The True Cost of IoT | EP 22

Carson: Welcome back to our Link Labs podcast, Get Linked. I'm your host, Carson Garner, and we've got another great episode coming at you today. Returning for the second time to our Get Linked podcast is our CFO, Jennifer Halstead. Jennifer is an expert in startup and early stage financing and plays a vital role in the projecting, forecasting, budgeting, and reporting the capital required for Link Labs’ go-to market strategy. With more than 20 years of experience in finance and legal compliance, Jennifer also plays an essential role in the company's marketing, human resources, operations management, and so much more. I could go on and on. Prior to joining Link Labs, Jennifer worked with multiple software startup companies through their growth and acquisition stages similar to what she's doing with us here at Link Labs. And we're so blessed and so thankful to have Jennifer as a part of our company and to have her join us back again on the podcast today. So Jennifer, thank you so much for joining and welcome to the Get Linked podcast!

Jennifer: Thanks, Carson. I'm excited to be here today.

Carson: Yeah, we always love having you. This is actually your second time joining us. So thank you for joining, and we're glad that you didn't get too scared of coming back on and joining with us. But for those who didn't catch our last episode – I think it was episode six or seven – could you tell our listeners a little bit more about yourself and your experience in the IoT technology field?

Jennifer: Sure. I came to Link Labs in 2019 after having worked with multiple software companies, taking them from startup through growth acquisition. My expertise is in building companies and helping customers solve hard problems by utilizing technology. I've got a finance background. I'm a CPA. I started my career in public accounting and that served as a great backdrop for helping companies, both those I work for and their customers, with strategizing around managing expenses and creating new revenue opportunities.

Carson: Yeah, yeah. And you know, like I was talking about, you do a lot at Link Labs. You have and wear a bunch of hats and, you know, we talk about that a lot. But, you know, today we want to discuss some common misconceptions around the cost of asset tracking solutions. And I thought you'd be the best one to bring on because you have such a wide variety of knowledge in the finance world. So what would you say, you know, are some types of costs that companies need to consider when evaluating some type of IoT project?

Jennifer: So hang with me here because there's a lot of them and I'll try to go through them fairly quickly. But we like to think about those main costs in six buckets. So the six things you need to consider when you're considering an IoT technology project. If you don't consider all of these, you're gonna have inaccurate cost information and the decision might not be the right decision, so you definitely wanna consider all six of these.

Jennifer: The first one would be tags. For a large-scale project, this is going to be the largest cost, because every item you're tracking needs a tag. There's two ways to drive down this tag cost. The first one is mass produced tag hardware. There are a lot of BLE tag providers that are manufacturing tags at very large volumes. If you can work with one of these companies and use a tag that's already been developed, you're going to save a lot more money than custom-designing a tag. The good news is there's already thousands of form factors available in the marketplace. So using a mass-produced BLE tag is going to get you the best pricing there.

Jennifer: The second piece when it comes to tags is thinking about your batteries very carefully. Batteries are one of the more expensive components of a tag. So if you have a disposable use case, you need a battery that's very small and short-lived so that you're not paying more than you should for that tag. When you have a use case where you need a very long battery life, you need to be able to extend that battery life. And when you can take an off-the-shelf product and extend that battery life, then you can drive down the total cost of your platform very significantly. At Link Labs, we do this with a patented firmware on that mass-produced tag so that that tag is going to last three to four times longer than standard. Now you're getting much more value, much lower cost over the life of the system when you're amortizing that tag cost because you're able to extend that three to four times what you would otherwise. Also, we’ve got complete configuration capabilities so that you're only using that battery when you need it; you don't have your battery on all the time draining that battery. In most systems, that's how they operate. But we changed that around so that we can really drive down that tag cost.

Jennifer: The second cost is infrastructure. There are some types of IoT technology like RFID that have major infrastructure components that can be very expensive. We've talked to some where just even one piece of the infrastructure costs like $5,000.

Carson: Wow.

Jennifer: That's crazy expensive and that puts a whole tax on the entire system and really drives up that cost. The other thing, when you're thinking about infrastructure, you want a low infrastructure cost. You also need to consider the Wi-Fi design and whether the system will be part of your current Wi-Fi network or whether it will run independently of that. A lot of companies don't want their IoT platform on their corporate Wi-Fi for security reasons, so that's a big consideration as well when it comes to infrastructure.

