, lighting, or building control, you still need a complete back end for those things, but a lot of the components are common,’ explains Arai.
‘However, it is tough to pull everything together. But we provide APIs, SDKs and a very scalable system to do that for you. It is not easy to develop all this on your own each time. System integrators spend a lot of time developing these solutions, but they are struggling to find a common way of doing so across lots of different applications. It is very hard to find one common platform that will support all these different IoT solutions,’ observes Arai.
‘This system integrator relationship is a very scalable solution for us,’ notes Arai. ‘We don’t need any sales people; they close the deal, use our platform and give us the money. By having relationships with system integrators we have a very scalable way to deliver our product, they are an indirect sales channel for us and they sort out the wireless connectivity side.’
Arai says the Kii platform is connectivity agnostic. ‘We don’t care about the connectivity solution. The key thing for us is to ensure our solution is very scalable. The hardware supplier, connectivity provider and system integrator do their bit and we provide a lot of processing power to handle all the data being sent to the Cloud.
‘If you have a small sensor, it sends data to the gateway and the gateway sends it on to the Cloud. One gateway supports say 1,000 sensors, so you can scale up in that way. However, take security cameras, for example. If you store all that data in the cloud it is a lot of data to handle.
‘But you can do interesting things with video data analytics now, such as facial recognition applications. For that you need algorithms for mobile edge computing where you can pick up ‘significant events’ and just stream a small packet of information of the event, rather than attempt continuous transmission,’ says Arai.
Distribution for M2M/IoT devices
The device distribution side is also very important. System integrators form one aspect of this, but how do you monetise an IoT device? ‘Prior to the Internet, devices were often standalone, but now they are connected to the Internet, so you can now provide a very interesting monthly type subscription service, as well as selling the hardware,’ observes Arai.
He argues that this will change the business model for device manufactures. Before the advent of the Internet, the worry was the cost of the device, cost of distribution, warranties and so on.
But if the device manufacturer is now selling a $5 per month subscription service on top of the hardware sale, then that can hugely increase the profit margin. Potentially, the manufacturer can get a lot of revenue - if he can scale up his distribution and thereby boost his sales.
‘If you come up with a $5 per month subscription service, the problem for a device manufacturer is how to sell directly to the end users. How do you get money out of them every month? No one has really succeeded in doing this except Apple. Other vendors can sell the hardware, but they don’t have the established credit lines with customers that services such as iTunes enable. Apple has that relationship with the end user already,’ points out Arai.
This is a hard conundrum for device manufacturers to solve, especially as many of them are start-ups or small companies working largely in isolation with little or no go-to-market capability. ‘The hardware may be good, but finding and then managing relationships with end users is very difficult; and creating billing systems with customers is hard,’ says Arai.
But Kii has done business with MNOs for a long time. ‘So, we started talking to them,’ says Arai. ‘We also have relationships with lots of device manufacturers. I can therefore introduce them to carriers, cable companies or other organisation with billing relationships already in place.
‘The idea is the service providers can handle the monthly billing relationship with the end customer and they can then provide a revenue share back to the manufacturer. So, we started dealing with the service providers and connecting them to the device manufacturers, acting like a distributer for them.
‘It is a new business model, as it passes subscription revenue back to the hardware guys. And to establish a scaleable distribution channel across the globe we worked with Brightstar (owned by Japanese mobile operator Softbank), which is a global distributor for carriers, cable companies and device manufacturers,’ says Arai.
The Space ecosystem
Between them, Kii, Brightstar and Softbank have created an IoT ecosystem called Space. Brightstar has a lot of distribution customers and billing relationships with carriers. Kii has device manufacturer relationships with interesting solutions. This creates a supply-demand ecosystem.
‘We start the relationship with the device manufacturer, then Brightstar and the carriers it has relationships with take over and find the customers. Brightstar distributes the devices and airtime through its sales channels, Kii handles the device and data management, and the carrier sorts out the connectivity and billing - and then shares out the revenue to all parties,’ says Arai.
For example, take Finnish company Haltian (another spin out from Nokia as it happens) which has created a child tracking device connected to Kii’s back end Cloud system via 2G GPS. It tracks the child’s whereabouts and can be used to define safety zones and detect speed, so if the child is suddenly going at 40km that could indicate that he or she might have been kidnapped.
Haltian developed the device, but it had no idea how to bring it to market. Kii worked with Haltian to come up with the mobile application and introduced the device to Brightstar. Brightstar got carriers interested and sells it through its partner channel.
Arai says the solution has particular appeal in regions such as Caribbean, South America, SE Asia, China, Puerto Rico and even in Europe - places where children are potentially not safe.
He cites another example in the shape of a security camera made by a Chinese company that produces a webcam. ‘We provide a security camera solution and sell through the channel to carriers using a monthly billing type service,’ says Arai.
‘The camera has motion and sound sensors, so if you are away from your home and something happens, the sensor can pick up movement or sound and push a 30 second video to the Kii cloud. We can then push a notification alert to your smartphone. You press a thumbnail and you can see the 30 second video. We are selling this through the channel. We are expanding this to the connected home type of solution and to kids.’
Arai points out that mobile carriers are not really monetising children under 12 right now. They do not tend to get them until their first phone at the age of around 10 to 12. ‘When they are older they can upgrade to a smartphone, but they are already associated with that operator, so the carriers are really up for this kind of device,’ says Arai.
‘Carriers are not good at sales like this, so what we are pushing is when you have a customer in your mobile phone store to upgrade a phone or buy a new one: ask them – do you have kids? How old are they? If they are young enough to benefit from the Haltian device, the store staff can recommend it as a solution.’
