
If you want to create an intelligent consumer device or improve your corporate IT infrastructure with IoT capabilities, it's only natural to wonder how much IoT solutions cost. In this article, you'll find a detailed overview of the key factors influencing the price of IoT, as well as rough estimates for several custom IoT systems from JustSoftLab’s portfolio. Let’s dive right in and start with the basics.
How much does the Internet of Things cost?
How much do Internet of Things solutions cost?
Go ahead, type this phrase into Google search! You’ll see dozens of articles with vague cost estimates for mobile apps that work in tandem with connected devices — and not a word about the devices themselves!
Meanwhile, the term “Internet of Things” 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 environments and other settings with high electromagnetic interference risk. IoT devices then transmit information to the cloud for analysis and visualize insights through a user interface — typically a cloud dashboard or mobile app (although voice interfaces have also gained popularity lately). In edge IoT deployments, devices have enough computing power to process sensor data locally and organize other IoT nodes.
The cost of the Internet of Things
The good old ITU-T Y.4000/Y.2060 recommendation 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 any company considering entering the IoT market. As you can see from the diagram above, IoT systems operate on four different levels:
Devices. IoT devices, or “things,” can vary in complexity from printed tags attached to inventory items to AI-based security cameras that store and process data locally. However, different IoT devices have one thing in common — the ability to collect environmental data using sensors and connect to the Internet. To perform these tasks, IoT devices must be equipped with firmware, middleware, or proper embedded systems that connect hardware components of electronic devices, link gadgets with each other and a central hub, and facilitate data collection.
Network. The network level includes wireless protocols that allow devices to interact with each other, transmit sensor data to the cloud, and encrypt all communications.
Service and application support. Here, we’re talking about the internal infrastructures that manage the business logic of IoT products. Consisting of cloud or on-premise servers and services, such infrastructures aggregate, store, and process sensor readings.
Applications. The IoT application is a general term describing all kinds of applications that allow end users to interpret sensor data, interact with connected devices, and configure device settings.
So, when we talk about the cost of the Internet of Things, it’s essential to understand how much each of these functional components will cost you.
Here’s what a realistic IoT cost estimate might look like Breaking down the cost of IoT devices
If you want to create a custom IoT solution, there are two paths: develop a device from scratch or upgrade non-electronic/analog objects with sensors.
How much does it cost to create custom IoT hardware? The cost of creating custom devices depends on the type, functionality, and complexity of your IoT solution and can account for 70–80% of the total IoT project cost.
The custom hardware/firmware development process involves several stages:
Analysis. At this stage, the hardware team collaborates with software engineers, business analysts, and company stakeholders to identify technical requirements for the custom device, refine the concept, and optimize the development budget.
Design. Based on the requirements defined during the analysis phase, engineers and industrial designers create PCB layout schematics and visualize the gadget's casing in 3D CAD. Hardware design must also meet all software requirements gathered during the previous stage.
Prototyping. The manufacturer creates up to ten PCBs, debugs them, and makes the necessary adjustments to the requirements document. Meanwhile, the firmware team implements basic features and modules and tests them on DevKits or the prototype itself.
Testing. Successful prototypes are turned into pre-production models using different materials for the device's casing. Various types of tests are conducted, including temperature analysis, signal integrity, and power integrity tests, as well as user testing. Critical bugs may be discovered at this stage, and the prototyping process begins again. Typically, a new IoT device goes through three to five iterations until the desired performance is achieved.
Mass production. Technical documentation for the production of PCBs, electronic components, and casings is handed over to the factory. The manufacturer produces the required number of devices, installs the firmware, and conducts testing to ensure the gadgets function as intended.
Overall, the stages of developing connected devices listed above can take anywhere from six months to two years.
How much will it cost your company to create IoT hardware, considering you need to analyze technical requirements, prototype and test your idea, and produce devices in large volumes?
The honest answer: “It depends” :)
A self-learning smart home system with facial recognition capabilities could cost up to $5 million (including the cost of hardware and software).
