Without Device Longevity, the Internet of Things Will Never Be
In our first post, we showed that the Internet of Things (IoT) offers a simple and scalable business case that is best served by Low-Power Wide Area (LPWA) wireless connectivity. In this post we’ll discuss why LPWA is the foundation of the IoT as a technical and business solution.
The L in LPWA
Why all the fuss over LPWA? It helps to start with the ‘L’ (and ‘P’ really) in LPWA. ‘Low power’ reflects the fact that technologies qualifying for the designation are able to consume very little battery power over very long periods of time. As an example (and maybe tooting our own horn a little), my company, Ingenu in partnership with WellAware, supports a digital oilfield application with a battery consumption level that yields performance over 20 years. Additionally, firms like Link Labs have developed LoRa-based tech for local area networks that provides battery life of 7+ years. So clearly, any technology designated LPWA needs to provide that low power connectivity.
‘Low power’ is really a manifestation of a much broader and more universal problem wireless connectivity needs to solve for the IoT: longevity.
But ‘Low power’ is really a manifestation of a much broader and more universal problem wireless connectivity needs to solve for the IoT: longevity. Longevity is defined as long life expectancy or in terms of technology: a long device life cycle. As applied to wireless technology, longevity means the wireless tech should allow for, and further, enable, a long device life cycle. And long means something different to IoT devices than it does to typical consumer handheld devices. If you have a smart phone older than two years, or even one year, your device is often seen as “old” technology. But for most IoT applications, like those enabling the smart city, the device life cycle is 10 to 20 years or more. For instance, it doesn’t make sense to replace the wireless module in smart streetlights every few years. Once placed, devices supporting infrastructure and enterprise assets need to be left alone in order to gain the cost efficiencies they offer. It simply costs too much to send someone out in a truck every couple of years to tinker with the things.
Simple IoT ROI Reality Check
To help us ground our thinking, let’s check out a simple example calculating the ROI on a device investment. The numbers used in this example are completely hypothetical but represent the notional ideas common in the LPWA space. We’ll assume the investment can bring us a return (or savings through greater efficiency) of $5 a year after all costs are accounted for.
At first blush, this seems like a no-brainer investment. However, let’s take into account the longevity of the device’s technology which we will vary in this example from two to twenty years. Device life encompasses any change in condition that would require a truck roll. Truck rolls are expensive and often show up as hidden costs. Truck rolls would include replacing a battery or replacing the wireless module because the tech is sunsetting (as happens just about every decade with cellular technology). Expected years in service represents how long the device will be in service including any truck rolls needed to keep it working. Truck rolls will most likely be outsourced to a service provider. A truck roll is assumed to cost roughly $350 per device, which frankly, is conservative. A more realistic truck roll cost may be upwards of $500.
The second table shows the annual savings from owning a device with the given device and expected life cycles. The table shows that a device with truck rolls every 5 years to, say, replace a battery, and an expected service life of 15 years would have two truck rolls (one at 5 years and another at 10 years). The cells highlighted in black show the annual savings of $5 with no truck rolls. The cells in gray show the loss (negative savings) that results from needing truck rolls (because the device life cycle is shorter than the expected years in service).
What becomes clear is that truck rolls are an IoT investment killer.
What becomes clear is that truck rolls are an IoT investment killer. In each case, the device life needs to be at least as long as the expected years in service in order to be profitable. As soon as a truck roll is required, the expected savings disappear. In order for an IoT investment to make sense, the savings have to increase 28-fold even to be considered. This result is logical, but the example helps really drive that home. Here’s the beautiful flip side: with the longevity LPWA provides, it makes sense to invest in areas that require a much lower estimated savings per device. This is precisely how the IoT brings about the efficiencies it is proclaimed to bring.
Here’s the beautiful flip side: with the longevity LPWA provides, it makes sense to invest in areas that require a much lower estimated savings per device. This is precisely how the IoT brings about the efficiencies it is proclaimed to bring.
