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The Cost of IoT: Ready-to-use vs. Custom IoT Solutions

Ivan Muts
October 16, 2023
10 mins to read

Table of Contents

    Internet of Things continues to pave its way into the lives of consumers, operations of enterprises, and even governments. As the newest report from the McKinsey Global Institute estimates, the IoT technology could have an annual economic impact of $3.9 trillion to $11.1 trillion by 2025. Nevertheless, while thinking about how much it costs to develop an IoT application, it is obvious that they are still regarded as complicated and expensive. Is that really true and what can you do as a business owner? This article will debunk the myth of IoT complexity and help you navigate the world of IoT development services.

    Challenges of IoT applications development

    IoT solutions are considered complex because a whole lot of components need to fuse together to make them work. And as is the case with things that we do not understand – they tend to be expensive and we don’t even know where that cost comes from. Plus, IoT technology is evolving constantly, and to get the best deal for your money, you need to be in line with the latest trends. So if you are a company with no in-house tech expertise, you’ll probably experience a “Houston, we have a problem” moment here.

    To demystify the myth of complexity, we will break down all the components of an IoT solution into 5 major layers – Hardware, Communication, Cloud Services, Software Application, and Security – and explain each of them and what role they play in an IoT solution. Also, we will suggest what can be done on each layer to cheapen the overall cost of IoT applications.

    Layers of an IoT solution

    what influence the cost of IoT application development

    1. Hardware layer

    Internet of Things is all about making “things” smart by connecting them to the Internet. Such connected devices – hardware equipped with sensors or actuators that are more common in IIoT solutions – gather data, transmit it and monitor parameters. Bear in mind that the number of sensors or devices in your IoT solution, their battery life, and their functionality, all influence the overall cost of an IoT solution.

    If you have an understanding of what your hardware should do, what you would like to track, and what information to collect, consider prototyping on platforms such as Arduino or Raspberry Pi. We advise you not to invest in custom-made hardware from the beginning, but to test your idea first. To learn more about the available off-the-shelf hardware options, take a look at this guide from IBM.

    2. Communication layer

    The Communication layer can also be called the Network Connectivity layer. Communication is a defining characteristic of an IoT device as it is needed to connect your hardware to the IoT platform (a so-called middleware between your hardware and an application). Network connectivity can be wireless or wired.

    Among wireless connectivity, we can differentiate cellular networks (LTE-M, NB-IoT, 3G, 5G), local area networks (Wi-Fi, Bluetooth), low power wide area networks (LoRaWAN, SigFox), and mesh protocols with short-range capacity (Zigbee, RFID). When choosing a network for your IoT solution, find out what is already available in your region. Who knows, maybe a good old WiFi connection will suffice in your case.

    Connectivity expenses depend on the network of your choice and their pricing plans. For instance, the connectivity cost in a narrowband cellular network is calculated at $6 to $12 per device, and with LoRaWAN it is from $4 to $6.

    And if you would like to know which wireless connectivity option to choose, we have covered all four types of wireless IoT networks in full detail.

    3. Cloud services

    The next stage in your IoT solution development would be connecting to a cloud server. A third-party cloud server is more cost-effective than building a web server from scratch. Cloud supports IoT devices and applications and this is where the data is aggregated and stored.

    It is also reasonable to choose not just a cloud provider, but a Cloud Platform, as it can offer your more benefits. A cloud platform not just establishes communication between the devices and application, stores and processes data, but also offers a set of ready-made features that make it faster and easier to develop and deploy IoT apps.

    4. Software application

    A notion of software in an IoT solution can mean both – embedded software and an app for end-users. The latter presents the device data in form of rich visuals and interactive dashboards and can be web, mobile or cross-platform applications. Embedded software is implemented in the devices and is intended for their proper functioning and control.

    As for an end-user app, we will discuss all its aspects in terms of how much they influence the cost a little bit further in this article.

    5. Security cross-layer

    And last but not least important layer is security. The security of an IoT solution is the foundation of all its building blocks and should be considered at all stages of IoT design and development. Devices should be protected physically and from unauthorized use, and data should be encrypted so it cannot be exploited.

    Requirements engineering: Understand what is needed for your IoT solution

    The next step in figuring out the cost of your IoT solution is to define the requirements. This process is called requirements engineering and starts with eliciting requirements, their specification, verification, and validation.

    The requirements engineering process is finalized by composing a document called a software requirements specification (SRS), which lays out functional and non-functional requirements and describes what a user can do with the solution. SRS bridges the gap between the business idea and technical requirements for the development team.

    To determine whether you have the necessary technical expertise in-house to create a solution, begin with going through all 5 layers described in the chapter above. Ask yourself a few basic questions to elicit the exact requirements and to find out what is exactly needed for your IoT solution:

    When you’ve defined how much data will be collected, in which form, and how fast, you can determine which kind of database and storage option is needed for your IoT solution. Then you need to decide which components of the solution you would like to build from scratch and which to buy as a ready-to-use solution.

