Three ways the Internet of Things may affect contracts

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Is opportunity in the Internet of Things (IoT) as real as people say it is? Let’s just say when it comes to predictions about future technology trends, a grain of salt should be a part of your diet.

Take for instance the figure mentioned in a recent DHL and Cisco report on the IoT potential in the supply chain and logistics industries. According to the report, $1.9 trillion is the collective value in supply chain and logistics from IoT technologies (representing new revenue plus cut costs) over the next decade.

We’ll see.

Of course, any new technological trend can seem like hype — until it’s sitting on your desk.

It doesn’t seem to be a stretch, however, that immediate benefits will emerge from IoT in supply chain and logistics — businesses that already depend on large connected networks. Adding more data isn’t that difficult when you’re already used to connecting dispersed time-sensitive information.

(Just a note here that do make a distinction between IoT and the connected enterprise. I like this definition of IoT from Wikipedia.)

IoT changes go beyond technology

The opportunities for IoT are huge in manufacturing too notes Ryan Begley in a recent article in The IBM Commerce blog Why Should a B2B Manufacturing Sales Executive Care About the Internet of Things?

Begley notes that implementing more IoT technology may have a profound affect on how manufacturers do business. If predicting what will happen during a contract or product lifecycle becomes possible, it can shift the focus of a company from reactive to proactive.

Imagine being able to predict wear and failure rates of key components long before they happen. Or imagine knowing that a problem will develop in 30 days with a key component — rather than being blind-sided by that product failure.

IoT will affect contracts too

A good question worth considering now is how the IoT will affect contracts. It may not be too soon to consider these issues:

* Outcomes, not widgets: Let’s say IoT’s promise is realized and companies of all stripes get more real-time data that allows them to react swiftly to problems happening in real time. If you are a vendor or supplier, that can significantly change the value of your product or service. You’re no longer supplying widgets — you’re providing an end result. Does that mean contracts need to become more about desired outcomes?

* Data and sharing get thornier: Let’s say you buy manufactured, complex products from company A. Company A has several key component suppliers: B, C and D. All of the suppliers have a vested interest in seeing data on their components. Access to that data becomes very important, especially if it predicts performance over time. What if the customer doesn’t want all that usage data to be shared with suppliers B, C and D? What if restricting data access gives company A an advantage in negotiating with B, C and D? As IoT technology grows, the boundaries of data sharing will have to be more clearly defined — which may not be easy.

* Regulation in the wings: It will probably only be a matter of time before privacy laws bump up against the idea of “things” sending out a stream of usage data. No doubt most of these issues will be in the consumer product world. But laws that affect consumer products have a way of “bleeding” into private industry too — especially when it comes to privacy legislation.

But let’s not get too fearful. The promises of the IoT in supply, logistics and manufacturing do indeed promise great things. Let’s see if they actually come to pass.

[About the author: Todd Hyten is a former business journalist who now writes about B2B topics and consults on content marketing. You can find him on Twitter and ]

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