IoT Adoption : The C-Suite Perspective on “Build vs. Buy”
Bringing an IoT-enabled product to market means designing and implementing tightly integrated embedded systems for existing or new product lines. The technical challenge is matched only by the organizational, legal and logistical challenges that accompany IoT development.
Even seasoned OEM leaders can benefit from systematically reviewing considerations that inform the decision to “build it or buy it”, including the cost-benefit trade-offs amplified by the nature of IoT development… on every project.
If your company is committed to integrating IoT into your products, the question arises, do we do it in-house or outsource – essentially, “do we build it or buy it”?
It’s far from an engineering-only question; it’s a potential organizational commitment.
Of course, if your engineering managers can’t get behind an in-house build, it may not be an initiative you want to force, and your best option IS to partner. Preferably with the most experienced embedded systems partner you can find.
However, if your engineering managers can back an in-house effort, it is important you and they fully understand the “ask” you are making of their organization, and it’s not just bravado, to shoot for the stars without a clue how to get there.
After all, getting products to market on time and on budget is a never-ending challenge, especially when new technologies and frameworks are involved, and the penalty of losing first-mover advantage, because you’re too slow, can run into the millions with mass-market products. So, let’s not fool ourselves over the complexity of the task and the risks, when there are a lot of unknowns in the technology choices before you.
Instead, let’s ensure you’re armed with some IoT-specific facts – the challenges, costs, and hidden risks inherent in development – to help guide your key stakeholders along the best path to successful IoT adoption.
Engineering Buy-In
The prospect of an IoT build-out can sound enticing to your technical managers. After all, engineers gravitate towards “build” like surgeons gravitate towards “cut”. It’s what they do.
But your managers know their teams better than anyone, and even If you do have some or most of the skills and capacity you need, on paper at least, the decision behind “build or buy” is very often more nuanced than it appears, and the level of effort to “build” can often look deceptively small.
Time to market, or time to MVP should be your North Star.
Ensure your Managers Understand the Level of Effort
To establish a realistic picture of the total effort, let’s look at both the extent of the technical challenges in IoT development along with those ancillary concerns, like governance, security and associated topics, that rarely interest engineers.
Design Imperatives for IoT
Despite the abundance of literature to the contrary, IoT isn’t a new “technology”, but rather a mash-up of existing ones. That’s one reason an in-house build can be so alluring – you know how to build all the pieces but that is not the challenge.
Orchestrating the interactions and functionality of all the components, in an environment where they have limited power sources, challenging conditions, and far less than the usual computing resources, is an entirely unique proposition.
All the line items can look like they’re covered, when what really matters is what’s between the lines. It’s not just the engineering effort that’s new, but the estimation of that effort itself, that must recognize truly novel challenges.
The big challenge is orchestrating multiple components into a tightly packaged system of embedded software and (typically modular) hardware like a microcontroller unit (MCU), all in an environment with scarce computing resources – almost always constrained by tight physical dimensions and low power.
Engineering Effort
The fact that IoT systems draw so much on multiple existing technologies makes it easy to downplay the real risks that arise from integrating all the pieces.
For OEMs just entering the market, the embedded systems used in IoT pose new engineering challenges, and frequently means clearing a series of unfamiliar hurdles along the way.
Beecham Research has found that having the right in-house expertise is rare—87% of companies they surveyed felt that they lacked the right expertise to select and procure the right approach to device connectivity.
Either way, as IoT devices bring AI/ML to the edge, you’ll need developers and engineers with a broad range of skills to connect IoT devices, create user-friendly platforms, and align IoT services with business goals. Expertise is scarce, so it’s critical to assess whether or not you can attract and retain that talent.
Not all of the effort is in engineering. The technical part of development comes with responsibilities for governance.
Legal and Logistical Issues
Even with high confidence from your technical managers, they may not be able to tell you everything you’ll need to do to support them. All those novel challenges in IoT also come with a responsibility for the legal and logistical efforts that support development.
These things aren’t necessarily on an engineer’s radar. Some examples:
- Compliance and Ethical Considerations
Ensuring the system and firmware complies with both existing and emerging regulation, and guidelines. That means managing software development and DevOps responsibly, to ensure conformity with ethical, privacy, and fairness considerations to adhere to general privacy laws like GDPR, industry-specific regulations, or internal compliance policies. - Certification
Getting certifications that your IoT components comply with industry, ISO, regulatory, and security standards – CE marking in England and the EU, FCC certification in the US, and RoHS everywhere, to name just a few. - Data Governance
Managing the security, and integrity of the data generated and ingested by the system is a common requirement across many types of systems. But in IoT, it often demands careful trade-offs between allocating compute resources at the edge versus in the cloud.
Governance in IoT product development is crucial for meeting legal obligations and ensuring the long-term product viability. The leadership required to manage these issues is outside the scope of engineering, even though they must be accounted for in design. From a planning perspective, governance implies cross-functional issues requiring collaboration among technical leads, project managers, and compliance officers or legal staff.
Optimal Tradeoffs and the Nature of IoT
With our laundry list of challenges in mind, let’s examine the relative merits of particular tradeoffs while also noting that your options are more than simply binary. There’s some room to maneuver around the landscape of resource management, financial, and time-to-market trade-offs to tailor your approach to your business model.
