IIC Journal of Innovation 7th Edition | Page 16

I ² M ²— The Future of Industrial Internet Monetization �

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Setup Costs: Required to install, test and validate the system. Profit: The component and system builders’ reward for business success.

To explain further, this table provides some examples of the Physical and Intellectual Costs of IIoT device components:

Cost Type Physical

Examples for IIoT devices

electronic boards, wiring and connectors, computer chips, basic displays, power supplies

Physical Cost can also be understood as the minimum payment to avoid a direct“ loss by delivery” for the component builders. The traditional industry uses such cost in insurance cases: It is quite similar to the“ cost of replacing a component”. If for example your computer was lost in a fire, the insurance company replaces the hardware but not the installed data or software, which can be recreated from backup or license keys, both secured separately.

The changing ratio between the hardware and software cost of a device from Figure 2 can be transferred directly to a similar ratio between physical and intellectual costs: For smart devices in particular, the intellectual cost will rise while the physical cost will stay flat or even fall.

UPFRONT AND USAGE COSTS

The Dynamic Monetization Method defines Physical and Setup Costs as Upfront Costs and Intellectual Costs and Profit as Usage Costs. Upfront Costs are traditionally paid before the system is deployed while the Usage Costs are paid when the system is operated and creates revenue for the Operational User. Upfront Costs principally

Figure 9: Split payment between upfront and usage cost

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