Internet of Things (IoT) – Considerations for the CFO

I already see the CFO/Finance Leader’s eyes start rolling with this blog – here we go again! 😉 I LOVE the practical use of technology and have been at the forefront of  FinTech since the early 80’s. So I’ve seen technology cycles come and go.  However, the promise, enormity and pace of change of the changes that are about to confront the CFO in the near future, prompts me to comment on the topic of the “Internet of Things” IoT for short, with some degree of trepidation.  We all can see that technological advances are disrupting the operating status quo and creating huge turbulence for companies. Industries are converging, and new competitors emerging, fast. The pressure to innovate has never been greater, nor managing the risks more difficult especially for the CFO.  In reading about the developing market and discipline, the following are my thoughts that will continue to develop and deepen as I begin writing about this first of many articles on IoT.

First a definition: IoT is an all-encompassing term that refers to the internet changing from a giant network of PCs to a mega-network that’s connected to everything around you. From your kitchen to your car and everything in between, and it is changing the world.

The Internet of Things (IoT), along with Cloud, Big Data, Predictive Analytics and Mobile finance form the three most prominent technology issues for CFO’s and this is echo’ed in FinancialForce CFO John Bonney’s comment; “It won’t be long before smart devices are as ubiquitous as smartphones are today. Wearables and home appliances like Nest’s smart thermostat have already taken off with consumers.” Consider Gartner’s estimates of the IoT Market:

  • Estimates are that there will be 25 billion embedded devices and intelligent systems by 2020
  • Some 44 trillion GBs of data will be emitted from those devices
  • On a global basis, the IoT will enable some 4.4 billion people to be connected
  • Overall, the global IoT market is expected to reach $4.3 trillion by 2024

Where did this all come from? In my opinion, The IoT evolution has been driven by developments and convergence across technology platforms and business processes. Consider the falling costs of computing power and data storage as well as the emergence of the cloud and advances in analytics.  There has been an explosion in device embedding beyond business and into EVERYTHING. So when you merge this with low cost bandwidth and mobility, you have fuel for the rocket-ship that the IoT ecosystem promises with endless commercial applications. Companies are just beginning to explore how to monetize IoT to drive stronger business growth and increase customer satisfaction (and interaction).  Some have been very disciplined and we can already see a few common use cases emerging. These include:

Health and Well Being: IoT is leading here with prevention and monitoring, urgent care delivered remotely and customized health care treatment delivered just-in-time.  For example, there are a number of IoT-enabled devices (stationary, wearables, implantables) available to monitor diabetes, heart conditions, and other ailments.

Usage-Based Billing: IoT has the potential to profoundly upend how businesses bill customers for products and services. Traditionally, businesses have sold products and services by billing a one-time fee. GE was an early adopter of the usage-based billing model by embracing the “as-a-service” economy, and there’s been a direct correlation between that move and the company’s general stock performance. It’s become an important metric to the GE investors. Its “Power-by-the-hour” concept for jet engines is an example.

Optimized Solutions Selling:  One of the greatest benefits of IoT data is its ability to uncover cross-departmental insights that can lead to identifying new revenue streams or optimizing current ones. For finance, this introduces new billing models but also demands new methods for recognizing revenue. With optimized revenue streams, a CFO can further establish strategic guidance and the tangible impact on the company’s financial well-being.

Customer-Driven Business Decisions: When recurring or usage-based billing is present, customer satisfaction quickly becomes a precursor for financial health. A compelling IoT use case improves the customer experience and drives engagement. This in turn creates more loyal (and financially stable) customers — something any company can get behind. With ongoing, high-quality customer care, finance can rest easily that revenue streams will come in as forecasted. Without it, a major customer issue could cause you to fall short of stakeholder expectations.

So What Does this Mean for Finance Leaders?

TIME!  How does the finance leader find the time to understand and implement these new technologies and the business models they enable? The key is to embrace technology that automates labor intensive tasks so that finance teams have the time to focus on strategic initiatives.

LEADING THE IoT STRATEGY? Typically, the larger the company, the greater the number of involved parties setting the IoT strategy.   It’s our recommendation that the CFO play an “architect” role, he or she has to identify the players vital to execution of an IoT strategy and decide whether the solution needs ownership, sponsorship, or just the support of each.  Here the CFO will influence which drivers and performance metrics apply to measure new revenue streams, costs and capital spend.

ANALYTICAL PLATFORM & COMPETENCY:  In the future, all finance teams will have real-time data at their fingertips to make more accurate, strategic decisions for the business. They will also be able to break down silos between departments, further transforming finance into the foundation for any business strategy.

ACCOUNTING AND STANDARDS MODIFICATION:  The CFO has to become more flexible. Companies must also be aware of how accounting standards may now apply when a business adopts a recurring revenue or usage-based billing model. Recurring models are distinct from one-off product sales and can easily become complex for finance teams especially if there are a mix of revenue types.   Companies moving into IoT should prepare their finance teams for this transition.

CYBER SECURITY:  Is now the norm/expectation for many busy C-level executives. Wi-Fi and collaboration in the cloud has set many free to work flexibly or on the move. But this also poses dangers of its own.  How do you anticipate where machines are hacked

The promise of IoT should be considered as a strategic differentiater for a company as it begins to command its future.   The CFOs must adapt to the new demands of the digital business model in terms of accounting and revenue. Finance functions who have already gained significant experience in data collection and predictive analytics, are better prepared to manage the volume of information coming from IoT, however they will need to have the time, skills and understanding of how best to use the information to really exploit the value of this new ‘treasure trove.


  1. “Gartner Says 4.9 Billion Connected “Things” Will Be in Use in 2015,” Gartner, November 2014.
  2. “Expanding digital universe: transformative opportunities,” EMC Digital Universe Study, April 2014.IC Insights, April 2015.
  3. “The global IoT market opportunity will reach USD4.3 trillion by 2024,” Machina Research, April 2015.
  4. “The Internet of Things Business Index,” The Economist, October 29, 2013
  5. “Leveraging IoT: How to Get Started,” John Bonney,, May 2, 2016
  6. “Capitalizing on the promise-and the power-of the Internet of Things.” Deloitte University Press, July 2015

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