Zenseio Blog

Key considerations for IoT sensor devices: 6 – Cost effectiveness
Important Finacial considerations

Executive Summary:

  • Cost-effectiveness is very important for sensor devices
  • In IoT, cost effectiveness is a system-level, not a component-level, optimization
  • Full-custom versus semi-custom versus off-the-shelf hardware is an complex application-specific tradeoff to be made

IoT systems dramatically benefit from localized data collection. The more granular the data localization, the better business decisions can be. Therefore, it is imperative for the IoT sensor devices to be cost effective to enable widespread deployments and to be able to reduce the overall business costs. Due to this desire for larger unit volume deployments, connected sensor devices need to be as as low cost as possible – cost competitive to other commodity devices with similar hardware features and capabilities.

Nevertheless, unlike many other simpler types of products, IoT is a complex system solution. To truly achieve cost effectiveness, the whole system cost has to be optimized – focusing on cost optimization of a single component may not result in the lowest overall system cost over the product’s intended lifespan.

For example, for some applications, field maintenance operational expenses (opex) may dwarf the capital expenditures (capex) for the cost of sensor devices, especially if those “things” are installed in very remote locations. Ultra low power solutions that reduce the time between battery replacements or that are self-powered by harvesting energy from their environment are proven methods of drastically reducing opex at minor increase to capex.

In some IoT applications, better quality and variety of sensors in a sensor device may allow to reduce the number of deployed sensor devices, thanks to their increased range and sensor fusion capabilities. Alternately, a device that can better compress or reduce the transmitted data, may have a huge impact on the reduction of wireless data usage and connectivity costs (for instance for satellite and cellular) or to enable switch to more cost effective methods of wireless communication (for example switching from cellular to LPWAN).

Another important tradeoff is how the sensor devices are designed and produced. This ranges from full-custom design through semi-custom design to using off-the-shelf components. The chosen approach should depend mainly on the nature of the application, specifically how many identical sensor devices are needed and if there are any special requirements to meet, for example a physical form factor, a unique type of sensor used, or operating conditions vastly different from those found in typical deployment environments.

Developing a fully custom-designed sensor device for a specific IoT application may not be a cost effective solution if the unit volume is low or even mid-size. The NRE (Non-Recurring Engineering) costs are typically very high for such custom high-tech products, and have long development and compliance certification lead times, especially those containing RF circuits. Any potential cost savings from optimizing the component BOM (Bill Of Materials) are dwarfed by the incurred NRE costs. Oftentimes, a more cost effective way is to use a multipurpose hardware platform which is amortized among many users and only to pay for any required minor customizations required to make such solution suitable for a given application.

Although the product selection process is a complex tradeoff between cost and benefits, here are some general rules of thumb:

  • For large deployments, more than 20,000 of identical units, or for specific form-factor implementation, full custom design may likely be the right choice
  • For fast time-to-market or small to medium unit deployments, it should be more beneficial to use pre-qualified off-the-shelf components if they are available. Appropriately configured modular hardware platform with off-the-shelf modules, slashes time-to-market without overpaying for the features not needed.
  • For unique IoT application requirements where off-the-shelf components don’t exist, consider a full-custom solution, but not before investigating a semi-custom solution based on multipurpose, modular hardware platform – where only a specialized module needs to be developed with other subcomponents being off-the-shelf. Many times, such chassis-based, semi-custom solution will be a more cost effective than full-custom solution as the bulk of hardware platform cost is amortized among many other users.

In any case, good understanding of the requirements for the overall business IoT application and the underlying technologies – not just sole focus on selecting the lowest cost components – is the primary factor that will determine financial success or failure in the IoT-powered business.

Bottom line: versatile, high quality, and capable IoT sensor devices are the most cost effective components for majority of IoT applications.