Internet of Things

How Much Does It Cost To Develop An IOT Application From The Idea Stage?

IOT Application

IoT is transforming our machines into life-like assets and the impact is growing all over us. Today, there are more communicating devices than humans and we can’t resist the temptation to make our lives more convenient. Add to it, we could be living inside a network of 21 billion connected devices by 2025.  However, that’s not the only reason it is grabbing the headlines. 

The enormous world of IoT comes attached to a similar quantum of risks. There are IoT products that succeeded and then there are thrice the number of IoT products that crashed out at some stage. 75% of IoT projects have failed in the past few years majorly because no one backed them with predictive budgeting. What enterprises overlooked was the convoluted mesh of devices, applications, and networks all tied together. 

If developing a simple app could be complex, then imagine the extent to IoT which involves both software and hardware engineering. As project managers lock horns with decoding the art of IoT budgeting, we have compiled a cost estimation analysis at every stage of IoT development. The following guide provides a minimum cost for a usual IoT project. 

IoT development is broadly categorized into the core areas of hardware, infrastructure, and application development so we have done the cost estimation accordingly. 

Here’s what you were looking for. 

Hardware – (Mechanical & Electrical Development)

 Starts at 100,000 USD for production-ready hardware                                                            

Since hardware costs could take 70% of the entire IoT solution development cost, the budget effectiveness is decided at this level itself. From procurement of the smallest component to 3D Modelling and then further to licensing & permissions, there’s extensive analysis to be done here. 

While the cost greatly varies as per the sector and complexity of every solution, hardware cost estimation in IoT spans across –

  • Analysis: Based on the finalized concept and the maximum allocated budget, the technical specification is laid out. 
  • Electrical Modeling: Creating Printed Circuit Board (PCB) layout schemes, internal system visualization in 3D and Schematic Circuit Design and COGS estimates
  • Mechanical Modeling and Industrial Design: Focus on 3D modeling & 3D printing, design sketches, integration with electrical components
  • Firmware Analysis: System architecture definition, driver design and embedded component design, test case evaluation, mobility compliance evaluation.
  • Prototyping: Producing a workable model of the solution in minimum hardware and to evaluate the business logic.
  • Hardware Testing Automation Setup: Custom engineering an automated test jig for testing new hardware being mass-produced at factories. 

As the above phase is iterative, researching, procuring and prototyping are the core differentiators. Therefore, based on the intricacy of the build and the service it delivers, the cost could vary. While hardware development of a complex home automation solution could cost around USD 500k, a simple wrist band sensing the physical activity could also take 500k USD, for a production-ready design.

As far as certifications are concerned, most reputed regulatory licenses (hardware and electric) could cost anywhere around USD 10,000 – 100,000. These include the FCC certification, UL/CSA Certification, CE Certification, and ROHS, water and dustproof certifications such as IP68 etc. 

Infrastructure (Network & Middleware Development)

Starts at USD 70,000 for production-ready setup

The infrastructure signifies the ‘internet’ in the ‘internet of things’ and is responsible for tying together devices, appliances, interface systems, and processing applications into a unified network of resources. Therefore the cost estimation at this level can be further classified into: – 

  • Procuring and establishing wireless networks, LoRa, Bluetooth, NFC, and Cellular, etc.
  • Developing Middleware solutions to enable device-device, device-app, and app-app communication.
  • Storage solutions for cloud-based or data center infrastructure 

An integral component of the infrastructure is end-to-end predictive maintenance and monitoring system development for the entire IoT solution being developed. This also includes the software for remote device and network management. Since continuous and automated data acquisition is the underlying objective of the IoT, it is crucial to include these systems in the cost estimation. 

Although front end development is an essential phase in the landscape, most IoT project costing is dominated at the hardware and infrastructure phase. Not only are these highly complex but also hold up to 80% of the share in the total project costing. Not to mention,  if the middleware includes Artificial Intelligence (AI) enabled algorithms, the overall cost would increase significantly. 

Therefore, enterprises who have mastered these steps don’t face any costing inconsistencies with the front end development or during Annual Maintenance Contracting of the system.

Ioterra, a B2B IoT Marketplace has developed a tool called IoT project cost estimation calculator. The application comprehensively covers the discussed two core areas of the project. Therefore, all the modules at the procurement, design, engineering, and infrastructure level are included in the estimation analysis. The cost estimator performs various permutations of the plan and assesses the impact of all the modifications on the overall costing. 

Adding devices such as sensors, or features such as waterproofing or long battery life, etc. will fluctuate the cost and show in the final report. So be it the COGS estimates, integration management, 3D Modelling / 3D Printing, or defining system requirement and architecture, the modules can be handpicked to form individual line items of the total estimated cost.   

Besides saving effort, such an app prevents promising IoT implementations from underestimating the project costs which is a major reason for aborted projects.

Application Development

Starts at USD 40,000 for production-ready setup

Software development including frontend and backend is equally critical as it includes resourcing programmers, UI designers, integration consultants, and project managers. While a simple IoT app could cost anywhere around USD 40,000, a more complex application that constitutes APIs, payment gateway integrations, or 3rd party data exchange of any kind could take the budget to USD 100,000. Few factors that govern the cost of software development include – 

5 major factors might influence your development budget:-

  • The degree of complexity at the UI and UX level
  • The level of security expected
  • The type and number of devices the app should worth with
  • Operating Systems and 3rd party integrations 
  • The team size of the resources deployed


This was an overarching understanding of how less or more an IoT design, development and deployment could cost. Given the unpredictable scale of stakeholders involved, the planning has to incorporate the vulnerabilities at the module level. Henceforth, it is recommended to follow a thoroughly researched predictive costing approach so that risks are mitigated at the right time. 

The total cost might still deviate but not to the extent of shutting the project before the launch. 

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