Editor’s note: Daniel Callahan is an analyst at Technology Business Research

HAMPTON, N.H. – Commercial Internet of Things has received substantial press over the last three years. It started in 2015 with hyped claims of IoT’s ability to deliver total transformation, but expectations around the technology have matured and IoT is now viewed as a reasonable technique for solving business problems.

However, one thing has not changed: When it comes to IoT market participants, the focus of the discussion remains on larger IT vendors, SIs [systems integrators] and customers. The missing story is the involvement of the distributors, VARs [valued added resellers]  and smaller SIs, and the current needs of the small to midsize customers.

What are distributors?

Distributors sit between IT vendors and VARs or SIs, procuring equipment or software from the former and distributing it to the latter two. Because distributors generally have a very large customer base, they can help vendors reach more customers or provide a channel for vendors that cannot afford to build their own, such as smaller ISVs.

Because distributors procure equipment from vendors and stock it themselves, they are incentivized to educate VARs or SIs about vendor products and help market them as well as to deliver sales training, demos and exhibitions. Distributors are masters of the supply chain, bundling and contract negotiations.

What are VARs?

VARs, along with SIs, serve on the frontline of IT and offer a more tailored storefront to customers than a larger vendor. VARs will seek to build and deliver turnkey solutions by mixing and matching technology and software, as well as layering on services of their own, such as integration, customization, consulting, training and implementation. VARs are often organized by customer type, from those offering general IT services to those specializing in education, the public sector, heavy industry and other niche areas.

VARs, along with SIs, often have the keenest grasp on customer challenges, making them well positioned to package IoT components, build applications or offer services.

What are SIs?SIs range from global to local, and in many cases, smaller ones cater to a specific subvertical or business process. The role of the SI is very similar to that of the VAR. The primary difference, in the context of our discussion, is that SIs are more adept at customization whereas VARs seek to provide turnkey solutions. SIs often shop at distributors for their equipment.

Why are small to midsize customers important?

Although the IoT conversation is centered on adoption among large enterprises, most of the revenue opportunity lies in addressing the multitude of small to midsize customers worldwide seeking solutions to business problems.

However, the nature of the early IoT era, which has been filled with extravagant claims, inadequate products and services, and a chaotic partner ecosystem, has led most cost-conscious customers (hint: the majority) to hesitate and throw up their hands in confusion.

Today, IoT offerings are increasingly addressing narrower business or technical requirements, and vendors are delivering collections of components that can be used to create complete solutions, lowering the burden on customers and thereby making IoT more accessible. With the increased accessibility, the small to midsize customer opportunity is ripe for IoT. However, TBR believes the larger IT, and in many cases operational technology (OT), vendors are not well structured to capitalize on the opportunity with smaller customers due to their more horizontal nature, along with the higher cost of sales they incur from having to decipher and construct a vast number of specific vertical use cases.

Next: Why the emergence of the packaged and bundled solution changes the game

(C) TBR