How to Calculate IoT ROI for Businesses + Benefits of Investing in IoT

Both upper management and customers are putting pressure on businesses to improve quality while simultaneously reducing costs. Companies need ongoing innovation to keep their competitive edge, maintain efficiency, and increase profitability.

One of the best tools to stay competitive in today’s market is constant innovation in technology. The Internet of Things is a prime example of this kind of technology in action. Of course, IoT systems are not easy to develop or implement, which makes some people ask, “Is investing in IoT worth it?” You can answer that question by going through several steps.

#1 Define a Framework

Determining your IoT goals and indicators is the first step in calculating your ROI. Exactly what do you want to get out of this IoT project? How well do they fit in with your overall company plan and goals? How will you calculate and monitor their progress? One possible goal for using IoT is to increase productivity, sales, or customer satisfaction. You can include cost, user satisfaction, and uptime in your metrics.

#2 Calculate the Cost of Ownership

Now, you need to calculate the total cost of implementing the IoT project, including the costs related to hardware and software. You can do this in person or via remote IoT pricing. Here are several main factors to consider:

Upfront & Recurring Costs

Given the length and scope of the project, in addition to the equipment and IoT devices involved, the upfront cost of using an IoT solution can differ significantly. 

Most asset monitoring systems need a monthly or annual membership or license fee, however, these costs are often low in the long run.

Training Costs

Some IoT-connected devices are intuitive and need little if any training for new users. However, companies may need to spend more time and money on educating the people who will be in charge of running the system.

Maintenance Costs

Although some IoT systems normally have minimal maintenance costs and do not need too many updates, it is important to put some time aside for maintenance and estimate its cost

#3 Test with Real Users

Testing will help companies specify the devices' features, capabilities, and behavior, all of which are essential to determining ROI. At every step of a project, companies should check their progress against the plan to see if they are still on track with their expected return on their Internet of Things investment.

Companies should run usability, connectivity, safety, efficiency, and compatibility tests to determine the IoT solution's overall viability. You need to know that testing connected devices is an ideal way to precisely match the solution to the demands of end users.

You also need to determine your new solution's selling point by analyzing user comments. Before acting on your IoT business ideas, do interviews with potential end-users to determine the product's value proposition. 

You may learn a lot about the solution's performance and how people will interact with it based on data gathered during testing. In other words, you will have a clearer picture of the benefits the solution offers.

#4 Take A Look at its Benefits

Any Internet of Things (IoT) solution should be built on four pillars: Boosting revenue, saving money & time, improving efficiency, and building trusting relationships with customers. 

Companies must now choose if IoT can help them save money by improving their operations or bring in more money by introducing novel products or services. Data from IoT devices can be useful in many ways, but one of the best-known is finding ways to upgrade current products and services to increase customer happiness or better understand and predict consumer demands.

Besides money, these three other metrics can help with evaluating the benefits of IoT for businesses:

• Downtime
• Time to market
• Customer support response time

Let’s take response time as an example. 

Smart Buttons

Smart buttons allow clients to place orders for goods and services in a flash. With this IoT technology, it's possible to restock inventory and introduce new services, streamlining business operations and increasing ROI via faster responses to customer demands.

Customers may easily and swiftly report their level of satisfaction via smart buttons. You may monitor the outcomes in real-time using a connected, personalized dashboard. So, in a way, you can see the impact of smart buttons on some ROI metrics, such as operating costs and efficiency.

#5 Develop a Timeline

It is essential to take into account the whole duration of the project when estimating the ROI for an IoT system. Keep these two time frames in mind:

• Deployment: Based on the complexity of the system, most IoT systems may be up and running in a matter of weeks. Nonetheless, you should take care to choose a system that can meet your performance criteria.
• Investment Return: This is the amount of time that you need to wait to get a return on your Internet of Things investment. Depending on the technology and the IoT project’s scope, it may be very different.

Be reasonable about these two timeframes, and create a plan that accounts for the inevitable disruptions that happen when moving to the new IoT infrastructure.

#6 Keep Monitoring the IoT Performance

The last stage is to keep an eye on metrics like ROI and performance from your IoT solution. As part of this process, it is important to periodically gather and analyze your IoT data and metrics, and to adapt your IoT strategy and activities appropriately. 

In order to see and understand your IoT performance and spot any gaps, faults, or possibilities for growth, you may utilize reports, graphs, or analytics tools. In order to improve the design and function of the IoT system, it is possible to test and confirm your theories and assumptions via feedback cycles, tests, and simulations.

