Decentralized IoT Procurement: Issues and Best Practices for Selling IoT Solutions

Decentralization Issue

In enterprise environments, buyers of IT solutions and services are mature and well known. However, when it comes to IoT solutions, it is unclear who actually purchases them and how IoT is sold.

These new solutions fall into a "no-man's land" between IT, business units, operations, and service groups. Unlike the centralized IT procurement model, IoT solution procurement is largely decentralized, and the buyers reside in several internal organizations.

This is because IoT is valuable to many parts of the organization.

If you provide remote sensing and monitoring solutions for industrial washing‑machine manufacturers, the data collected is valuable to after‑sales, product design, and sales & marketing units.

The after‑sales unit uses the data to determine when service is needed and to detect early trouble signs. The product design unit uses the data to improve the next model. The sales and marketing unit uses the data to understand which features customers use most, enabling them to develop more effective messaging.

So who actually purchases IoT solutions?

The vast majority of companies do not have a centralized organization, such as an IoT office, that makes purchasing decisions for these solutions.

The buyer may be a manufacturer, a product design group, a traditional IT organization of another manufacturer, or an after‑sales service organization of another manufacturer. Because there is no centralized procurement organization, solution vendors find it difficult to locate the "right" buyer, slowing the sales process.

IT and IoT address different organizational domains

To understand why IoT procurement is decentralized, consider a company's value chain (Figure 1). Small or large companies perform a series of activities that create value for customers (e.g., producing products or services that customers purchase).

Primary activities are functions directly involved in creating and delivering products or services. These include procurement of raw materials, transforming them into finished goods or services, distributing those goods, sales and marketing, and supporting after‑sales service.

Support activities do not directly participate in primary value‑creation activities but support the organization and its functions. These include IT, finance, human resources, legal, and procurement.

IoT solutions directly involve primary activities.

In the remote‑sensing example, the manufacturer's after‑sales team uses data to detect early fault signs, then proactively orders replacement parts and schedules on‑site service calls to resolve issues before the washing machine fails.

This predictive and proactive maintenance step directly creates value for the customer. In contrast, IT may maintain the database that stores customer data or build integrations that allow data to connect with spare‑part order management systems and service appointment scheduling systems.

Although IoT solutions are networked, IoT is not IT.

IoT is more like industrial technology or operational technology rather than information technology. For this reason, IoT occupies a different domain from IT, which explains why the IoT buying process is decentralized.

IoT and IT must coordinate and align

In today’s companies, IoT is a collaboration of three different organizations – IT, business units, and major value‑creation functions such as operations, manufacturing, marketing, and engineering (Figure 2). The main buyers will come from one of these organizations.

To actually purchase, these organizations must coordinate roles and responsibilities, budget allocation and transfer, and resource distribution. Some negotiations and planning may occur in a structured forum, such as a monthly business‑unit‑IT coordination committee or steering committee.

Because IoT management and procurement are decentralized in most companies today, this collaborative buying process is common. While it adds complexity and slows adoption, it also exposes IoT’s value to a broader audience, sparks interest across the company, and facilitates future purchasing efforts.

How to Sell IoT – Best Practices from Six IoT Vendors

1. Understand where your solution fits in the enterprise value chain.

Whether you sell on‑premise or SaaS‑based IoT solutions, you can determine the fit of IT and IoT in the context of a specific IoT solution. This helps you identify primary buyers, secondary buyers, and the roles of IT and various business functions.

2. Engage corporate digital transformation offices.

In a decentralized IoT procurement environment, these offices (if they exist) have visibility and influence over many cross‑functional innovation programs that often involve the same functional organizations related to your IoT solution. They can save you a lot of time and point you in the right direction.

3. Reach every function your solution touches.

Each of these organizations is a potential buyer (primary or secondary). In a decentralized buying environment, they must cooperate to pool their budgets and resources. You need to ensure all these organizations understand and support your solution.

4. Connect the buyer’s dots.

Your solution sits between IT, business units, and various operational functions. Your buyers will need support and resources to deploy the solution. Help your buyers plan internal collaboration meetings, identify what other teams need in terms of resources, support, and budget, and optionally provide interfaces, sample agreements, role and deliverable lists.

5. Develop a sales pursuit plan around the decentralized procurement process.

This is a more complex sales engagement that requires interaction with multiple organizations. Build and plan your resources and support around a longer sales cycle.

6. If you are a startup, help your buyers understand how to purchase from you.

When purchasing IoT solutions from a startup, using traditional enterprise procurement processes is ineffective and only increases buyer risk. Help your potential customers develop new procurement practices for buying solutions from a startup.

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