How much does IoT cost?
How much does the Internet of Things solutions cost?
Go on, type that phrase in the Google search bar! You’ll see dozens of articles featuring ambiguous cost estimates of mobile applications working in tandem with connected devices — and not a single word about the devices in question!
Meanwhile, the Internet of Things term refers to cyber-physical systems where electronic and non-electronic objects collect environmental data using sensors and exchange it over a network. These networks are often wireless; companies implement wired IoT solutions in industrial settings and other environments with a high risk of electromagnetic interference. IoT devices further relay the information to the cloud for analysis and visualize insights via a user interface — typically, a cloud dashboard or mobile application (although voice interfaces have also been trending up lately). In edge IoT deployments, devices possess enough computing power to process sensor data locally and orchestrate other IoT nodes.
Good old ITU-T Y.4000/Y.2060 recommendations document , which has been around for almost a decade, still provides the most accurate reference model for IoT products and is a must-read for all companies eyeing the Internet of Things market. As you can see from the scheme above, IoT systems operate at four different layers:
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Devices. IoT devices, or things, may range in complexity from printed tags attached to inventory items to AI-powered security cameras that store and process data locally. What various IoT devices have in common, though, is the ability to collect environmental data via sensors and connect to the Internet. To perform these tasks, IoT devices must be equipped with firmware, middleware, or proper embedded systems, which interconnect the hardware components of electronic devices, interface gadgets with each other and a central hub, and facilitate data collection.
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Network. The networking layer comprises wireless protocols that allow devices to communicate with each other, transfer sensor data to the cloud, and encrypt all communications.
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Service support and application support. Here we talk about back-end infrastructures driving the business logic of IoT products. Composed of cloud or on-premises servers and services, such infrastructures aggregate, store, and process sensor readings.
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Applications. An IoT app is an umbrella term describing all kinds of applications that allow end-users to interpret sensor data, interact with connected devices, and adjust device settings.
So when we talk about the Internet of Things cost, it is key to understand how much every one of these functional components is going to cost you.
That’s what a realistic IoT cost estimate may look like
Deciphering the cost of IoT devices
If you’re looking to create a custom IoT solution, there are two routes you can take: design a device from the ground up or enhance non-electronic/analog objects with sensors.
How much does it cost to build custom IoT hardware?
The price of building a custom device depends on the type, functionality, and complexity of your IoT solution and may amount to 70-80% of the total Internet of Things project costs.
The custom hardware/firmware design process spans several stages:
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Analysis. During this phase, a team of hardware experts collaborates with software system engineers, business analysts, and company stakeholders to elicit technical requirements for a custom device, polish the concept, and optimize the development budget.
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Design. Based on the requirements defined in the Analysis phase, engineers and industrial designers create printed circuit board (PCB) layout schemes and visualize the gadget’s enclosure in 3D CAD. Hardware design should also meet all the software requirements gathered in the previous step.
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Prototyping. A hardware manufacturer creates up to ten PCBs, debugs them, and makes corresponding changes to the requirements document. At the same time, the firmware team implements the basic features and modules and tests them on DevKits or the prototype itself.
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Testing. Successful prototypes are transformed into pre-production models that use different materials for the device case. Various types of tests are then conducted, including thermal, signal integrity, and power integrity analyses, as well as user tests. During this phase, critical errors might be detected, and the prototyping process starts all over again. Typically, a novel IoT device goes through three to five iterations until the desired performance is achieved.
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Mass production. The technical documentation for PCB, electronic components, and enclosure production are handed over to a factory. The manufacturer produces the required quantity of devices, installs firmware, and performs testing to validate that the gadgets function as intended.
Overall, connected devices spend anything between six months and two years in the development stages listed above.
How much would it cost your company to build IoT hardware — given that you need to analyze technical requirements, prototype and test your idea, and manufacture devices en masse?
The honest answer is, “It depends” 🙂
A self-learning smart home system with facial recognition capabilities may cost up to $5 million (hardware and software costs included).
The price of building a custom ECG tracker that analyzes the electrical signals of a human body and measures how well your heart works could reach $ 300,000— but there are additional IoT development costs you should be aware of.
