IoT costs from a business strategy perspective

September 4, 2023
September 7, 2023
Irati Etxeberria

Before implementing an IoT project in any company, it's essential to conduct a comprehensive analysis to ensure the success of the project and align it with your business objectives. Specifying your business goals and making a technology assessment, having a data strategy well defined.  

From the high level perspective a successful IoT project should help you:

The initial business case for connecting products typically focuses on achieving cost savings, for example, by optimizing service and maintenance. Most companies that have implemented IoT are in this early stage.

Photo by Jani Kaasinen on Unsplash

For many companies, there is an even greater opportunity that lies in creating new business models to build deeper customer relationships, improve the value proposition and increase revenue. One of those ways to redefine the business model is to convert a traditional product into a connected product-as-a-service (IoT model).

In this post, we would like to put focus on the costs involved when a business starts on an IoT journey. Understanding the different types of expenditures will help to make strategic decisions that benefit each unique IoT business. 

Let’s delve into how CAPEX and OPEX costs are impacted in the context of IoT deployments.

CAPEX refers to the upfront capital expenditures or investments made by an organization to acquire, develop, or upgrade physical assets or long-term assets. These assets are typically expected to provide benefits to the company over an extended period, usually more than one fiscal year. Examples in IoT: 

OPEX refers to the day-to-day, ongoing operating expenses incurred by a business to maintain its operations and generate revenue. These expenses are typically related to the regular, recurring costs of running the business. Examples in IoT:

The choice between CAPEX and OPEX for an IoT project depends on various factors, including the financial strategy of the organization and the specific requirements of the project. 

These are some of the points a business needs to consider when establishing its strategy for a new IoT project from a cost perspective. Each company has a unique position regarding internal talent capabilities, short and long-term budgeting or IT infrastructure investment planning, and an early internal analysis can go a long way toward the prospects of a new IoT venture.

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