Overlooking IoT TCO risks millions in hidden costs

Internet of things (IoT) devices and services are growing in affordability as they become more widespread and deployed for applications. Yet while managing cost is a priority in these budget-strapped days, a narrow focus on cheap connectivity is undermining the business case for many IoT projects, leading to hidden costs and significant performance gaps, according to analysis by Eseye.

The IoT connectivity solutions provider’s Beyond the price tag: the true cost of IoT connectivity study of senior IoT decision-makers noted that IoT connectivity total cost of ownership (TCO) encompasses all costs associated with designing, deploying and maintaining connectivity throughout a device's lifecycle to understand the true value of the investment.

Among the key findings in the study was a blunt warning that prioritising low upfront costs is often a false economy. Just over two-thirds (68%) of the senior IoT decision-makers agreed that cheap IoT connectivity providers weren’t a good long-term investment, and the report urged a look beyond the initial sticker price to calculate the true TCO.

Moreover, the study stressed that the impact of applying a TCO framework was significant. In a worked example detailed in the report, Eseye partnered with a global advertising brand to assess its connectivity strategy. The five-year TCO assessment identified a net saving of £8.8m. These savings were achieved across multiple dimensions, including the elimination of redundant hardware, reduced data fees, fewer outages and the avoidance of supplier lock-in.

“Too many promising IoT projects are undermined by a short-sighted focus on upfront costs, leaving them vulnerable to connectivity failures, spiralling operational fees and an inability to scale,” said Eseye CMO David Langton. “Eseye found that 99.6% of IoT deployments fail to meet required connectivity levels. Enterprises are often tempted by the cheapest per-unit connectivity offer, but this rarely delivers the best long-term value.”

In a call to action, Eseye identified five critical steps businesses must take when assessing an IoT initiative: assess the full TCO, not just the initial price; link connectivity directly to revenue and service levels; design for the entire device lifecycle; control operational and data roaming costs; and mitigate future network risk.

This means that businesses need to look beyond the initial SIM or connectivity quote and that they must evaluate all expenses over the device’s lifecycle, including potential service downtime, maintenance and supplier management. For business models such as EV charging points or vending machines, a connectivity outage directly results in lost revenue and customer dissatisfaction. For critical applications such as remote health monitors, 100% uptime is non-negotiable.

Eseye said considering connectivity needs during the design phase is key to maximising TCO. This includes optimising battery life – which can be extended by as much as a third with the right technology – and designing a single global SKU to save more than $1m in logistics, engineering and compliance costs.

The study also observed that when deploying devices globally, unexpected data roaming charges can result in huge bills. It added that using solutions such as eSIM localisation allows devices to remotely switch to the most cost-effective local network, which can reduce data costs by 60-80%.

Furthermore, as the technology landscape is constantly changing, as evidenced by the recent 3G network shutdowns in the UK by operators like Vodafone and EE, the study highlighted the fact that devices not designed for 4G and beyond, like some early Nissan Leaf electric vehicles, have faced manual upgrades or withdrawal from service.