Hardware certification
Certification is often considered one of the major factors behind the cost of IoT hardware. Although the Internet of Things regulations differs from country to country, they usually encompass the following categories:
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Environment and electrical safety. These regulations include the Restriction of Hazardous Substances (ROHS) and Energy Star compliance, as well as standards tests for issues like overheating and electric shock, which are part of the International Electrotechnical Commission (IEC) and Underwriters Laboratories (UL) certifications.
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Communication protocols. Before you label your gadget as Bluetooth-compatible, for example, you have to test it against the Bluetooth SIG Qualification program. The same goes for Zigbee, Z-Wave, LoRaWAN, and other popular connectivity technologies.
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Electromagnetic and radio-frequency interference. Before your product hits the shelves, you need to validate that the performance of your device won’t be affected by other connected devices within a Wi-Fi/BLE/cellular network range, while the device itself conforms to the electromagnetic radiation exposure standards.
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Product and industry-specific standards. For example, a wearable device company has to perform chemical tests to ensure that their gadgets’ enclosures do not contain skin allergens. On top of that, there’s compulsory Food and Drug Administration (FDA) and National Institute of Standards and Technology (NIST) security certification for medical IoT devices, which not only affects time to market, but also involves significant expenses.
According to Entrepreneur, the price of a certificate for a simple electronic gadget (including devices that rely on wireless connectivity) starts from $10,000.
Estimating the cost of non-electronic IoT solutions
The Internet of Things concept revolves around continuous data acquisition and exchange — and you don’t always need an electronic device with custom-written embedded software running on it to collect sensor data and send it to a cloud-based or on-premises server.
Here are several examples of non-electronic and pseudo-connected IoT devices that cost little to nothing:
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A typical smart farming solution is a set of temperature and soil moisture sensors paired to a microcontroller or microcomputer; in the meantime, sensor prices dropped by over 200% between 2004 and 2018, reaching historic low of $0.4 .
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Brick-and-mortar retailers track inventory levels and foot traffic using RFID tags and beacons, which cost around $20 on Amazon.
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And now it’s totally possible to create detergent containers that scavenge energy from their surroundings to communicate with smartphones and Wi-Fi devices, alerting homeowners when they’re running low on cleaning supplies.
While there are many ways to save on hardware components, cyber-physical systems still need a place to collect and process sensor data — and that’s where your IoT cost estimate might go awry.
Assessing IoT infrastructure costs
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Network. IoT connectivity is usually enabled by means of short-range wireless (Wi-Fi, Bluetooth, NFC), low-power wide-area network (LPWAN), and cellular solutions. In case your IoT product comprises a system of connected gadgets communicating over a cellular network, your connectivity expenses might fluctuate around $0.04 per megabyte. Some telecom companies offer narrowband IoT pricing plans for enterprises, charging $6 per device annually.
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Embedded software. Custom IoT devices — even dumb sensors that merely gather environmental data — use embedded software with pre-programmed logic. Ranging in form and complexity from bare-metal firmware to customized Android, this software may add up to $20,000 to your IoT cost estimate. If you’re planning to incorporate a third-party gadget into your IoT ecosystem, you might also need middleware — i.e., drivers, APIs, and SDKs connecting devices and applications that fail to communicate otherwise. Custom firmware for an IoT solution may cost you $10,000-30,000.
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Data storage and analytics solutions. Here we talk about data lakes and warehouses where sensor data is kept and organized — and software that boils down gigabytes of raw data to meaningful insights. IoT adopters typically leverage smart gadget connectivity and data analysis through PaaS solutions built by Google, Amazon, or Microsoft. While cloud IoT platform pricing could be fairly reasonable (Azure IoT Hub fees, for example, start from $10 per month per an IoT hub unit, with 400,000 messages sent daily), you still need to develop the business logic of your IoT solution from the ground up. A UK-based national park has recently turned to ITRex Group to create a robust digital twin solution for effective land, water, and other natural capital asset management. The solution comprises a network of sensors that aggregate environmental data and send it to the cloud for further analysis. Technology-wise, the system will incorporate a data lake driven by AWS services (S3, DynamoDB, Redshift, Glue, etc.), streaming services facilitating sensor data collection without an intermediary hub, and dashboards for data visualization. A realistic IoT cost estimate for this project would start from $250,000.