The cost of creating a custom ECG tracker that analyzes the body’s electrical signals and measures heart function 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 primary factors affecting the cost of IoT hardware. While IoT regulations vary across countries, they typically cover the following categories:
Environmental and electrical safety. These regulations include the Restriction of Hazardous Substances (ROHS) and Energy Star compliance, as well as standard tests for issues such as overheating and electric shock, which are part of International Electrotechnical Commission (IEC) and Underwriters Laboratories (UL) certification.
Communication protocols. Before labeling your gadget as Bluetooth-compatible, for example, you’ll need to test it through the Bluetooth SIG Qualification program. The same goes for Zigbee, Z-Wave, LoRaWAN, and other popular communication technologies.
Electromagnetic and radiofrequency interference. Before your product hits store shelves, you must ensure its performance won’t be affected by other connected devices within Wi-Fi/BLE/cellular network ranges, and the device itself meets electromagnetic radiation exposure standards.
Product and industry standards. For example, a company producing wearable devices must conduct chemical tests to ensure their gadget casings don’t contain skin allergens. In addition, there is mandatory FDA (Food and Drug Administration) and NIST (National Institute of Standards and Technology) certification for IoT medical devices, which not only affects time to market but also entails significant costs.
According to Entrepreneur, the cost of certifying a simple electronic gadget (including devices using wireless communication) starts at $10,000.
Estimating the cost of non-electronic IoT solutions The concept of the Internet of Things is based on continuous data collection and exchange — and you don’t always need an electronic device with custom-written embedded software to collect sensor data and send it to the cloud or a local server.
Here are some examples of non-electronic and pseudo-connected IoT devices that cost little or nothing:
A typical smart farming solution consists of soil temperature and moisture sensors connected to a microcontroller or microcomputer. Meanwhile, sensor prices dropped by over 200% between 2004 and 2018, hitting a historic low of $0.4.
Traditional retailers track inventory levels and foot traffic using RFID tags and beacons, which cost around $20 on Amazon.
It is now quite possible to create detergent containers that harvest energy from the environment to interact with smartphones and Wi-Fi devices, alerting homeowners when they are 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 wrong.
Estimating IoT infrastructure costs
Network. IoT connectivity is typically provided via short-range wireless communication (Wi-Fi, Bluetooth, NFC), Low Power Wide Area Network (LPWAN), and cellular solutions. If your IoT product is a system of connected gadgets interacting via a cellular network, your connectivity costs could hover around $0.04 per megabyte. Some telecommunications companies offer enterprise narrowband IoT plans, charging $6 per device per year.
Embedded software. Custom IoT devices — even dumb sensors that simply collect environmental data — use embedded software with pre-programmed logic. This software, ranging from bare-metal firmware to customizable Android, can add up to $20,000 to your IoT cost estimate. If you plan to include a third-party gadget in your IoT ecosystem, you may also need middleware — i.e., drivers, APIs, and SDKs linking devices and applications that would otherwise be unable to interact. Custom firmware for an IoT solution can cost between $10,000 and $30,000.
Data storage and analytics solutions. Here, we’re talking about data lakes and warehouses where sensor data is stored and organized, as well as software that distills gigabytes of raw data into meaningful insights. IoT proponents often use smart device connectivity and data analytics via PaaS solutions developed by Google, Amazon, or Microsoft. While IoT cloud platform pricing can be quite reasonable (for example, Azure IoT Hub pricing starts at $10 per month per IoT hub unit with a daily transmission of 400,000 messages), you still need to develop the business logic for your IoT solution from scratch. Recently, a UK national park approached JustSoftLab Inc. to create a robust digital twin solution for efficient management of land, water, and other natural capital assets. The solution includes a network of sensors that collect environmental data and send it to the cloud for further analysis. From a technology standpoint, the system will include a data lake powered by AWS services (S3, DynamoDB, Redshift, Glue, etc.), streaming services to facilitate sensor data collection without an intermediary hub, and monitoring dashboards for data visualization. A realistic IoT cost estimate for this project would start at $250,000.
