With IoT Now granted sole access to Digi’s normally closed customer conference, we ask the CEO and COO their strategy for growing an M2M hardware provider. In Part 2 of Jeremy Cowan’s report the new emphasis is on service and scalability.
Ron Konezny, CEO: That’s a hallmark of products these days, our products have to be so easy to use, you don’t need a manual. The other hallmark that you’re going to see infiltrate Digi’s products is the concept of Mobile First. With the advances of Bluetooth Low Energy you can interface with products with a mobile device in the field. You’re not having to get on the internet, or log onto a website, get a password, go through a ream of settings. You can connect with that machinery right there and then.
Imagine if you are a restaurant chain owner, your employee base is very volatile, they probably don’t want to be there most of the time, they’re paid meagre wages. We’ve got to make things easier to use, easier to buy, to install, to troubleshoot. So Bluenica has impact culturally beyond the size of the acquisition, the revenue it brings.
We’re seeing good results; last quarter was our first quarter (together), we’ve got some pilots that have been approved now for roll-outs, and we expect Bluenica in the next fiscal year to add a meaningful contribution to Digi’s performance.
IoT Now: You mentioned pharmaceuticals. What’s your expectation in the next year for growing other verticals?
RK: We don’t want to get too far ahead of ourselves. We’ve got a lot of work to do. We envision over time that we will have a Retail, a Transportation, and a Medical practice within Digi. Right now we are very focused on retail, and do a little bit of transportation. Our retail customers are saying “I’m glad this food is protected but what about during transportation?” They’re pushing us into their transporters. We landed a big contract last quarter, a trucker operating over 300 vehicles to service 7Eleven stores.
Kevin C Riley, COO joins the table: … and the warehouses.
RK: Thank you, yes. Kevin Riley was recently promoted to chief operating officer. He oversees our Cold Chain Solutions Group in addition to Sales & Marketing.
IoT Now: Kevin, how will you be changing what Digi is doing?
KCR: It’s about refining the organisation. How do you organise the Sales team to be more effective, trying to integrate the Marketing so that it ties into the areas we’re going after, and finally our customer support piece.
IoT Now: You’ve got a line of revenues in your Financial reports for Services. It’s significant but nothing compared to your hardware. Do you envisage that growing significantly in the coming years?
RK: Services revenue is really three categories; Cold Chain Solutions Group, we have a group called Wireless Design Services that helps our customers implement their hardware solution, and we also have our Cloud and Professional Services revenue in there. We envision that services revenue growing, probably outpacing the growth of our hardware business, but right now as you mention it’s about 5% of our revenue so it’s pretty modest. As that revenue becomes more recurring it will outpunch its weight, it has a high contribution margin, and has good longevity as well.
IoT Now: Is one of those three areas going to drive that?
RK: We think Cold Chain has the most potential, but Wireless Design Services are working on projects that contain Digi content.
IoT Now: The figures for North America have outperformed everywhere else, but do you see the next growth phase coming from Europe?
RK: Europe is our second largest market and it’s growing for us, but we report in US dollars so it depresses the results. Europe for us is not growing at the pace of North America but it’s just as big a market. It is more difficult to service, it’s fragmented but this is a very important market to us. Europe has attributes more suitable to our offerings.
IoT Now: Such as?
RK: Our products are high performing, they offer industry-leading warranty terms, you’ve got expert support, you have a distribution network that’s almost unparalleled in IoT/M2M, so you get that local support from a strong company with a new product roadmap.
KCR: In the cold chain there’s more regulation on food safety in Europe than in North America. It’s coming and we see that as an opportunity.
RK: It’s one thing to get the product to work once in the lab. It’s a whole different thing to have 10,000 of them work all the time for five years. Think about the applications; outdoor lighting, sub-station monitoring, renewable energy, oil & gas, critical infrastructure. You wipe out the benefit of the system if you’ve got to send a person out there every year to ‘burp and bottle’ your hardware.
KCR: You asked about the growth of the services; as our customers become more aware of our capabilities to help them we’ve seen growth. It’s not just the off-the-shelf product but where there are things we can add to enable them in their environment.
RK: That’s really important because a lot our customers need that expertise, they’re newer. Like your media, there’s a thirst for information. We don’t want to give up our strong R&D and engineering, we want to complement it. We’re working hard to make a more scalable company and it goes back to simplification of our product line. If you want a little less memory a little more processor, I’m going to give you the same ‘Super SKU’ and you ‘ll get more than what you ask. I benefit, I’m shipping the same product. It’s a heck of a lot easier. Maybe the difference is a buck or two, but I’ll save way more than that in lowering my costs and offering you better service.
The author of this blog is Jeremy Cowan, editorial director of IoT Now
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