Understanding The Total Cost of Ownership of Your IoT Deployment to Optimize Your Spend

October 26, 2022

Blog

Businesses worldwide are rapidly adopting the Internet of Things (IoT) with the global IoT market growing 22% ¹ last year alone and expectations to surpass $500 billion before 2027. But as inflationary pressures mount, cost is on the minds of most IoT fleet managers. For many of those embarking on their first deployments, the full scope of decisions associated with putting a fleet of connected devices into the field can be daunting.

Before jumping into a deployment, it’s critical to understand the total cost of ownership – both the upfront investments and on-going operational expenses. The combination of these categories of ownership expenses provide you levers you can adjust to reduce costs. So drilling down, what are the cost components of an IoT deployment, and what areas are most worth investing in?

Infrastructure Investments

Before you can build a house, you must first start with the infrastructure. The same goes for an IoT deployment. Infrastructure investments in IoT includes everything you need to get your fleet up and running upon initial deployment: costs associated with devices and software, labor, quality assurance, and testing. It’s important to keep in mind that there’s usually a tradeoff between lower priced infrastructure components – whether cheap devices or cheap labor – and this usually comes in the form of delayed time-to-market or other opportunity costs.

Infrastructure investment areas and questions to keep in mind:

• Devices: 75+ billion IoT devices are expected to be in use by 2025.
  • How many devices are you deploying in year 1? year 2?
  • For how long do you expect them to be in the field?

• Labor: Investing in upskilling employees can help close IoT skill gaps. 
  • Who is involved in planning/designing your IoT infrastructure? How much time will they spend on this to get it up and running? To keep it current? To innovate?
  • Who is involved in the implementation, testing, QA and in-field support? How much time will they spend on this to deploy?
• Software: IoT software is essential for tracking and managing devices.
  • Does your solution include data and device management software? Are they one and the same? If not, are there integrations that have to be made to combine these data sources? How much do these cost individually?
• Q/A and Testing: There are 5 types of IoT testing: usability, compatibility, security, performance, and compliance.
  • How much time do you spend Q/A and testing a device before it is deployed?
  • How much data do you run through typically when you test?
• Opportunity Cost / Time-to-Market: There’s a race to market – IoT deployments were ranked a top 3 investment priority among IT professionals in 2022.
  • Is this a part of a broader launch, and are there time targets?
  • Are you competitors doing similar things? If so - since when? If not - do you expect them to be soon?
  • What is the risk of waiting 3 months, 6 months, 12 months?

Operating Expenses

It is very common to focus primarily on the upfront investments needed to launch an IoT deployment, but the biggest opportunity to reduce expenses for the long-haul sits in the second category: operating expenses. IoT deployment operating expenses include fleet tracking, theft prevention, issue detection and troubleshooting, equipment maintenance, labor, and connectivity.  

It’s this last area – connectivity – that can make the biggest impact on all the other areas of the ownership costs. The reason it can have such an impact is because devices don’t generate their intended value when they’re not connected. Ensuring you partner with a provider that will provide the right connectivity for your deployment is critical. It’s also important that they provide the right tools to manage your deployment that will make it easy to track the location, health, and even revenue generation in real-time of a deployment.

Operating expense areas and questions to keep in mind:

• Fleet Tracking:  More than 70% of fleet managers use tracking technology to better manage operations and use predictive maintenance to improve equipment lifespan and reduce disruptions.
  • What do you want to be able to see 24/7 regarding your fleet?
  • Who will be tracking your fleet, and what is each role looking for?
• Theft Prevention and Security: Nearly 50% of companies currently can’t detect breaches in their IoT devices and only 37% of executives are confident in their company’s IoT security measures. Connectivity providers should be helping close this gap.
  • How often do you see device or SIM card theft?
  • What causes this type of theft? Have you seen it increase/decrease over the last year?
  • How much time/labor is spent managing theft of devices?
• Equipment Maintenance: IoT devices that need to be retrieved require additional time and attention from staff. Predictive maintenance can improve equipment lifespan and reduce disruptions.
  • How many times per year are you doing preventative maintenance on your equipment?
  • How much time/labor is spent in preventative maintenance per year?
  • How often are you doing reactive maintenance when something breaks per year?
  • Typically, when something breaks, how large is the repair cost?

The Connectivity Link

In all, creating a clear picture of an IoT deployment’s total cost is key to securing the right resources and creating proper expectations for an IoT project. Organizations overfocused on minimizing upfront investment can end up moving too slowly to compete or leave themselves without well-tested devices that perform in the field or the capabilities that control costs and protect revenue. Likewise, spending too much of the deployment budget on device or initial labor costs can lead to scalability issues as IoT initiatives get bigger and go international.  Across both infrastructure and operational investments, great connectivity can be the force multiplier that helps assure the success of an IoT deployment.

• Connectivity: Leveraging a redundant network keeps devices connected at all times, critical to maximizing value. While novice buyers often focus on basic price information, expert IoT implementers ask for performance or test data. With the best connectivity platforms, fleet managers can examine device usage patterns, optimize their backend operations and receive continuous, proactive maintenance notifications. 
  • What regions do you need to deploy to?
  • What regions do you want to add in the next 1,3,5 years?
  • Are you entering any new markets? How have you handled connectivity in different regions so far? One carrier or many?
• Staff and Labor 13% of fleet professionals attribute technology to reduced labor costs.
  • How many people and how much of their time will be required to manage the fleet? 

^{1. https://iot-analytics.com/iot-market-size/}

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Mike Georgoff is the Chief Business Officer at Hologram where he is responsible for the product, design and revenue teams. He brings deep experience from high-growth startups, joining Hologram in 2021 from H-E-B, one of the country’s largest retailers, where he served as the Chief Product Officer, building out their digital and e-commerce capabilities to compete head to head with Amazon and Whole Foods. Mike started his career in product at Redbox – transitioning from an analytical role – served as the VP of Product at RetailMeNot, and the Chief Product Officer for Main Street Hub, which sold to GoDaddy in 2018. 

In addition to his leadership role at Hologram, Mike serves as a board member for Workify, a seed-stage startup. Mike graduated summa cum laude from the University of Michigan with a major in political science and minor in economics.