IoT Business Case: Why the Numbers Only Break in Year Three

These cost items have one thing in common: they only exist per year. A device doesn't cause them once – it causes them again every year it is in the field. The right unit for a connected product is therefore not the device but the device-year. Four items decide whether this calculation holds up.

First, connectivity over the product's lifetime. Per device and month it looks harmless – that's exactly the trick. Multiplied by the fleet and by ten years of operation, it becomes the largest recurring item in the whole calculation. On top of that comes something no specification mentions: radio technologies have an expiry date. Networks are switched off, tariffs restructured, contracts expire. Migrating a fleet that has already been shipped is an item in the business case, not an IT topic to be solved later.

Then there's update capability. For a long time it was a feature; now it's an obligation. A device that no longer receives security updates becomes a problem under the Cyber Resilience Act – for you as the manufacturer, not just for your users. What's expensive isn't the individual update. It's the readiness: an update infrastructure that runs for ten years, keys and certificates that have to be managed, documentation that is still accurate when nobody who built the device is around anymore. That readiness costs money every year, including the years in which you don't roll out a single update.

Things get tricky with support. A connected product generates contacts that a non-connected one never did. Every device that can report a fault will report it. And the roles are reversed: your customer often sees the fault before you do and expects you to know about it already. What was meant as a service promise becomes a service expectation – with a cost side nobody calculated, because it never existed in the product business.

And finally, the fourth item, which actually sits on the other side: your share of the value. The value of a connected product is almost always created in operation at the customer's end. It saves trips, prevents downtime, improves planning. That's real value, but at first it lands entirely with the customer. Whether any of it reaches you isn't decided by the feature but by the pricing logic: do you sell the device once, sell availability, charge by usage, or take responsibility for an outcome? Anyone who takes on a long-term obligation and is paid once doesn't have a cautious business case. They have a contradictory one.

This point is especially uncomfortable for companies with a healthy spare-parts and service business. A connected product that runs more reliably and can be repaired remotely reduces exactly the revenue that is earning good money today. That's not an argument against it. But it belongs in the calculation – and not as a footnote.