    If you are just starting out in the world of IoT solutions, it might be reasonable to choose as many out-of-the-box components as possible. They will help you to prove your concept (or not) and save you lots of time and money.

    What may influence the IoT app development cost?

    The building of an IoT solution includes costs connected with hardware development, but it’s a huge separate topic that we, as a software development company, won’t elaborate on. As we’ve already stated above – if you’re thinking about creating your hardware from scratch, consider first trying out options already available, even if they don’t meet your needs at 100%. In most cases, it should be sufficient for the MVP version of your IoT solution. If you’d like to learn more on this topic, we recommend reading this article that explains the role of MVP in IoT software development.

    Instead, here we would like to concentrate on the development of an IoT app that is also a very important part of the entire solution. There are three aspects we would like to discuss, namely, security, interoperability, and scalability.


    The security of an IoT solution is of crucial importance. It should be consistent across all layers of the IoT solution – hardware, network, cloud, and application – and not overlooked when it comes to rushing to market.
    So what can you do to enhance the security of your IoT product? Here’s a checklist:

    Ensure adequate IoT security is considered at all stages of the development process. Even with an MVP version, data integrity and security should remain intact.


    It is better to build your IoT solution on a standardized ecosystem, relevant for your use case and industry. To provide effective data transfer, secure and seamless interaction among the devices and all components of an IoT solution, make sure your devices support open-source messaging protocols. We mean such communication protocols like MQTT or CoAP, Application Programming Interfaces (APIs) based on RESTful principles.

    As an example, here are the most popular protocols available for an IoT solution:


    When building an IoT system from scratch, you should plan with future integrations and scalability in mind. Adopting a microservices approach would solve the problem of scalability early on. This modular approach is about building many smaller services that are loosely coupled, independently deployable, and are more easily manageable. Also, don’t forget to consider the number and complexity of IoT app features, as they might influence the development cost.

    Ready-to-use IoT platforms: Vendor evaluations

    After assessing the engineering requirements for your IoT system, decide which parts should be developed from scratch. A lot of existing solutions can cover a lot of services, like storage, advanced analytics, device management, adaptable modules, drivers, and source libraries that reduce development and testing time, and even the development environments with SDKs for creating apps/services. Selecting the IoT platform vendor that offers the most components for your solution will take a lot of things off your mind.

    But those are not the only benefits that “out-of-the-box” IoT platforms offer. By integrating one of the IoT platforms, you can access readily available partner networks, secure development lifecycle, ability to scale with ease and achieve a quicker time-to-market.

    Finding the best IoT Cloud Platform among 426 vendors on the market is no mean feat. Pay your attention to the components they offer and, of course, the price.

    In the table below we collected a brief comparison of IoT cloud platforms that can guide you in your choice:

    PlatformsKey offeringInteroperabilityIoT price impact
    Google IoTGoogle Cloud IoT Core
    Device management
    From $0.0045 for 250 MB to 250 GB of stored data. A free plan is available for the first 250 MB.
    Amazon Web Services IoT PlatformAWS IoT Core
    Rules engine
    Development environment
    From $0.25 for each enabled device for up to 14,999 devices.
    Microsoft Azure IoTAzure IoT Hub
    Device monitoring
    Device management
    IoT Edge
    both over WebSockets
    The basic tier starts with $10 for 400,000 messages/day per IoT Hub unit. The standard tier has more features and starts with $25 for 400,000 messages/day per IoT Hub unit with a free plan for 8,000 messages per day.
    Oracle IoT Intelligent ApplicationsOracle IoT Cloud Service
    Asset monitoring
    Data analysis
    Data integration
    Oracle price sheet is calculated per device and per month with a fixed number of messages.
    IBM Watson IoTBM Watson IoT Platform
    Device management
    Real-time analytics
    From $500.00 per instance per month for pre-integrated ready-to-run IoT platform with1,000 sensor type devices included.
    SalesforceSalesforce Service Cloud
    Data management
    Cloud orchestration
    MQTTPricing is at a fixed price of approximately $4000/month or on a quote basis. There is no free plan available.
    Cisco IoT Cloud ConnectCisco IoT Control Center
    Mobile connectivity
    eSIM as a service
    Machine learning to improve security
    MQTTPricing is available upon request.
    ThingsBoardThingsBoard Community Edition
    Data collection
    Device management
    Subscription plans start at 10$ per month for up to 10 devices and 10 assets, and there are 5 plans to choose from. All these plans include unlimited customers, dashboards, integrations, API calls, data points, and messages.