You can't just measure your IoT ROI once; rather, it's an ongoing process that involves clear objectives, KPIs, methods, and instruments.

Benefits of IoT Investment

Now, after evaluating the ROI, you may still wonder if it’s worth it to invest in IoT. Here are the main reasons that companies decide to put their resources into an IoT solution.

To Remain Competitive in the Market

The Internet of Things is still a new field, but it is expanding at a fast rate, and there are no signs that this trend will soon stop. In fact, Statista predicts that the IoT market will expand to $2,227 billion by 2028, which is just staggering. 

This is only one of the many reasons why the IoT is considered the engine of the coming "fourth industrial revolution." It brings a lot of changes in the industry, including a huge productivity boost and a complete remake of old business models.

Get Real-time Data

Let’s say you have integrated the Industrial Internet of Things (IIoT) into your operations. In order to take sophisticated preventive actions, it is necessary to have access to real-time data on every design or operational procedure. By keeping an eye on the status of vital equipment, problems can be fixed before they ever arise, and production can run more smoothly and efficiently. This shows you how IIoT can make your smart factory smarter.

In addition, all involved groups can be aware of the project's and the asset's current status by monitoring vital data points via a system of sensors installed at strategic spots on the assets. This will let them know whether any adjustments are necessary, and if so, when they need to make those changes.

Help Protect the Environment

It's imperative that today's business owners take steps to reduce their organizations' impact on the environment. In this regard, the Internet of Things may undoubtedly be of use.

When discussing the Internet of Things (IoT) and its impact on the environment, we can use agriculture as a good example.

Infinite opportunities exist for using IoT technologies in this field. Farmers, for instance, can use smart sensors to monitor factors like lighting, heat, soil moisture, and pressure and gain real-time data on their operation's greenhouse impact.

To drastically cut down on waste, they can leverage IoT to fine-tune lighting and irrigation settings automatically. By remotely controlling irrigation and lighting with connected sensors, these technologies significantly reduce water use.

Minimize Costs

Using IoT and IIoT devices, you can monitor equipment in real time to track their health and performance while predicting possible downtimes and identifying small issues before they turn into giant, expensive disasters.

For example, imagine an IoT app that monitors liquid levels, temperatures, and any unexpected or rapid changes in order to send alerts to your smartphone or other devices. Your company will run smoothly if employees are able to remotely track their equipment and know they will be notified if there is a problem.

Boost Customer Satisfaction

The Internet of Things is more than just sensors and digital gadgets communicating with each other. These devices are real-time data collection sources that work like gold mines for boosting customer satisfaction. 

A company can improve the quality of service by keeping track of and analyzing customer behavior, habits, and similar decision-making trends in order to learn more about their customers. The only other important thing is being able to easily see all the data. 

Protect their Employees

The IoT's ability to collect and send data in real-time helps the private manufacturing sector greatly reduce accidents at work. Smart devices can tell when something is about to break down and let you know about it in time.

Here are some examples

• Computer-vision cams are used to find and warn workers of potential hazards in the workplace.
• smart glasses, belts, and gloves that you can wear to help lower the risk of harm and make things safer. For example, there are smart safety helmets with accelerometers and GPS devices that can track where workers are and pick up on quick moves that could mean they slipped or fell.
• devices that can pick up on sound and use it to let service staff know when a machine isn't working right

IoT makes things safer in many places besides the workplace, like the things we use every day at home. Installing cams, motion sensors, and other Internet of Things (IoT) devices could be very helpful in keeping us safe from things like machine breakdowns, fires, and thefts.

FAQ

How do you calculate ROI in IoT?

Different industries, goals, and data availability affect the ROI of IoT innovations. One of the simplest ROI models is to just divide the net benefits by the total expenses and multiply the result by 100.

Can ROI measure success?

ROI is a way to figure out how much money you make from an investment compared to how much it costs. It's a part of data and is used to help make plans for future IoT business ideas. This lets you see which strategies are working and which ones could use some work.

Is it worth it to invest in IoT?

Many companies around the world have seen their investments in IoT pay off. The Internet of Things (IoT) has shown its worth many times over, from making supply chains work better to making cities smarter.

If I want to implement an IoT project, how long will it take? And how much does it cost?

It all depends on the scope, budget, and the complexity of your IoT project. Of course, you can share the details with an IoT development company like LANARS and let us come back with accurate remote IoT pricing.