With all this talk of what can be connected to the IoT and how it can be done, almost no one seems to be concerned with how much all this is going to cost. If the growth predictions are even half accurate, someone’s going to have to start writing some big checks pretty soon.
Ross Mason, founder of MuleSoft, a connectivity provider, is thinking about it. “Just do the math,” he said.
He created a model based on a hypothetical IoT problem: How much to connect all the cows? You heard me: ALL the cows. And once they were connected, what would be the benefit?
He calculated that putting a health monitoring chip into every one of the about 9 billion cattle in the U.S. would cost about $10 billion in integration, or a bit more than $1 per head. The return would be about $2.4 billion per year, attributed to remediated losses from animal illness and death, according to the U.S. Department of Agriculture. The returns would diminish a bit each year, but the plan would break even in about five years. So, maybe that’s worth it, but how long will it take for a house full of IoT light bulbs to pay back a homeowner?
To answer some of these questions, Mason has quantified his IoT cost assessment model to help businesses determine whether IoT initiatives are a wise investment. It incorporates hard-to-estimate costs like the architecture needed to install the network, connection to the “edge” layer in the IoT architecture, how to support and connect devices and the role that APIs provide in offering easy access to these connected devices through a hub or indirectly.
Mason says that the industries that are most likely to benefit from this cost benefit analysis are utilities, like power or water.
“If you can leverage existing infrastructure, you’ve got a leg up,” Mason said. But that’s changing as cost per implementation drops. “Increasingly the value is much higher and the cost is much lower than it was 10 years ago.”
In the Connected Home market, he sees the play as more about making money from the devices. “There’s a race to the bottom line on the consumer side,” he said. “I think the Amazon Dash button was a genius move.”
In the end, there will be a bell curve of cost-effectiveness. Some solutions will work financially and others won’t, and most will be someplace in between.
“It’s like the early days of the Internet. It’s about better experiences,” he said. “The outcome will be a new type of business model. It’s a long-sum game.”
Let’s play.