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What All Goes into The Costing of Your IIoT Project?

What All Goes into The Costing of Your IIoT Project?

  • By

    Sujata Tilak Managing Director, Ascent Intellimation IIoT Thought Leader

  • /
  • Posted

    08 Mar 2019

What All Goes into The Costing of Your IIoT Project?

The Industrial Internet of Things or IIoT has been heralded, primarily, as a way to improve operational efficiency. However, in today’s global environment, it is also serving as a great tool for unveiling new opportunities and building new revenue models. In the coming years, the world will witness manufacturers leverage IIoT to exploit intelligent technologies to increase production efficiency, fuel innovation, boost revenues, and transform the workforce. According to a report, in the next five years, smart factories may contribute as much as $500 billion in added value to the global economy.

A lot of manufacturers across the world are waiting to make the IIoT plunge but often stumble at calculating the cost of the IIoT project. So one of the most common questions they have in mind is “how much does it cost?” Of course IIoT projects have huge variations in nature, size and shape. So there is no straight answer to costing question. Like any project, IIoT project runs thru different phases –

Planning >> Implementation >> GO-LIVE >> Operations

You should consider Total Cost of Ownership (TCO) in each phase. Here are some pointers-

  1. Planning costs: Like any major initiative, IIoT projects need meticulous planning that starts with identifying business objectives and ends with finalizing partner who will provide solution and implement it. An internal cross functional team will be involved in planning. You may hire a consultant to help you with planning.   
  2. Connectivity: One of the biggest costs that contribute to the overall IIoT project is with respect to connectivity. There are different levels of asset connectivity and each needs different investments -
  • Connect to asset controller / PLC – communication card, protocol converters, connectivity license etc.
  • Retrofit PLC and sensors – sensors (cost depends on what you want to measure and fitment of sensors on machine), PLC, IO Modules, relays etc.
  • Electrical signals – IO Modules, relays etc.
  1. Edge infrastructure: Another major cost factor of any IIoT project is network in the plant. Most common network used is Ethernet, wired or wireless. But others like LPWAN, LoRa are also being used. If you have lot of legacy equipment, you might have to invest in RS485. All network components have to be industrial grade, unless your entire plant has controlled environment. Network security should be in place from day 1.
  2. Cloud infrastructure: The cloud is one of the most significant building blocks of any IIoT undertaking; by delivering data from anywhere, it enables manufacturers to configure, provision, and design the solution they need and drive true shop floor connectivity. Cloud services costs, though not major compared to other costs, are recurring. It will depend largely on the type of cloud deployment model– hybrid, public, or private, sizing, the security level, cloud vendor etc.
  3. Solution licensing: Solution license cost depends on licensing model – perpetual / subscription, selected modules etc. AMC costs should also be considered. 
  4. Supporting software licenses, if any: Sometimes, IIoT project could comprise of process changes, product replacements, updates, as well as new hardware and systems. Although you might have considered the cost of all the new tools and technologies you will be required to invest it, make sure to also consider the cost of supporting software licenses – which includes licenses costs as well as the cost of annual maintenance.
  5. Solution provider’s services: Considering how big and complex an IIoT project is, the likelihood of you choosing a solution provider to manage the implementation end-to-end is extremely high. Your investment in a solution provider is a major component of the overall IIoT project cost, and it depends on the scope of your project, the modules being implemented, customizations required, efforts for connectivity, existing process maturity, your user base as well as the support cost - post implementation.
  6. Internal costs: Any IIoT project needs a fair amount of investment in terms of person-hours devoted by cross-functional teams that drive the project to successful closure. This includes defining specs, working in collaboration with the implementation partner on solutioning, project management, change management, support etc. Another important cost is championing the system to users, securing their acceptance, hand holding them and ensuring sustained usage – which involves training and support costs for users.
  7. Operations costs: Finally there is operations and maintenance cost.

Keep IIoT costs down

Lot of challenges come during project execution in spite of planning and having good team. Costs can spiral out of control very quickly, especially internal costs. So what is the best way of keeping costs down? Based on my experience of helping manufacturing companies with their Industry 4.0 journey, it’s best to carry out the implementation in a phased manner to keep costs down. Pick up a small process or a part of your existing workflow; make minimal investments, see the ROI, learn from the experience, and then proceed with larger and wider implementations.

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