Are you out of budget for the next phase of your IoT solution development? Do you have sufficient resources to cover the extensions and delays in the current phase of your project? Do these seem like familiar issues to you, considering your IoT project development? We have seen many situations where this kind of budget constraint comes into play in a software development project. There are several reasons that cause this kind of issue.
Scale of Development
Typical enterprise IoT projects are multi-year endeavors that require investment in software development, hardware development, product marketing, and all other aspects.
Typical hardware companies, who do not have background experience in software development, underestimate the costs that would be required to build a solution. Sometimes, what is also underestimated is that the cost of maintaining the solution and upgrading it will keep increasing over time. This is because as an enterprise project grows and succeeds, it needs resources in different aspects: more developers, more QA members, more people in the development team, more people for cloud administration, more people for security, a significant presence for frontline support and feedback management. All these aspects increase as the project starts to scale up, and this is normal and expected in an enterprise project. However, sometimes due to shortsightedness, we think that Phase 1 is the most valuable thing that we are building for our customers and that they will pay us lots of subscription money just to use the features of Phase 1.
This doesn’t typically work because the people who are using your phase one product are your early adopters. You will get real-time feedback from them, and you will try to implement that feedback and improve your product. If you succeed at this stage, your product will grow, and the development requirements will also grow. Without new development, you cannot reasonably expect an enterprise IoT project to thrive.
The other aspect that causes search constraints is the conservative approach of “wait and watch”. Many times, management makes a decision saying that we will wait and see the results of phase one before we enter the next development phase. However, the success of phase 1 depends on us taking the inputs from stakeholders and implementing them. Implementing early feedback is important to convert early adopters to long-term adopters. However, this feedback alone is not enough. A product needs to continue evolving and improving to meet the changing needs of its users and the market. Without ongoing development activity or the wait-and-watch approach, we are setting ourselves up for failure. This issue can typically be prevented by planning for the long term. Knowing the project life cycle, estimated activities, and associated costs can greatly aid in this type of planning.
A clear understanding of the estimated costs and activities associated with the entire lifecycle of a project is crucial. This will enable informed decisions about budget allocation and prevent budget constraints.
Revenues from Subscriptions
Another thing to note about project budgets is that the financial models should consider the revenues and gains from sources other than subscriptions. Financial models that overestimate the revenue from subscriptions or its contribution to the total gains from an IoT solution will end up with budget constraints. There are multiple benefits to an IoT solution. The top ones are that customers are more loyal, which increases your brand preference, making you a preferred brand for customers. It generates additional revenue in terms of services and sales to our distributors, and these factors are larger sources of gains than subscription revenue. Estimating this increase in increase customer lifetime value (CLV) will help in building more robust financial models.
If you are currently facing budget constraints, evaluating your financial models and ensuring that they take into account all potential revenue streams, not just subscription revenue, can be a good starting point.
These are the top three reasons that you may be experiencing budget constraints. Which one of these can you relate to? Which one have you seen happening in your own project?
Have you faced any budget constraints in your IoT project? If so, what measures did you take to overcome them?