Economies of L
The longevity enabled by LPWA is manifested in long device life cycles. As just shown, these long device life cycles are the foundation of the economies of scale achievable by the IoT. A reminder from Econ 101: economies of scale are achieved by stretching fixed costs (like device costs) over a greater number of units (including time). Longevity then, is the “stretching factor” leading to a higher return on investment (ROI) for IoT device deployments. The premise of the IoT is to bring unprecedented efficiencies across the economy, from the enterprise to the household. These efficiencies are built on top of the economies of scale that longevity enables.
There is a subtle and often overlooked point here that should be emphasized: longevity isn’t just a nice side benefit for the IoT or interesting side effect of LPWA technology; longevity is the very foundation of the IoT’s entire value proposition. In short, without the longevity that LPWA enables, the IoT would be unable to realize its purpose.
longevity isn’t just a nice side benefit for the IoT or interesting side effect of LPWA technology; longevity is the very foundation of the IoT’s entire value proposition
Longevity is necessary to garner any demand for IoT devices as it enables the ROI that justifies investing in them. Return on investment greatly hinges on the usable lifetime of IoT devices. The longer they can function as intended, the better the ROI and lower the total cost of ownership (TCO). Because demand for IoT devices has thus far proven to be extremely price sensitive, it will be essential for device manufacturers to attain economies of scale so that their devices’ prices can be at the level businesses and consumers are willing to pay.
Businesses and others investing in IoT devices will achieve greater economies of scale the longer their investment can be utilized without additional expenditures. If manufacturers were to attempt any sort of “planned obsolescence” scheme, the demand would quickly dry up because prices in this space are so elastic. The long device life cycle, therefore, not only enables businesses and consumers to invest in IoT devices, but also allows manufacturers to gain the ROI necessary to be profitable at such a low price point.
This price sensitivity can be good for manufacturers. Longer device life cycles allow for a longer time period to stretch design and capital assets across. First, the device makers will reach scale as they are able to produce enough devices over which to stretch their fixed costs. These costs include design and testing costs, certification costs (where applicable), and their own capital costs for manufacturing. Because device prices need to be sufficiently low to achieve broad adoption in the market, the margin per device will not likely be very large. However, this margin can be increased as the manufacturer reaches scale through longer device life cycles and greater volumes. The long device life cycle plays into the need to reach scale quite nicely.
Longevity also enables a reduction in variable costs. As our simple example tells it, the lack of variable costs each time a device needs to be serviced is what makes an IoT investment possible. Many of our earliest customers were highly demanding utility customers, and they honed our technology by giving us real-world problems to solve. These problems challenged us to meet needs that weren’t the kind a committee could foresee in their discussion rooms. These customers wanted to eliminate a cost that already existed in their world: the need to send a technician out to find out what is actually happening at a meter.
the wireless tech must not only eliminate truck rolls, but also not introduce truck rolls because of short battery life or built in obsolescence
For the new wave of IoT applications, it is essential that the wireless tech not only eliminate truck rolls, but it must not introduce truck rolls because of inadequate battery life or built in obsolescence (like the technology sunsets that plague the cellular world). That is why the longevity that long battery life allows is such a core part of LPWA’s value as the connectivity solution for the IoT.
longevity is the key to achieving the economies of scale that enable investing in the IoT broadly and deeply throughout the market
Conclusion
To unlock the tens of billions of devices expected to join the IoT, we cannot be limited to only the lowest hanging fruit. As shown by our simple example, longevity is the key to achieving the economies of scale that enable investing in the IoT broadly and deeply throughout the market. Without longevity, only very high-return applications are worth investing in but with it, a vast field of savings opportunities open up. Only with LPWA’s longevity can we unlock the next great wave of the IoT.
Learn how Ingenu’s LPWA technology, RPMA, provides the only viable LPWA wireless connectivity by reading our white paper, How RPMA Works.
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