Understanding TCO for IoT: Building for Scale


Innovators building IoT solutions often get caught up in the excitement of bringing something new to market and do not consider the many factors that play into the total cost of each device as a project scale.

Total cost of ownership (TCO) is important, yet many innovators consider pricing as the only cost consideration and choose the cheapest connectivity solution to get started by just comparing the cost per megabyte (MB) of data. However, the cost per MB might be a small piece of the puzzle when it comes to overall system cost. To optimize TCO, there are many other considerations. What if a connectivity provider with a slightly higher per MB cost had an option to reduce the amount of data to transmit?

For example, a device that needs to call a cloud application programming interface (API) needs to use a secure, full-fledged protocol the entire way. That usually involves high overhead and processing on the device side. If the connectivity provider can offload the cloud API call from the device to their platform, the device may be able to use a lighter protocol. In that case, the overall data usage can be reduced. The reduced protocol overhead and encryption load may enable the device to run with a smaller battery. The firmware and the logic can be simpler and thus you could achieve the goal with a smaller number of developers. Each of those would greatly contribute to reduce the TCO.

When it comes to calling a cloud API from a device, a unique set of credentials needs to be provisioned for every device. It means either issuing a set of credentials and embedding it in the firmware at the time of manufacturing a device or implementing an initial bootstrap mechanism. After a device is deployed in the field, the credentials should be rotated over time, and solutions makers may also need to consider purchasing expensive solutions for device management.

The net-net: Taking a piecemeal approach can be an expensive solution with lots of heavy lifting (a.k.a., intensive processing) for the solutions developer. Another option is “smart connectivity” in which those developing IoT solutions work with an IoT connectivity provider to take a more holistic look at their IoT strategy. Smart connectivity considers all the factors beyond connectivity to help keep costs in check.

If those developing IoT solutions do decide to go it alone, here’s what they need to consider:

  1. Hardware development. This includes device and credential management to provide unique credentials and certificates on each device. This is not a one-time process. Credentials may be embedded when the device is manufactured, but over time, keys may need to be rotated, and a device management system and over the air (OTA) update mechanism is critical to achieving that. A different way to accomplish this is to use a SIM card or SIM chip as an authentication token, using smart connectivity to offload the heavy lifting to the cloud.
  2. Software development. Developers use cloud services at the back end, so cloud software is needed in every device that can send messages with encryption. On the device, transport layer security (TLS) Is necessary, as well as a resource that can perform encryption, which means having enough CPU and memory. More encryption also means a bigger battery. If the heavy lifting is done on the device side, the cost per device would be significantly higher. If, however, the heavy lifting is offloaded from the device to the cloud, low-cost devices can be used, lowering TCO.
  3. The cost of hiring engineers. This includes their time to determine device authentication, provisioning, and integration to the cloud. If a device can simply send out data to an endpoint that a smart connectivity platform offers and the platform takes care of the rest, the firmware development can be much simpler and requires fewer developer resources. 
  4. Global connectivity. Many IoT devices are manufactured in one location, tested in another, and deployed in a third place. This often requires global connectivity, which can be expensive. Plans with no commitment and pay-as-you-go pricing can help reduce TCO.
  5. Lifecycle management. This includes deployment, visibility for operations, the ability to upgrade remotely, the decommissioning of devices and services, and more. A big factor is whether a company is paying for a device even when it’s not in use. The ability to suspend a SIM card after it’s activated but not in use (such as when it’s in transit to a new site) and then reactivated when it’s needed can help reduce TCO.
  6. Maintenance and support. Once IoT devices are deployed in the field, things don’t always go as planned. Often, they use more data than expected. One way to analyze why this is occurring is to look into communication over the cellular link so customers can analyze packets being sent and received by the device. With this level of transparency, customers can determine what needs to be changed to suspend unnecessary communication by updating the firmware or configuration.
  7. Communications overhead when connecting to the cloud. When a full-fledged secure protocol is used by the device to send data to the cloud endpoint, the data needs to be encrypted. Those protocols also incur overhead due to headers and additional information to let the endpoint know who is sending data and what the data is about. With a smarter connectivity solution that can identify who is sending data and convert the data format as needed, that byte of data – such as GPS coordinates or a temperature from a sensor – can be sent without additional metadata even in a proprietary binary protocol that is more efficient. This reduces data consumption and therefore TCO.
  8. Encryption. The same principle of offloading the heavy lifting to the cloud is used here to reduce overhead. If the end-to-end encryption is not required or not possible, smart connectivity providers can use a secured link to receive data and add encryption before sending data over the public Internet or an untrusted network.
  9. Power Management. It’s common that the longer a communication module sleeps, the longer the battery life will be. If the communication module is interrupted during a sleep cycle due to an incoming packet that is not desired, it would cause unexpected battery drain and shorten the battery life. Using smart connectivity, a secure, private network can be created so that only your devices and your server backend can communicate in the network. In such an environment, devices are not interrupted by an unexpected incoming packet and maintain the expected battery life.

Making a poor decision in any of these areas can cause costs to spiral, potentially doubling or even tripling TCO. Improperly designed systems are difficult to scale and often need to be completely replaced.

While connectivity costs are given a lot of attention when considering an IoT solution, it’s essential to look at the entire cost of a system over its lifetime – both obvious and hidden – and balance these against the value delivered as a project scales. By thinking holistically about their IoT solutions, innovators are solving these challenges and optimizing TCO to generate a sustainable profit.

Kenta Yasukawa is CTO and co-founder of Soracom, where he has led deployment of the industry’s most advanced cloud-native telecom platform, designed specifically for the needs of connected devices. Before co-founding Soracom, Kenta served as a solutions architect with AWS and conducted research for connected homes and cars at Ericsson Research in Tokyo and Stockholm. Kenta holds a Ph.D. in engineering from the Tokyo Institute of Technology, with additional studies in computer science at Columbia University's Fu Foundation School of Engineering and Applied Science.

Edited by Maurice Nagle
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