Internet of Things: How Much Does it Cost to Build IoT Solution?

IoT is trending. Companies invest in new tech to streamline business processes and cut expenses. Consumers buy wearables and smart home appliances to save time and improve the quality of their lives. If you want to become an IoT Solution millionaire, you’d better take action now. There’s only one question you need to answer: how much do the Internet of Things solutions cost to make – including hardware, software and research?

Proof of Concept: validate your smart idea

What would you do if you wanted to develop a mobile app? Perhaps you’d study the initial demand for it, go talk to your target audience and build a Minimum Viable Product to see customer response and decide on the app’s functionality.

It’s exactly the same with connected gadgets.

Here’s what you should do:

  • Define product concept. You study similar solutions available on the market, compare their functions and decide what features could help your product stand out from the competition. Then you compose product requirements specification and choose a suitable business model;
  • Create PoC. Proof of Concept (PoC) is the evidence that a product can perform certain functions, solve a real-life problem and therefore be a commercial success. At this stage companies design a prototype device (or choose an off-the-shelf solution if they’re pressed for time and money), define use cases for the gadget, test it in various environments and document their findings. Then they pass the data to a software development company and hardware components manufacturer. If you don’t have R&D facilities to conduct proper research and create PoC, you should trust the task to a reliable vendor. PoC and research are essential for companies that want to develop a complex or innovative IoT solution that requires integration with new or niche third-party devices and services.

If you’re working on a groundbreaking gadget, you need PoC for two reasons

  • Reduce IoT project costs. Companies that opt for custom connected devices usually start with prototypes, make sure sensors capture accurate data, document the results and determine the gadget’s functions before entering the beta stage. Thanks to this approach, developers avoid feature creep (and every feature costs money);
  • Impress investors. According to Gartner, in 2017 50% of all IoT solutions will be developed by startups. A couple of weeks ago we told you about Invoxia, Evrythng and other successful companies that currently dominate the Internet of Things landscape. Do you think they would’ve received millions from business angels and venture capitalists if they hadn’t had ready-to-use gadgets and a handful of use cases to support their claims?

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3 factors behind the Internet of Things product development costs

The Internet of Things is the environment where gadgets equipped with smart sensors collect data and exchange it over a network. Thus, the system operates on three levels: hardware (various objects enhanced with embedded systems and smart sensors), infrastructure (a piece of software that receives, analyzes and stores sensor data; it runs in the cloud or on a corporate server) and apps (applications for smartphones, tablets and PCs that connect hardware to the infrastructure and enable users to manage smart gadgets).

Hardware and software components are developed separately and may cost you an arm and a leg unless you choose the right product development strategy.


The price of building a smart gadget usually amounts for 70-80% of the total Internet of Things development costs and depends on the type and complexity of a project.

According to Pavel Shylenok, our Head of Mobile Department who is currently engaged in a complex Home Automation project, building sophisticated Internet of Things Connected Home solutions that feature cameras, motion sensors, smart locks and hubs that orchestrate various home appliances may cost as much as $ 4-5 million.

As we have learned from our experience, seemingly simple projects can often be expensive, too. Not long ago we built a data visualization mobile app for a custom IoT gadget enhanced with EKG sensors that detects the electrical signal of a human body and presents the data in graphic form. Although similar apps cost around $ 15 thousand (provided you address an offshore vendor, of course), you may end up spending $ 300 thousand on hardware development and certification.

The thing is, anything can be smart nowadays.

By 2020, electronics will comprise only 0.2% of all devices that will have some form of IoT capability. Diageo, an alcoholic brand that manufactures Smirnoff, Baileys and Johnnie Walker, places printed sensors on the bottles to track goods across supply chains and interact with customers after the purchase. If that’s what you want, we have great news for you: between 2004 and 2016, smart sensor costs have dropped by almost 200%.

And what if you can’t avoid building a custom device – and don’t have $ 300 thousand to spare?

Use prototypes.

There’s a plethora of open-source prototyping platforms and microcomputers like Adruino, BeagleBoard and Raspberry PI that enable startups to build smart gadgets and dedicated software from scratch. Although there’s no talking about mass production here, prototypes are essential during the PoC stage. Insulin Angel implemented the Wunderbar off-the-shelf prototyping tool to design a temperature-tracking device for diabetics. Once they had a viable product, they were able to launch a successful IndieGoGo campaign, take part in several tech contests and create some media hype around the project.


The components of IoT infrastructure include:

  • Middleware. According to Intel, 85% of gadgets were not designed to talk to each other or connect to the Internet. Middleware (or gateway) is a computer program that brings IoT parts together, enabling communication between smart sensors and the application layer;
  • Network. The Internet of Things won’t work without a highly scalable wireless network infrastructure, low latency and high speed connections;
  • Cloud-based or data center infrastructure. Here we talk about storage solutions and software that boils down gigabytes of raw data to what’s truly meaningful. The Internet of Things startups typically leverage smart gadget connectivity and data analysis through PaaS solutions built by Intel, Amazon or Microsoft.

