If you’re not sure what to include in your IoT development budget, keep reading. This article will cover all the key costs required to implement an IoT product idea. Knowing what it takes to create an IoT system, you can properly calculate your investments, cut development costs and prevent overheads.

Tip: Before you begin, study your target market and its ROI potential. So far, industries bringing the highest revenue to IoT startups are: smart home (19%), healthcare (14%), wearables (13%), smart city (13%) and automotive (11%),  (according to Harbor and Progress Software).

IoT development – calculating all the costs

“In the Internet of Things, everything matters. App functionality, number of IoT devices, target OS and IoT hardware components all contribute to the final cost of your IoT system. While there is no money-saving plan fitting everybody, you can prioritize your IoT system functions and figure out what works for you.”  Igor Safroniak, PM at IoT projects

Now, let’s explore each IoT cost factor in more detail.

1.IoT back-end & infrastructure

Any IoT system needs a back-end to process the data collected from IoT devices. You have two options: build a web server from scratch or use a ready-made cloud platform. Using a third-party cloud server is more flexible and cost-effective than building a web server from scratch. Either way, you will need a robust back-end development to support your system.

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In most cases, companies choose servers by Amazon or Google to store the IoT data.  This way, they can add new IoT devices later or scale down once it is needed. One also has to pay monthly subscription fees for using these services rather than make a one-time investment.

2.IoT app development

When planning your app development, take into account the following aspects:

– Functionality

1.Think of the core features. These are the must-haves for your app’s functioning  (for example, a map displaying the equipment movement in real-time is crucial for a traffic management app). Imagine how a consumer will use your app and how you can serve his needs best.

2.Avoid unnecessary features. If a reasonable budget is your top priority, restrain from adding insignificant features. You can add them later as updates or Premium features. Distracting pop-ups or a messy timeline might only harm the user experience and overwhelm your users.

3. Set your differentiative points.
Sometimes, a 3D map of a construction site makes your app different from all the others. In such a case, it’s worth adding to your feature list.

– Target OS

Next, think of all the operating systems where your IoT app should run.

One of Vakoms clients, a US-based startup Beam Authentic, required a desktop app developed for Windows, Linux, and macOS. It had to automatically transmit content pieces to wearable device via USB and store them on a web platform. To cut down the costs and time spent on native app development for all 3 platforms, Vakoms decided to go cross-platform. Using a Qt framework, we built a cross-platform solution running on multiple OSes.

While cross-platform frameworks save the time & costs spent on development, they also add restrictions to creating native features. Thus, if you want to target mobile, web and desktop OS with the same app, add the development costs for each target platform.

3. IoT hardware cost

If you want to reduce the expenses, consult with your IoT partner the components and design of your IoT device or sensor. Once the IoT hardware prototype is ready, it is sent to manufacturing companies. In some cases, up to 70-80% of total IoT project costs might go to hardware development alone. 

Either way, certifying your IoT devices is another major factor. IoT device certifications are obligatory to prove that the IoT device fits the international standards before release. This stage might consume a large part of your budget. For example, the CE certification for a simple SigFox device is around €10K

4. IoT development team size & time

The scope & structure of your team will directly affect your IoT development budget. 

A full-scale IoT development team consists of:

– system architect

– hardware engineer

– firmware (embedded software) engineers;

– back-end developer;

– front-end developer

– mobile app developer 

– UX & UI designer;

– project manager;

– QA engineer;

– DevOps. 

No doubt, such a team will require a great deal of investment. However, the optimal structure & number of specialists differs from case to case. For instance, you might need a hardware developer for the beginning of your project. If you have the product design ready, UI & UX designers won’t be needed as well.

From our own experience, it takes around $40K/month to handle a team of 10 members. Also, the rates vary a lot across the countries and even cities.

5. Hidden & unpredicted costs

“Any changes to functionality or design along the project add more man-hours of work and end up changing the whole game. That’s why it’s worth involving the unpredicted expenses in your budget.”

Make sure you have a clear product vision to prevent any further redesign or redevelopment tasks.

Another fact: companies tend to spend more on cybersecurity, states Gartner. Thus, worldwide spending on IoT security has grown by 28% from 2017 to 2018, reaching 1.5 billion. This turns out quite reasonable compared to cost losses from data breaches, counting around $4 billion on average. 

The basics is to plan your security practices ahead and include them into your costs.


External factors might indirectly affect your IoT project costs. As the price of IoT sensors is dropping, connected gadgets are becoming more accessible to users. To find out the exact price of your IoT system development, contact us and learn how expensive or cheap your IoT system is to create. This way, you can prevent any redevelopment later and save on unnecessary expenses.