SLAs and business transformation in the same sentence – doesn’t sound right, does it? Well. There is, however, more to the matter if you look at SLAs (Service Level Agreements) through the lense of IoT business models.

Many vendors see their SLA as a necessary evil as few of their clients really understand the SLAs before signing up for services. Most companies have signed up for various cloud services and often it seems as though there is no real consequence in SLAs whether solution A or B is chosen. Using SLAs as a strategic competitive advantage can however be possible if Internet-of-Things (IoT) business models and technologies are utilized in the right way.

Connected products are Service by Design

IoT enables products to be updated on a regular basis. The traditional R & D product life cycle focusing on major product releases, now shift focus to integrating maintenance and upgrades into one continuous development process (if you are interested in this subject you should read this blog: A product’s life starts when unwrapped and powered on)

Launching connected products with endless possibilities for updates mean that the R&D organization must embrace in-market maintenance and upgrades and therefore the SLAs become business critical. Products and the R&D organization’s mindset should therefore support service “evolvability” – so new services can be deployed in already in-market products.

The SLA will instead of a disclaimer be perceived as a business model and value proposition encompassing the business and organization structure. It becomes responsible and business critical for the entire organization, spanning R&D, Support, Production, Finance, Sales and Marketing.

Example: Company ”Acme Group” is producing gutters and downspouts. For certain customers it is of great importance to avoid unnecessary water in their building foundation and unnecessary moist. ”Acme Group” wishes to differentiate their premium product by adding connectivity to their gutter installations. This enables them to warn customers when big cloudbursts occur in their area, when the pipes are blocked and when the pipes have tilted. ”Acme Group” can now leverage their premium product by adding not only subscription based online-services but also offering technicians to oversee their installations and if necessary change or clean pipes. By adding SLAs to a connected product they can now offer entirely new services with a steady income stream. The new business area demands changes to the existing organization and the SLAs are now strategic and business critical.

Utilizing SLAs are not a zero-sum game

Utilizing SLAs in a strategic way enable companies to develop a service-based business model that saves money for the customer and utilize resources more effectively – thus avoiding a zero-sum game. This is achieved by offering services that are business critical to the user and not “nice-to-have connected add-on features” that do not provide significant business value (e.g. the rain gutter relaying “it is raining” and nothing about how much and the state of the pipes). You can read more about connected products and data value here Internet-of-Things and The Elusive New Oil.

Further down the road this will enable “Acme Group” and many other “traditional” companies to offer services instead of products by applying data analytics to their business. By analyzing the data they can risk-manage maintenance, predict breakdowns and pro-actively change spare parts. “Acme Group” and other companies may even extend their business further by applying the IoT business model “Sensor-as-a-Service”.

Bottomline: by connecting products and applying strategic SLAs, companies can transform their business so that resources are utilized effectively and new service-driven business areas are created.

More information:

Managing Partner Jakob Appel,, +45 26 17 18 58

Learn more about how IoT can introduce new business models to your organisation.