    Although we are strong advocates of simplifying the solution development process – especially if it’s for an MVP – in any way you can, we cannot omit to mention that in some cases companies opt for building everything from scratch. For instance, companies that have strong technical support in-house may find that the operational expenses on out-of-the-box solutions exceed what they can do on their own.

    What influences the total cost of IoT application development?

    An end-user IoT app is often one of the most important parts of a solution because it gets to interact with users. The complexity of the IoT app and its type is in direct correlation to the development cost. The development budget for a simple IoT app with basic features may start from $30,000. If your app should have third-party integrations with, let’s say, payment systems, or complex logic, the development cost could be calculated starting from $50,000.

    Here are other major factors that influence its development cost:

    Hidden costs of IoT solution development and how to avoid them

    In this chapter we would like to discuss the less obvious factors that influence the overall IoT solution development cost and how to prevent them.

    Scaling up

    IoT system scalability is something that is often overlooked at the initial stages of the development process in order to save costs. But after the trials, if the system is scaled up from hundreds of devices to hundreds of thousands and it needs to handle different types of data and tasks without losing quality or speed, the costs can soar sky-high.

    As we have mentioned earlier, we recommend designing for scale from the start. Your system should be capable to handle an increase in features, users, and numbers of connected devices with great performance. And if you need another argument, the latest research by McKinsey shows that IoT offers significant economic value potential which can be captured by those companies that have achieved scale.

    Changes to the scope

    Insufficient planning may result in redesigning and making U-turns amidst the development process and it will not come unnoticed in your invoice. Unfortunately, such situations happen more often than not and it is frustrating for all parties involved – for the customer and for the development team. To avoid such pitfalls, we advise following the development best practices and starting the whole process with requirements elaboration and composing the SRS document.

    At Euristiq, we offer our clients to start cooperation with the Discovery phase, during which we conduct workshops and interviews to specify all the requirements, understand the project scope and technical limitations. The main goal of Discovery is to get on the same page with our clients and elicit Software Requirements Specification, project roadmap with the detailed timeline, and feature-based cost estimate.

    Depending on the complexity, the Discovery phase may cost around $5,000-15,000 and take up to three weeks, but it is a small price compared to prolonged development with lots of changes on the way or even a complete abandoning of an entire project halfway through.

    And of course, we offer some flexibility for our clients, as there are cases when not everything can be 100% predicted beforehand. If our clients would like to suggest changes when the development of their solution is in full throttle, they can do that via our Change Management Process. Then we recalculate how the changes will impact the budget and time of the development and present it to the client for approval.

    How to calculate the total cost of an IoT solution?

    Time to get brutally honest – there isn’t an exact answer to this question. With IoT, when too many components are at play here, the price can fluctuate depending on your requirements and expectations.

    Also, there are other things to consider.

    Like, would you develop your solution in-house or would you bring in the development partner? Even with the outside help, there are options, too. You can extend your team and outsource some parts of the development process, or you can partner with an experienced software development company for end-to-end development. When you are working with someone who has done the job before, you can minimize the risks and accelerate the time to market.

    Bear in mind, that the approaches to cooperation cost differently. With the team extension model, you hire software developers and pay an hourly rate for each specialist. With end-to-end development, the cost is calculated for the entire app. At Euristiq, we offer feature-based cost estimation for the entire solution and this approach has proved to be successful for a number of our clients.

    So unless you have solid IT expertise in-house, the best way to find out the cost of your IoT solution would be to reach out to a software development company and request a quote.

    Summing it up

    Combining the physical and digital worlds, IoT continues to drive the transformation of businesses and the economy. Getting on board with the latest technological advancements will yield great results for your business if you follow the rules.

    Entrust your IoT solution to the hands of professionals who have handled the matter before. We can help you manage risks and get your product to market faster than the industry average. Contact us for a consultation or if you need support.


    How much does IoT cost?

    With extensive experience in creating IoT applications, the development cost of an IoT app can range from $5,000 to $1,000,000. For IoT proof of concept (PoC), pricing typically falls between $5,000 and $20,000, while an IoT minimum viable project (MVP) usually ranges from $20,000 to $80,000. More intricate solutions involving large-scale device connectivity and data management can incur costs ranging from $200,000 to a million dollars.

    Is IoT low cost?

    The cost of an IoT project is based on factors like complexity, number of devices, required features, and data processing needs. Tailored solutions offer best cost-effectiveness for your unique requirements.

    Are IoT sensors expensive?

    The average price of an IoT sensor starts from $0.44. Mass production promotes competition between manufacturers and decreases their price. The overall cost of sensors for your IoT solution depends on their type, characteristics, and capabilities.

    Why is IoT cost effective?

    IoT is cost-effective because it improves efficiency through automation, reduces operational costs, and human errors. It also helps optimize resource allocation and reduce waste, driving significant savings.

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