Hidden IoT infrastructure costs
Many IoT solutions require complex support systems, also known as infrastructure.
For example, your company specializes in predictive maintenance and sells transformers equipped with smart sensors. You need a mobile app to generate alerts if the sensors register abnormal behavior. Your IoT solution might also include a web app for managing field technicians and ordering parts that need replacement. To automate these processes, you need to contract with hardware manufacturers, network service providers, and Maintenance, Repair, and Operations (MRO) companies — and integrate your custom software with their business applications, which inevitably involves additional IoT development costs.
Another example is IoT-based remote patient monitoring systems that (in addition to hardware, apps, and connectivity!) require a dedicated customer support team ready to assist users whose condition worsens.
Estimating IoT application costs
How much does it cost to develop an IoT application?
As with hardware, it all depends on the size and complexity of your enterprise. These examples of IoT software projects from JustSoftLab’s portfolio will give you an idea of what to expect.
IoT software projects and their cost estimates
We collaborated with a digital health startup that wanted to bring a custom heart rate monitoring device to market. Our medical IoT developers created an iOS app that visualizes sensor data and alerts hospital staff in emergency cases. To visualize ECG sensor data in real time, we used OpenGL APIs and partially offloaded the load to the mobile GPU. A similar IoT app costs $10,000–$15,000.
JustSoftLab created a smart indoor navigation system for an exhibition center. The solution, powered by BLE beacons that track users' location via a mobile app, helps guests navigate the venue and receive real-time information about exhibitors. Such an IoT system would cost your company $40,000–$60,000.
To help healthcare organizations reduce healthcare-associated infections (HAIs), a US digital health company created an IoT platform that improves hand hygiene among medical staff. The company approached JustSoftLab to create a complete software ecosystem for its solution, including a cloud backend, desktop app, and Android app. The smart hand hygiene compliance platform tracks handwashing events via BLE-powered wearables, collects and processes sensor data in the cloud, and reminds hospital staff to regularly wash their hands via the Android app. Meanwhile, hospital administrators can monitor hand hygiene compliance via the desktop app and generate reports for specified time periods. Such an IoT system costs around $90,000.
How to reduce IoT development costs and avoid failures
If you add up the cost of IoT components listed in the previous sections, you’ll understand that your IoT solution will likely cost you $30,000–$50,000. That’s the price of a minimally viable product (MVP) IoT system. Considering that 75% of IoT projects never materialize into market-ready products, it’s a significant investment.
According to the Microsoft IoT Signals study, common reasons for IoT project failures include technological barriers, insufficient budgets, and a lack of clearly defined use cases.
IoT cost diagram
Below are some tips to help you successfully develop IoT solutions and avoid costly mistakes in the process.
Start your project with a discovery phase to create a business case for your IoT solution and ensure there are no technical limitations. While your provider will inevitably charge you for the hours spent in the discovery phase, $10,000–$12,000 is nothing compared to the losses you’ll incur if you abandon the entire project halfway through.
Use off-the-shelf prototyping tools, such as System-on-Chips (SoC), microcontrollers, and microcomputers, to create a proof-of-concept version of your device. You can buy a powerful microcontroller, such as the Arduino Uno based on ATmega328P, for less than $30, receive it within 24 hours, develop a prototype in a fairly short time, and focus on developing the embedded software and mobile/web applications, while negotiating a deal with a hardware manufacturer.
Use an iterative approach to IoT development to avoid feature creep and flexibly scale your system along with your business. The problem with IoT products (especially in the consumer electronics segment) is that companies overload their gadgets with features to appeal to a wider audience. This usually prolongs the development and testing cycle, pushing release dates indefinitely and draining budgets. To avoid this scenario, it’s recommended to launch an MVP as soon as possible, test the IoT solution with real users on real tasks, and gradually expand its feature set to support new use cases.
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