The same applies to elderly care, where it is often the child that will pay for the device and subscription to help ensure their parents safety. Parents with young children or children with elderly or infirm parents are willing to pay a premium subscription if it means added protection for their loved ones.
Combining IoT devices for added value services
Arai says: ‘Next year we will come up with a solution that combines several devices together for elderly care. For example, people have to use the toilet all the time. If you have a door sensor in the toilet, it sends an alert to the carers when it opens and closes, so they know they are alive.
‘But if the door stays closed for over 30 minutes say, that might indicate they have had a fall. The door sensor can sense when they go and build up behavioural patterns and send alerts if those patterns become abnormal.’
Another application being looked at by Kii relates to the fact that a lot of elderly people go to the kitchen at night to get water. It’s dark and they may fall before they have had a chance to find the light switch. But if you install a motion sensor for when they come in, it can be programmed to switch on an LED light automatically so they can see. The solution is due out in the first quarter of 2016.
‘We are focusing on kids and elderly care right now,’ explains Arai. ‘It’s important to make this a success, so we are focusing on those areas that are likely to succeed. The buyer in these two scenarios is not the end user; it is someone who really cares for the end user. The psychology is, if the application is for you, you care about the cost.
‘But if it is for your kids or your parents our research suggests that people don’t care – at least up to around the $20 a month mark anyway. So, if you get one million subscribers at $20 a month, that $20 million in revenue a month you didn’t have before,’ says Arai.
He points out that this provides a whole new revenue stream for mobile operators to tap into. It is also a good way for carriers to get back at the OTT providers such as Google and Apple. But service providers need to identify the key groups to sell specific applications to when it comes to IoT and wearables. There has to be a good reason for people to invest in the application or wearable and Arai believes the industry is still at an early trial stage trying to identify what will sell.
He also suggests that operators are spending a lot of money trialling IoT, but they could reduce their costs considerably by using Kii’s platform with no financial commitment while they are in the development stage of their IoT offering. ‘You have to find the end user value; what they willing to pay for particular applications,’ says Arai. ‘By using our platform operators can keep their development costs down.’
Open APIs for IoT developers
He adds that another important aspect of the Space ecosystem is that Kii makes available its APIs to third parties. ‘Someone may come up with an idea to combine different devices together. Because they can access our API for free they can quickly develop ideas and new solutions,’ he says.
‘For example, Haltian sends a notification to the parents’ smartphone, but if mum is cooking in the kitchen and she’s left her smartphone in another room, we have come up with a solution that connects the Haltian device to an LED light in the kitchen – if there’s an alert it flashes red.
‘We can then charge $1 more for that extra application. The point is, the LED light manufacturer is Chinese and Haltian is Finnish. They have no knowledge of each other, but Kii knew them both and brought them together. You then have a single cloud managing very different devices. So, opening up our APIs to third parties means developers can come up to many different ideas.’
Device interoperability is of course a major issue in developing the IoT and Arai says that Kii is participating with the AllSeen Alliance to come up with standardised device interoperability solutions, so new ones do not have to keep being written every time an application is developed.
‘We are heavily participating and developing this with them, but it is not ready yet and we need something now, so we do our own interoperability solution for the time being, but we will use the standard when it emerges,’ he says.
Moving into Europe
Kii does not have much of a presence in the European market as yet, but Arai reports it is now working with Brightstar in Europe - it does have R&D facilities in Spain too, but no sales organisation as yet, although it does have some staff.
Anthony Fulgoni, VP Business Development, EMEA at Kii, chips in to say: ‘We are pushing what Kii does, finding system integrators, working with Haltian and some of its partners and we are especially working in transportation, logistics, healthcare, child and elderly tracking, but also security tracking too.
‘We were at IFA in Germany recently to find new hardware partners. One of the things we bring is the offer of Space as an ecosystem to get them to market faster and maybe make more of their particular product by combining it with other things.
‘A lot of device manufacturers are very siloed,’ he continues. ‘What we do to engage with them is talk about their business, talk about how they can grow, and one of the things we can really do is talk about how they get into a massive market like China.
‘But we also talk to them about how we can give their product wider appeal than what they are currently focused on,’ continues Fulgoni. ‘Take traffic sensors developers; they can be a bit in their own world, but we can give them a picture of wider applications that will expand what they do. IoT is not just about the consumer market, it is about the industrial and enterprise markets too.’
Fulgoni adds: ‘It is early days yet and everyone talks about cloud, but what is the difference between one cloud offering and another? We think we are slightly different because of our co-operative approach. We are not just interested in selling a subscription; we are interested in your product and what can be done with it.’
Arai says: ‘I think IoT now is at the stage the Internet was in 1995. Everyone has a browser, but no one quite knows what will succeed. A lot of things are being tried and that is where we are. The Internet took about five years to take off, but I think IoT will be much quicker. Kii is providing a tool to make the trial and error period much easier and cheaper, and the distribution tie up with Brightstar will make it all much quicker.
‘The Chinese market and Alibaba is very interesting too,’ he continues, ‘because we are sitting on Alibaba’s Aliyun Cloud. Alibaba has 500 million users with a billing arrangement. So, if we come up with good enough solutions, Alibaba will take it on and the developers and distributors don’t have to do anything – just plug into the Alibaba cloud.’
It will be interesting to see if Kii’s Space ecosystem pioneers a new commercial model. In theory at least it has all the appearance of being something of a virtuous circle, where each participant helps each other out in providing customers with a ready-made, end-to-end IoT service out of which everyone can make money.
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