To understand why a platform may be necessary for IoT, we need to first understand what IoT is and why companies and consumers might benefit from it. IoT is fundamentally an architecture and not a single technology itself.[i] That is to say that IoT connects existing technologies in a specific way (described by the information value loop in Figure 1) to enable people and companies to accomplish entirely new things, and in doing so, it creates value for them.[ii]
However, given the diverse nature of IoT technology, it is unlikely that any single company will have all of the devices or expertise in-house needed at every stage of the information value loop. Rather, even the biggest companies likely must choose from a vast array of technology and integration partners to make relatively simple IoT applications work. Beyond merely the physical sensors, elements as diverse as managing RESTful services, API management or data analytics models, all must come together seamlessly and work the first time. Therefore, one of the big challenges facing businesses that seek value from IoT is coordinating the many elements needed to come together simultaneously. That coordinator could be an IoT platform.
A platform is typically a space — physical or virtual — for two parties to meet in order to create value.[i] More precisely, the platform represents a two-sided market — one where the platform can affect the volume of transactions on one side, while balancing the price paid by the other side. IoT platforms operate in a similar manner. They create value, not by making any specific product, but rather by connecting previously disconnected supply and demand.