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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