Running Before You Can Walk
Three specific concerns support the wisdom of partnering with an experienced IoT vendor to accelerate your first IoT effort, even if your long-term strategy involves building up your internal practice:
- Slower time to market allows competitors to outpace you
- Scaling (what) on your own is incredibly difficult (why )
- A bigger up-front investment means a longer payback period
The right IoT partner can mitigate initial risks, no matter your strategic direction.
Slower time to market allows competitors to outpace you
When building an IoT solution from scratch, you’ll need to spend time assembling technology building blocks before you can even start building the value-added applications. Meanwhile, you’re already behind competitors who outsource or have existing IoT practices. The analogy is the weeks it takes to procure, build and configure an on-premises data center, versus the hours or it takes to spin up cloud computing resources.
Scaling on your own is incredibly difficult
Companies with sufficient in-house expertise can often build a workable prototype, but can’t make the next leap to scaling. Prototype building is far different from the challenge of scaling to the kind of enterprise-grade IoT solutions required for manufacturing, where requirements are unforgiving for high availability, security by design, scalability to tens of thousands of devices, multi-tenancy, fast recovery times, and efficient management. And when it comes time to update the software at scale, you are on your own.
A bigger up-front investment means a longer payback period
Building your own IoT solutions generally means investing a larger upfront amount. You need to build the baseline, non-differentiating components of an IoT platform you would otherwise get out of the box. Higher up-front costs, makes corporate buy-in challenging—to say nothing of the resources you are diverting from other parts of the business.
Hurdling Barriers to Entry
In some ways “build or buy” is a false binary.
IoT solutions are not projects with defined start and end dates, and the development required doesn’t lend itself to a “build, sell, and forget” lifecycle. Rather, they are more like services that you have to support with ongoing maintenance, customer support and improvement.
Even if you have strategic plans to build an in-house IoT practice, there’s no requirement that you launch headlong into development up front, with all the capex and massive schedule risks that implies. For most OEMs, building an IoT practice will be a process and it makes sense to decouple that from the imperatives of getting to market quickly and avoiding costly mistakes.
As you build in-house capacity, by outsourcing your first IoT offering, you can ease into independent development, and your key technical leaders can learn by engaging with embedded system engineers, absorbing the kind of process, design, and engineering lessons that will inform and refine staffing and logistical decisions.
Seasoned IoT vendors can also collaborate closely with your SMEs to lend experience to design and prototype phases, for example, to help mitigate risks that come from unfamiliarity with the new challenges we explored above.
The Strategic Business Decision
Frequently the business case for IoT adoption all but writes itself. But the separate question of “build or buy” is full of trade-offs – some obvious, some not. The underlying calculus clearly involves assessing both qualitative and quantitative variables, many of which are not readily apparent up front.
In recent years, the reported success rate for internal IoT projects – just those that make it to market at all – has been routinely under 25%, with many study respondents echoing the theme that what “looked good on paper” turned out to be far more challenging than anticipated.
As a general rule, just tackling new technologies in-house commonly means risking 30-50% schedule slippage – often worth millions in first-to-market advantage. Those are statistics, and clearly some organizations have made first-time IoT projects successful, and maybe your company will be one of them.
Doing IoT internally, from the start, means making a significant investment up front, and it means extending the payoff time. That can eventually pay dividends, but a measured transition can offer a similar ROI.
That’s why in many cases the decision to buy comes down to comparative advantage: by partnering with a seasoned embedded systems developer, you can be confident that the end-product will meet your requirements, on time and on budget. It’s about mitigating the risk of missing target dates, not putting over-committed resources through endless crunch time, only to produce a design that doesn’t scale, or worse, not even reaching MVP at all.
By engaging an experienced partner, your business effectively offloads the unique risks and headaches that accompany IoT, you can better predict project costs, and you retain the option to reallocate the opportunity cost by using the full capacity of your engineering team where it makes more sense.
When it comes to architecting and engineering the whole, there’s no substitute for experience-driven creativity. The right partner can provide a level customization you would expect with an in-house build, accommodate scaling issues, and navigate your project around the standard pitfalls.
With the global consumer IoT market alone expected to expand at an annual rate of 12.7% from 2023 to 2030, from a value of $220.50 billion in 2022 (GrandView Research), full service embedded systems developers will flourish. With new developers entering the market all the time, membership in one particular category of IoT vendors will never increase: those that already have a track record of 20 years of success on the edge.
We’re well beyond the early adoption phase for IoT. In many verticals IoT is quickly transitioning from nice-to-have to a market expectation that includes a demand for more and more intelligence at the edge. That means the kind of highly efficient AI and machine learning traditionally found in the cloud is finding its way to the edge, faster than many people imagined, thanks to hardware advancements and ever-improving AI software frameworks.
For now, adopting an effective IoT strategy by partnering with an experienced developer can get you to market quickly with what is proving to be an increasingly powerful differentiator for both consumer and industrial OEMs.
What’s at stake is your time to market and ultimately your bottom line.
