The True Cost of IoT Ownership and the Role of Managed Service Providers

As businesses are increasingly adding IoT solutions to improve operations, refine customer experiences, and discover new revenue streams, the complexities of managing these technologies were becoming more evident. For companies exploring IoT options that best fit their business model, it’s important to consider not just the initial investment but the total cost of ownership (TCO) over time.

A recent study by VDC Research titled Managing IoT Costs with Managed Service Providers offers insights into these challenges. The study surveyed over 150 IoT decision-makers across various industries, including aerospace, healthcare, industrial automation, retail automation, and transportation. These respondents, all using long-range wireless communication technology in their projects, provided a detailed look into the financial and operational realities of managing IoT solutions. It becomes clear why many organizations are turning to managed service providers (MSPs) for support.

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Understanding IoT Costs

Deploying IoT solutions involves various costs—some obvious, others less so. Traditionally, businesses might focus on hardware expenses and cellular service costs, but these represent just a fraction of the total picture. The TCO of IoT includes:

• Development and Deployment Costs: These include the expenses tied to designing IoT solutions, integrating them with existing systems, and ensuring they function reliably. According to the VDC Research study, designing and managing connectivity is particularly challenging, with nearly 48% of surveyed organizations identifying this as a significant hurdle.
• Operational and Maintenance Costs: Maintaining a stable connection is crucial to avoid downtime, which can lead to lost revenue and customer dissatisfaction. Projects without managed connectivity experience, on average, two and a half times more connectivity issues per year compared to those using MSPs (removed redundant phrasing).
• Downtime Costs: Connectivity disruptions carry direct costs, such as repairs and technical interventions, as well as indirect costs, like missed opportunities and damaged reputations. The VDC survey indicates that companies relying solely on in-house management faced 60% higher costs related to connectivity downtime than those utilizing an MSP.

The Cost-Saving Potential of MSPs

Partnering with a managed service provider can significantly reduce these costs. MSPs bring specialized expertise and infrastructure that streamline IoT connectivity and management. Here are some of the main benefits:

1. Reduction in Development Costs: The study found that using an MSP for connectivity management can reduce the costs associated with long-range wireless connectivity by up to 60%.  This reduction not only saves money but also shortens development cycles, enabling faster project completion—essential in fast-paced markets.

2. Lower Operational Costs: One of the most impactful reasons to use an MSP is the reduction in the frequency and severity of connectivity issues. Companies using MSPs reported a 70% reduction in the time spent fixing connectivity problems.  This translates into fewer service calls, less downtime, and ultimately lower operational expenses.

3. Improved Reliability: MSPs often provide access to advanced technologies like dual-SIM routers, which can switch between carriers to maintain consistent connectivity.  This capability is crucial in areas with variable signal reliability, minimizing expensive downtimes. The ability to automatically switch networks ensures that devices remain online.

4. Support and Maintenance: With an MSP, companies gain access to a single point of contact for connectivity issues, easing the process of troubleshooting and reducing the need for expensive on-site repairs. VDC’s research shows that projects not using an MSP were three times more likely to experience delays of three months or more.The initial inclination for many organizations is to manage IoT connectivity internally, hoping to maintain control and save costs. However, the complexities of IoT solutions often lead to unexpected challenges.

VDC’s research highlights that organizations using MSPs are more likely to conduct thorough financial analyses before selecting a solution, leading to more informed decisions that balance costs and benefits. As IoT deployments scale, the benefits of an MSP become even more pronounced. With thousands of devices in the field, the ability to swiftly address connectivity issues and replace faulty hardware through a managed service can translate into millions of dollars saved annually.

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Strategic Partnerships

The shift toward managed IoT solutions reflects a broader trend in how organizations approach digital transformation. As the IoT landscape becomes competitive and complex, businesses must focus on differentiating through innovation rather than grappling with the headaches of connectivity management.

Organizations can reduce costs, improve predictability, and free up internal resources to focus on strategic initiatives by partnering with an MSP. This approach optimizes the TCO of IoT projects and positions companies for long-term success in a rapidly evolving market.  VDC’s study found that projects not using an MSP were twice as likely to have high average monthly connectivity costs.

For those evaluating their next IoT project, the decision to work with a managed service provider should be seen not as an added expense but as a strategic investment in reliability, efficiency, and growth. Managed solutions allow businesses to focus on what they do best, while the MSP handles the complexities of connectivity. In a world where downtime is costly, and customer expectations are high, the right partner can make all the difference.
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