Improve ROI by building your IoT solution in phases

Over the course of this blog series, we’ve walked through one of the biggest challenges that customers face with IoT: How to begin. It’s not that the nuts and bolts of building an IoT solution are more complex than other technologies, it’s just that IoT is different from traditional IT implementations in that it is primarily a business investment.

Because of this, when it comes time to begin building out your solution, your approach should be a bit different too. The all-encompassing scope of an IoT implementation makes a phased investment the best approach.

Phased investments help minimize risk. Phases enable you to adjust and refine a small-scale deployment before expanding out across your business. Building the solution incrementally also reduces the risk of realizing an error, anomaly, or unforeseen issue in full production and having to rework every connection and integration point. When planned correctly, phased investments can also help you lower costs of future investments, boosting the ROI of the entire solution.

So what are these recommended phases? Good question!

Starting quickly helps sustain the momentum you’ve gained in the planning and budgeting process, and starting small helps you detect and address issues before you roll out broadly.

Once you’ve selected a vendor to work with, choose an initial deployment within your budget. At this point, it’s important to make sure the platform you’re building on is robust enough to expand to new scenarios down the road; you don’t want to run into platform limitations when it’s time to expand.

Pick a small subset of your targeted business case and work with your provider to deploy a proof of concept (POC). You may choose to connect 25 vending machines, for example, out of your targeted 1,000. Once your subset is connected, you can decide on business process changes, determine the most relevant data, and adjust the solution to better address your target business scenario. All of this provides a strong foundation for scaling the solution when you are ready.

At the same time, just because you’re starting small doesn’t mean you should limit the initial investment. Planning ahead can make expanding the solution faster and easier down the road. Your vendor may offer a bulk discount for installing sensors on all your targeted machines while you’re building out the POC, for example. Doing so may increase the initial investment and reduce short-term ROI, but subsequent phases will be cheaper and faster because the initial connections are already available.

After you’ve piloted the solution and refined it based on what you learned, the next step is scaling out to achieve the target business outcome. This may entail connecting additional devices or incorporating increased data volumes. There will still be adjustments during this phase as you continue to refine data streams and adjust business processes.

During this phase, the ROI can become more noticeable, as cost savings from the solution start to offset the investment. Adjustments made during the POC phase often contribute to greater ROI than anticipated, and any far-sighted investments you made initially will start paying off by lowering the costs of expansion. Your platform comes into play here as well. By choosing a platform that can easily expand and incorporate the new additions, the cost of expanding is lowered and the risk of surprises is minimized.

With a broader level of integration and increased flow of data, new insights become available, which can help you identify other areas where IoT could add value. As you start to realize returns from your IoT investment, you may start to see a case to address new scenarios and business needs.

Using the approach we outlined a couple of weeks ago, evaluate the costs of addressing new scenarios and calculate the expected ROI. Because the original investments are already in place, ROI should be higher and break even sooner. Start small by adding one or two new capabilities to the existing system. Refine the data, determine business processes to alter, scale the solution, and repeat. In some cases, adding new capabilities may completely transform business processes or create entirely new ones.

Regardless of where you are in the IoT evaluation process, Microsoft can provide tools and resources for every step of the journey—from developing a business case and calculating ROI to rolling out a full solution. If you’ve read all four of the posts in this series and you’re ready for a deeper dive, be sure to check out our latest whitepaper “Addressing ROI in Internet of Things Solutions”.

For more about how companies are realizing new value and taking their business to the next level with IoT, make sure and visit

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