IoT projects that go vastly over budget or are too expensive to maintain and manage are liable to fail. To get your project off the ground, and provide the best return on investment (ROI), you must calculate total cost of ownership (TCO) as accurately as possible. Read on for our guide.
Top 3 takeaways on calculating IoT total cost of ownership
- IoT TCO is a complete measure of how much an IoT solution costs over its lifetime
- TCO includes upfront spend, implementation and ongoing costs
- To calculate IoT TCO, you can use Wireless Logic's 12-point TCO framework. It covers the major cost components including hardware, software and platform, connectivity, network infrastructure, data management, scalability and security.
Table of contents
- How much do IoT projects cost?
- How to calculate IoT costs
- IoT TCO calculation guide
- How to avoid IoT overspend
- How security impacts IoT TCO
- High non-compliance costs affect IoT TCO
- Resilience: IoT mustn't break or break the bank
- Final thoughts
- Frequently asked questions
What is IoT total cost of ownership?
IoT TCO is a complete measure of how much an IoT solution costs over its lifetime. It covers upfront and ongoing costs.
Many companies don’t calculate TCO accurately by not including all costs or underestimating them. They lack a systematic way to evaluate and control known costs and fail to appreciate that unknown costs can rise up and change the picture entirely.
Many IoT projects don’t make it beyond proof-of-concept, go over budget or take longer to implement than expected. You must manage TCO well for your IoT to be successful long-term. If you don’t, costs can spiral and ROI can suffer.
How much do IoT projects cost?
How much your IoT project will cost will vary enormously according to many factors, such as the number of connected devices you will have, the geographical spread of your deployment, the complexity of the application and many more factors.
There are estimates of average IoT costs out there, for example one that puts the cost of developing an IoT application between $30,000 and $500,000+, but they may not include all cost elements.
Recent data on how much IoT projects overspend by is trickier to come by. One report cites research findings that large IoT projects often run around 45% over budget and deliver 56% less value than anticipated.
When an IoT project overspends, the ROI can become untenable. When you consider 60% of projects don’t make it beyond proof-of-concept, you cannot afford to contribute to your project’s risk by miscalculating its lifetime costs.
How to calculate IoT costs
To calculate your IoT project budget, the most important thing you must remember is to factor everything into your estimate.
Your IoT costs must include both an upfront spend and ongoing costs for a complete TCO. That’s all design, development, implementation and ongoing costs.
There are 12 major sources of IoT costs and Wireless Logic’s 12-point TCO framework outlines them all in detail. Use it as a TCO template to help you forecast the cost of your IoT project.
IoT TCO calculation guide
Don’t forget that costs can spiral if you don’t take a structured approach to calculating IoT TCO. With that in mind, here is a four-point TCO calculation guide:
- Know your project’s objectives
The better you understand them, the less likely you are to be surprised by costs you hadn’t factored in - Create your budget outline
Use Wireless Logic’s 12-point TCO framework to put this together. It covers the major cost components including hardware, software and platforms, connectivity, network infrastructure, data management, scalability and security - Do a breakdown of each cost
Go into the detail of each of the 12 cost factors. You must understand the complexity and importance of each one and include all their relevant elements. For example:
- will your device be in remote locations? If they are, they will incur higher logistics and resource expenses
- do you know how much your data storage costs will increase over time? As your solution scales, you're likely to need more storage
- do you need to share data, and do you know what costs will be involved? - Monitor spend
Make informed decisions at the right time to keep your project on track.
TCO calculator
Calculate the cost of your IoT project with Wireless Logic’s 12-point TCO framework.
Get it for free in the white paper How to assess and reduce TCO in IoT
How to avoid IoT overspend
If you don’t recognise and calculate all the costs associated with your IoT project, the budget could soon spiral out of control.
That can happen at any time, not just before you launch your solution; it could be soon after devices have been installed in the field, or years down the line when unexpected costs start to negatively affect TCO.
Unexpected costs, such as those caused by outages, security breaches or penalties resulting from non-compliance with regulation, can damage TCO catastrophically.
Therefore, to minimise TCO, you must build security, compliance with IoT regulations and resilience into your IoT solution.
How security impacts IoT TCO
IoT devices are under constant threat from cyberattacks. In fact, they were the most frequently attacked in 2024, according to Beaming’s cyberthreat report into UK businesses.
When cyberattacks happen, they can cause downtime and that has a cost. Not just to get back up and running and fix the security leak, but also from revenue lost whilst the IoT was offline. Added to that, there could be fines if an investigation finds regulatory non-compliance. Worst still, is the cost of reputation loss, which can be the most expensive of all.
So acute is the security risk to TCO that, in 2024, Forrester found over a third (34%) of enterprises that experienced a breach targeting IoT devices were more likely to report costs between $5-and-$10 million.
To mitigate security’s risk to TCO you must build security measures, rigorous testing and predictive maintenance into your designs and plans. Find out how in our paper on IoT resilience and our advice on IoT security for resilient connected devices.
High non-compliance costs affect IoT TCO
Regulators require manufacturers and developers to build continuous availability, robust cyber-defences, rapid recovery and strong data protection into IoT designs from the start. This is not least because the IoT underpins critical infrastructure and solutions such as patient monitoring and energy networks.
IoT legislation is designed to protect businesses and consumers from security threats, loss of data privacy and unsafe devices. Compliance also extends to data sovereignty and permanent roaming.
If a business falls foul of mandatory legislation, it can be expensive to put the failing right. If a product has to be recalled, for example, it could cost an average £2.5-5 million but could exceed an astonishing £10 million, according to Insurance Edge.
Then of course there are the fines. A severe failing under the EU Cyber Resilience Act (CRA), for example, could result in a fine up to €15 million or 2.5% of total worldwide annual turnover, whichever is higher.
Clearly, non-compliance can devastate IoT TCO so it is imperative to understand and comply with IoT regulations.
Resilience: IoT mustn’t break or break the bank
TCO and resilience are two sides of the same coin for the IoT. Resilient IoT is less likely to incur costs because of a security incident, device recall or outage.
To improve resilience, and help minimise TCO, build security in from the start, implement firmware-over-the-air updates and monitor to detect anomalies; test rigorously, deploy software fixes and security patches diligently and interrogate analytics to identify emerging issues.
Redundant systems and failover mechanisms provide continuity whilst predictive maintenance reduces the risk of unplanned downtime and automated incident response accelerates recovery.
For full guidance, get the free paper How to achieve high-availability and cyber-resilience in IoT.
Minimise IoT TCO with Wireless Logic
Careful TCO calculation and management is essential for successful IoT projects. Without a structured approach to working out TCO, it is likely costs will be missed. Use Wireless Logic’s 12-point TCO framework to calculate your TCO or contact us to discuss.
Get more information:
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White paper: How to assess and reduce TCO in IoT
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White paper: How to achieve high-availability and cyber-resilience in IoT
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Solutions: IoT security for resilient connected devices
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Article: Beat downtime: IoT regulations and resilience.