Many connected gadgets require a complex support system which is also called “infrastructure”, and that’s why entering the IoT market is often expensive. Let’s take predictive maintenance, for example. You sell transformers enhanced with smart sensors, so customers can monitor equipment performance and prevent failures. You need a mobile app to generate alert notifications if sensors register abnormal behavior and a desktop application to send technicians to fields and order equipment parts that need replacement – and that’s not to mention contracts with equipment manufacturers, network providers and MRO (maintenance, repair and operations) companies.

The development and implementation of such sophisticated systems involves considerable upfront investments.

And don’t forget about security and safety tests. Consumers are well aware of hacked baby monitors and not-so-smart refrigerators; make sure your gadget doesn’t steal email credentials and uses secure authentication. If you want to sell a smart wristband, you have to prove the plastic it’s made of won’t cause allergy. There have been rumors that IoT gadgets emit radiation and cause cancer, and you must put those rumors to bed. That’s why you need to certify your product in every country you’re going to sell your device to (which may result in release delays since certification rules differ).

These are the things you should take into account long before you address a software vendor.


How much does it cost to develop an app that enables users to operate connected devices from a smartphone, tablet, PC or wearable device? Just like with hardware, it depends on the size of your project. Let us study a few cases from our portfolio to show the difference between a large, medium and small IoT endeavor.

  • Small project. Although building a custom EKG monitor like ECDGram will cost you about $ 200-300 thousand, it has a very simple dedicated mobile application. The gadget employs EKG sensors that track the electric signals of a human body and visualizes the sensor readings in real time, thus enabling doctors and patients with heart disease to effectively monitor heart activity and avoid complications. We built an iOS application that uses the OpenGL library to produce high-quality visuals (up to 500 dpi per second) in real time and wrapped it in a native container. An app like this takes about 300 man-hours to develop and costs $ 10-15 thousand;
  • Medium project. Our customer – an exercise equipment manufacturer from California – had entered the Internet of Things market before they contacted R-Style Lab. The company designed a stationary bike equipped with smart sensors and a complimentary iPad app enabling users to track the historical workout data. Our task was to develop native apps for iOS/Android smartphones and Android tablets. In order to achieve the goal, we implemented several technologies including ios-charts and MPAndroidChart for graphical data presentation, integrated the apps with major social networks (so that users could share their achievements) and connected the software to BLE interface (we didn’t have a real bike and used a simulator instead). Considering the number of features and Android fragmentation, the project took almost 1000 man hours to complete. A software solution similar to SBC Fitness will cost you about $ 30-35 thousand;
  • Large project. US law enforcement agencies needed a reliable mobile app that would support a wide range of radiation monitoring devices and could be used by officers who worked in radiation contaminated crime scenes. Our software engineers came up with a comprehensive solution for iOS/Android-powered smartphones and tablets that is integrated with multiple radiation detection devices via Bluetooth, analyzes sensor readings, generates reports and sends data to the server. The Radiation Meterage App also secures data through remote PIN generation and obligatory authorization. This time, we didn’t have a defined scope; the project evolved over time, and new features were added gradually. As a result, it lasted for 2000 man hours (including software POC and QA) and cost around $ 70 thousand.

It’s worth mentioning that IoT software development cost is just the tip of your spending iceberg.

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Figuring out the cost of IoT solution: final estimates

  • If you work on a complex or innovative IoT solution, your Internet of Things journey starts with the Proof of Concept. Unless you can’t prepare it yourself, you’ll have to pay for the man hours your vendor spends on research (and cover prototype expenses, of course);
  • You need to design and produce hardware for your IoT solution. If you lack funding, you can always turn to prototypes;
  • IoT infrastructure requirements depend on the complexity of your solution and the business model you’ve chosen. Don’t try to challenge the industrial IoT and Home Automation markets unless you’ve got a couple of millions to keep the project going over an indefinite period of time or you’ve found investors eager to spend that much on your idea;
  • It would probably cost you 20-30% of your entire budget to develop an IoT app. You can partner with an offshore vendor to reduce software development costs;
  • Make sure to save some money for marketing. After all, IoT will soon be bigger than mobile, and you have to convince consumers your device is better than its alternatives.

The bottom line is: if you calculate and add up the costs of IoT components (including hardware, infrastructure, mobile or wearable applications and certificates), you won’t arrive at a sum smaller than $ 50 thousand. Here’s how much a simple IoT project costs.

At this point, you might feel discouraged and consider abandoning the project for good. It definitely wasn’t our purpose. We want you to weigh the pros and cons of building a smart gadget, make sure you can provide the necessary infrastructure for the device and streamline your business.

The Internet of Things’ cost is high, but there are ways out! IoT startup funding has grown by 30% in just 12 months. Provided you have a feasible idea, you can always find an investor or launch a crowdfunding campaign. If you’re a non-tech guy and don’t know how to present it to business angels, you can always address a reliable vendor who can build a smart gadget using off-the-shelf solutions, do software POC and help you pitch the idea to VCs. Don’t give up, and your hard work will eventually pay off!