IoT Services and Hidden Costs


IoT is not just about connecting numerous devices across geography. It’s about meeting the changing needs and expectation of customer. It’s about business model which can deliver bottom line growth through new services.

For companies with strategic IoT initiatives, one key thing would be to run the service in an uninterrupted manner. And to run the service successfully they need a clear understanding of the recurring operational cost, potential revenue from new service offerings, potential area to save operational cost and the time to achieve the ROI.

IoT companies have a tendency to focus on the upfront expenditure – design, development of application, hardware sourcing & manufacturing, security measures & implementation costs. These are initial, onetime non-recurring costs and a part of the whole story. They often overlook the operational expenses (OpEx) which is much needed for running the connected service business.

Key elements of OpEx:

1. Network communication: Monthly subscription fee – with limited or unlimited data plan.

Average annual mobile network operator spends for 100K devices:

  • Home automation & security: $2/device/month
  • POS company: $.60/device/month
  • Industrial equipment: $1.25/device/month
  • Transportation & logistics: $0.50/device/month

Suggestions: Partner with experienced IoT carrier, monitor real-time usages, take best plan

2. Administrative labour: Every deployed device need 15 interactions/year for routine check, report generation etc. And each interaction required at least 5 min.

Average annual admin labour spends for 100K devices:

  • Home automation & security: $5.2 M
  • POS company: $6 M
  • Industrial equipment: $2 M
  • Transportation & logistics: $2.8 M

Note: All without IoT platform.

Suggestions: An IoT platform which enables to optimize the administrative labour cost.

3. Technical support: Depending on industry, 10%-30 devices require technical support, troubleshooting. It can take from 30 min to 3-5 hours. Manual support for IoT service is not easy. Engineer first need to determine the cause: hardware, firmware, IoT application or the connectivity

Average annual technical support spends for 100K devices:

  • Home automation & security: $1.45 M
  • POS company: $967 K
  • Industrial equipment: $1.2 M
  • Transportation & logistics: $483 K

Note: All without IoT platform.

Suggestions: Remote diagnoisis. Indentify root cause. Optimal rate plan.

4. Time to market: Inefficie nt low-cost operational process will impact the service time to market.

Average annual revenue lose for 100K devices (with 8 weeks delay):

  • Home automation & security: $1.6 M revenue lost
  • POS company: $16.6 M revenue lost
  • Industrial equipment: $332 K revenue lost
  • Transportation & logistics: $116 K

Note: All without IoT platform.


IoT is not fit-for-all solution and vary widely. With full understanding of total cost of delivering the service, business can make prudent, profitable & sustainable decision.

Reference: Cisco


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