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The Cost of Prototyping an IoT Solution

November 30, 2018 Written by Andrei Klubnikin, Senior Content Manager
The path to successful IoT product design and deployment lies through ideation; besides creating compelling business cases, the process involves electronics prototyping and software development. With the greater availability of open-source software libraries, development kits and off-the-shelf boards, IoT prototyping surely won’t break the bank, and that’s why the majority of Internet of Things startups sail through this phase on a limited budget — especially if they have an experienced in-house team and R&D facilities or entrust the task to a reliable IoT vendor. However, one should not forget that IoT solutions often incorporate new technologies or unusual combinations of APIs and custom hardware components and are therefore considered to be innovative. This basically means that your IoT project will be preceded by the so-called Discovery Phase intended to help you test the feasibility of your idea and choose the right technology stack.
In the end, the cost of prototyping a connected product is directly proportional to the complexity of your solution and the duration of the Discovery Phase.
In this article, we’ll try to assess the cost of building an IoT prototype — given the fact that the Internet of Things is a multi-level system where smart devices communicate with each other and with the server and are managed via mobile and web apps.

Top 3 Factors Affecting IoT Prototyping Costs

Proof of Concept & Product Roadmapping

In IoT development, Proof of Concept (PoC) is the evidence that there are no technology limitations to turning a novel concept into a fully-fledged product which, among other things, has a strong commercial appeal. This evidence — or lack thereof — is one of the key deliverables produced during the Discovery Phase. The major difference between a PoC and prototype is that the former is designed to merely test an assumption and identify an IoT solution features prior to the development stage, while a prototype can be considered the first attempt to create a working model of the product.
It should be noted that 70% of IoT projects stall at the Proof of Concept stage. The relatively high failure rate can be largely attributed to insufficient research into the Internet of Things’ impact on business, inadequate technical expertise and project management issues.
The path to successful IoT product design and deployment lies through ideation; besides creating compelling business cases, the process involves electronics prototyping and software development. Product roadmapping is another reason to invest in research. No IoT startup or company looking to streamline business operations can develop a sufficient IoT strategy based solely on assumptions: it is only when you connect real hardware to real software that the system’s functional and non-functional requirements start shaping up.
One of our customers, for instance, wanted to create a smart security system based on motion sensors which would allow homeowners to track movement both inside a building and in the surrounding areas. During the Proof of Concept stage our IoT development team discovered that the ratio between the measured data properties prevented the software from taking the necessary measures — for instance, notifying the user of suspicious activity — automatically, and the sensors were replaced with Wi-Fi-enabled video cameras. Another company addressed R-Style Lab to create a machine vision system that would analyze X-ray images of patients with prosthetic intervertebral discs and identify the prostheses’ unique numbers. To achieve the desired 90% accuracy, 4K X-ray images were needed, and they were not produced by radiography equipment at the time, so the project was postponed.
While the above-mentioned examples relate to PoC, the Discovery Stage will also help your company develop a solid product development, launch and implementation strategy.
Businesses that invest in the Internet of Things pursue different goals including improved decision making and lower operational costs. Businesses that invest in the Internet of Things pursue different goals including improved decision making and lower operational costs. However, the implementation of a connected solution might not always yield the desired results — due to high IoT infrastructure costs, outdated enterprise IT systems and the absence of a business case. You may equip your warehouse personnel with wearables facilitating the picking process and realize that — despite increased productivity — sustainable cost savings can only be achieved through staff reduction.
Thus, the Discovery Phase of an IoT development project which includes PoC, requirements elicitation and product planning, is meant to verify a concept, align technology and business goals and help companies avoid costly hardware development mistakes. It is always carried out by a senior Business Analyst, software architect and skilled Project Manager and, depending on a project’s complexity, lasts for 2-6 weeks, which translates into $8-15 thousand (based on the median Eastern European developer hourly rates).
Have any questions? Ask our team!

Hardware Prototyping

Prototyping an IoT solution with off-the-shelf or custom hardware components will help you accomplish several feats:
  • You can test the feasibility of a leading-edge product and enhance its feature set.
  • You get assets for a fundraising campaign.
  • You can conduct early usability tests with real users.
The expenses involved in creating a fully functioning IoT prototype suitable for beta-testing include the cost of designing and manufacturing a custom Printed Circuit Board (PCB), assembly, electronic components and enclosure, and largely depend on production volumes.
Provided you clarify hardware and software requirements during the business analysis phase, the PCB design and modelling part will take three to seven weeks. You then need to address an electronic design company, manufacture custom hardware and test the prototypes. According to Pavel Shylenok, CTO at R-Style Lab, custom board production costs start from $1 thousand per item; it might take you three to five iterations to reverse the PCB engineering and achieve the desired performance.
Meanwhile, the entire prototype development phase (PCB design and hardware production costs included) could be estimated at $25-40 thousand.
Provided you clarify hardware and software requirements during the business analysis phase, the PCB design and modelling part will take three to seven weeks. At the early stages of IoT product development, you can also use off-the-shelf microcontrollers, sensors and enclosure; the benefits of such an approach include:
  • Flexibility. Modern single-board microcontrollers and microcomputers offer a plenty of baked-in features including USB support, SIM card slots, multiple digital input and output pins, varied connectivity options (BLE, Wi-Fi, cellular) and decent processing capabilities and are compatible with different open-source hardware components and development kits.
  • Efficiency. You can buy a powerful microcontroller like the ATmega328P-based Arduino Uno for less than $30, have it shipped in 24 hours, develop a prototype within a fairly short time frame and focus on embedded software and mobile application development while simultaneously negotiating the deal with a hardware manufacturer.
The choice of ready-made IoT prototyping tools is based on initial hardware requirements — for instance, connectivity, power consumption, RAM and flash memory, system architecture and availability of SDKs — which are defined during the Discovery Phase. It should be kept in mind that a hardware prototype does not always have the same functionality as the end product.

Software Development

The Internet of Things is a multi-level system, but it is the software tier where the real magic happens.
The Internet of Things is a multi-level system, but it is the software tier where the real magic happens. In order to create a seamless connected experience and elimite complex device configuration, you need to interface the solution’s components — i.e., physical hardware with low-level software running on it, as well as mobile and web applications, — the right way, and create reliable data processing, visualization and management tools to help end users unlock the power of the Internet of Things.
According to Pavel, firmware development will cost you anything between $10 thousand and $20 thousand. AWS IoT is a great set of tools to connect ready-made hardware components to existing smart solutions, start capturing and analyzing sensor data and create a scalable IoT infrastructure. As the business logic of an application still has to be written from the ground up, however, the web part — including front-end, back-office system and custom API development — can be estimated at $20-35 thousand. Finally, there are custom mobile apps which support effortless device management and set-up. Among the factors that affect IoT application development costs we can list the number of supported platforms, integration with 3rd-party services and applications, data ingestion sources and security standards. The development of MVP versions of custom Android and iOS apps will cost you at least $20 thousand.

IoT Prototyping Costs: Final Estimates

In the end, we arrived at an impressive figure — $80-130 thousand!
Mind that it is only a ballpark estimate since IoT projects vary in complexity: it’s one thing to build a custom medication tracker with a temperature sensor, it’s another thing to design a Smart Home solution with an AI-based video analysis system. Therefore it is only possible to calculate IoT prototyping costs on a case-by-case basis.
Either way, the success of your project almost entirely depends on research, since inadequate requirements elicitation, technology stack choice and product roadmapping always lead to costly mistakes which, unlike with custom software development, cannot be fixed with a few lines of code.

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