Hidden IoT infrastructure costs
Many IoT solutions require a complex support system, which is also called “infrastructure”.
For instance, your company specializes in predictive maintenance and sells transformers enhanced with smart sensors. You need a mobile app to generate alert notifications if sensors register abnormal behavior. Your IoT solution may also incorporate a web application for managing field technicians and ordering equipment parts that need replacement. To automate these processes, you have to contract equipment manufacturers, network providers, and maintenance, repair, and operations (MRO) companies — and integrate your custom software with their business apps, which is bound to incur additional IoT development costs.
Another example is IoT-based remote patient monitoring systems, which (besides hardware, applications, and connectivity!) require a dedicated customer support team ready to help users whose condition is worsening.
Calculating the cost of IoT applications
How much does it cost to develop an IoT app?
Just like with hardware, it depends on the size and complexity of your undertaking. These examples of IoT projects from the ITRex portfolio will give you an idea of what you should expect.
IoT software projects and their cost estimates
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We collaborated with a digital health startup looking to bring a custom heart rate monitoring device to the market. Our medical IoT developers created an iOS application that visualizes sensor data and alerts hospital staff in emergency cases. To render ECG sensor data in real-time, we leveraged the OpenGL API and partially shifted the workload to mobile GPU. A similar IoT application costs $10,000-15,000.
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ITRex created an intelligent indoor navigation system for an exhibition center. Powered by BLE beacons, which track users’ location via a mobile app, the solution helps guests find their way around the facility and receive real-time information about exhibition participants. An IoT system like this would cost your company $40,000-60,000.
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To help healthcare facilities reduce hospital-associated infection (HAI) rates, a US-based digital health company created an IoT platform improving hand hygiene among medical personnel. The company turned to ITRex Group to create a complete software ecosystem for their solution, including a cloud-based back end, a desktop application, and an Android app. The intelligent hand hygiene compliance platform tracks handwashing events using BLE-powered wearables, aggregates and processes sensor data in the cloud, and reminds hospital staff to wash their hands regularly via the Android application. Hospital administrators, meanwhile, can monitor hand hygiene compliance using the desktop app and generate reports for specified time periods. An IoT system like this costs approximately $90,000.
How to reduce IoT development costs — and avoid failure
If you add up the costs of IoT components cited in the previous sections, you’ll realize that your IoT solution will likely cost you $30,000-50,000. That’s the price of a minimum viable product (MVP) version of an IoT system. Considering that 75% of IoT projects never materialize into market-ready products, this is a significant investment. (Here you can learn more about MVP pricing factors)
According to the Microsoft IoT Signals survey, some of the common reasons why IoT projects fail include technology roadblocks, insignificant budgets, and a lack of a clearly established use case.
Below you will find several tips that would help you sail through IoT development — and avoid making costly mistakes in the process.
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Start your project with a discovery phase to establish a business case for your IoT solution and validate that there are no technical limitations on your way. Although your vendor will inevitably bill you for the discovery phase hours, $10,000-12,000 is nothing in comparison with the losses you’ll suffer should you scrap an entire project halfway through.
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Leverage off-the-shelf prototyping tools such as systems on a chip (SoCs), microcontrollers, and microcomputers to create a proof-of-concept version of your device. You can buy a powerful microcontroller like the ATmega328P-based Arduino Uno for less than $30, have it shipped in 24 hours, develop a prototype within a fairly short time frame, and focus on embedded software and mobile/web application development while simultaneously negotiating the deal with a hardware manufacturer.
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Take an iterative approach to IoT development to avoid feature creep and scale your system flexibly along with your business. The problem with IoT products (especially within the consumer electronics segment) is that companies are overstuffing their gadgets with features to cater to a larger audience. This usually extends the development and testing cycle, pushing release dates into an indefinite future and sucking the budgets dry. To avoid this scenario, it is recommended that you launch an MVP as fast as you can, test the IoT solution with real users and on real-world tasks, and gradually expand its feature set to support new use cases.
