« Back

Accurately Assessing Internet of Things ROI


By: Dan Johnson

The Internet of Things (IoT) is being touted as a lot of things, but especially as a transformative IT tool that will help manufacturers improve productivity and efficiency. The hope is that with all this optimization will come the ability to increase revenue and wring more profit out of that revenue. 

However, you first have to invest in the IT infrastructure to implement the IoT and handle the significant increase in data that it will generate. If your company has embraced the Internet of Things and developed a manufacturing IoT strategy to kick start it, it’s important to measure the return-on-investment (ROI) to determine if it’s all worth it. What criteria are important for considering how the IoT is improving performance and productivity while reducing cost and inefficiencies? What constitutes a successful IoT implementation that results in a positive Internet of Things ROI? 

Of course, there is the actual implementation expense – the additional hardware and software cost (if any) and training, for example. So first, you should factor in these expenses: 

Implementation and retrofitting downtime.  Machines need to be taken offline for IoT upgrades and installation. This cost can be minimized if you can plan to rotate out machines while you make them “smarter.” 

Consulting. Unless your workforce has the capabilities to plan, implement, and manage IoT solutions, you’re going to need outside vendors to supply the expertise.

IoT platform expenses. Any manufacturing IoT solution will incur ongoing costs for data storage, processing, and analytics, as well as costs for operating, maintaining, and updating the solution itself.

Ongoing operational costs. While IoT solutions often reduce overall operating expenses, they also add operating expenses -- devices and sensors all require a power supply and Wi-Fi, cellular, or other forms of connection.

Security. Even on the most secure platform, connected devices can create their own unique vulnerabilities and need security measures in place to ensure data integrity and prevent unauthorized access.

But there are less clear-cut factors, too – anticipated future sales and bookings, as well as reduced overhead and production costs through optimized processes and streamlined operations.  As humans, we have a tendency to over-value things for which we need buy-in and approval. To determine as accurate an Internet of Things ROI as possible, it’s important to be realistic about the value and expectations regarding your manufacturing IoT implementation. 

Still there are ways to help validate softer manufacturing IoT-related costs as part of your Internet of Things ROI consideration: 

  • Assess the amount of time saved by connecting more data-driven assets
  • Identify the additional number of tasks that can be performed by one employee or tracked by one work cell
  • Calculate the efficiencies gained by greater worker autonomy to make on-the-spot decisions enabled by greater data access through multiple devices
  • Highlight how better, more -informed decision-making improved productivity, creates a safer workplace, and minimizes supply chain disruption

Fortunately, the manufacturing IoT environment which enables more informed, optimized operations through improved data acquisition also provides the tools for more accurately calculating Internet of Things ROI. With greater systems integration and increased data flow, new information and insights become available which can help you identify where IoT is adding value, now and in the future. As you start to see returns on your manufacturing IoT investment, you may also see additional opportunities for utilizing it.   

As competition continues to drive innovation, manufacturers are doing everything in their power to retain customers and expand products and services to derive more income from them. The IoT holds the potential for not only improving efficiency and productivity, but creating new revenue-generating opportunities as well. That’s why it’s so important to establish the metrics for management to accurately understand the return they should expect from investing in the Internet of Things.