Jennifer: The third major cost is installation. Will there be union involvement or certifications required? How is the system provisioned? How is it calibrated? Does additional equipment need to be rented for that installation? What type of man hours are required to install to set up the tags and get the system operating? Is this going to be done all at once or is it going to be scaled over a rollout period? There's a lot of questions to consider when you're considering the cost of installation. And some of these may be a little bit more transparent than some of the other costs.

Jennifer: The next cost is data transport. Once you have your system installed, now you're dealing with a lot of data. That's the whole point of IoT, right, getting all of that data and getting that information. If you process everything in the cloud, you've got to transport that data from your tags and your infrastructure up to the cloud. That transport time can create latency, so you're not getting as real-time as you should, and there's a significantly high transfer cost to that data. At Link Labs, we do this by edge processing at the tag so that we're reducing the costs of the data transport 100 to 1,000 times percent, which really drives that down.

Jennifer: The next cost is cloud costs. So hang in there with me. We're almost there, right? Number five. Once you've got your system installed, you're generating the data. You're getting it to the cloud. Now you need a massively scalable cloud backend to utilize that data and create the reports that are going to provide the information that you need. Even if you're integrating into an operational platform, you still need this cloud layer capability with device management capability and a cloud data lake that has to be maintained. So there's a cost to that.

Jennifer: And then the last one is maintenance, so managing the firmware for infrastructure and tags. Some systems don't allow firmware over the air or auto updates, so you can't make any changes once you've implemented them. And you have to budget for the time to manage the devices, maintain the calibration, and keep the entire system operating like it should, as well as outside support from whomever you're buying from. So that's a lot of costs, Carson.

Carson: That's a lot of costs to consider, but I think you have it on the head. And I wrote down a couple things just for my own notes. But like you said, form factor of tags, we at Link Labs have the ability to give so many different form factors to meet different use cases, to help different needs from customers, as well as being Wi-Fi independent. You know, our solution is Wi-Fi independent. And just a couple things that you said is just right on the head. And I think, you know, investing in a solution like ours is a great thing because it saves you so much time and money and different things that you would have to invest in if you try to do it on your own. So, and it's true that there is a cost to IoT, but a common misconception is that IoT technology as a whole is expensive and not worth the investment. Why do you think that people believe that? And why do you think that it's a misguided assumption?

Jennifer: Yep, we just spent a bunch of time talking about all those costs. That's a lot of costs to consider. And it actually, when you lay it all out like that, it can feel a bit overwhelming from the cost side. But there are ways to significantly drive down these costs. And that's one of my favorite things about Link Labs is we're evaluating every single one of these and how to drive down the cost on each one. I'm a CFO. I care about cost. Every CFO I know cares about cost, but the best CFOs care more about value than they do about cost. Is the IoT project going to create significantly more value than cost? And that's where we get on to return on investment.

Jennifer: So two things here. First, you use the word investment. I like that word, but I think it can even be a little bit misleading here because when you think about investment, you think about making a deposit and then seeing a return on that deposit gradually over time. If you go to the bank, you're going to put in a bunch of money and you'll see little bits of interest over time that accumulates into that return on investment. But IoT can be different than that. What if you could put a small amount down and see a 2x return on that in the first month? Traditional systems often have a payback of over a year or even a couple of years, right? When CFOs are evaluating capital projects, they're looking at the return on investment usually over a multi-year period when it's a large investment. But for eligible companies at Link Labs, what we do is we offer an IoT platform that allows you to pay monthly, so that you're realizing the return as you go. You pay just a monthly payment and you're recognizing that return on your investment immediately.

Jennifer: Second, if that IoT platform is not driving a significant return on your investment, you shouldn't do it. If you're not seeing in month one, the value created immediately from your investment, then you need to consider that very carefully. Most of the customers that come to us, I'd say about 90%, the return on investment is clear, it's immediate, they're recognizing that right away. But I do get some who I will call, maybe come with research projects. They come with inquiries, well, what if we could do this, or it would be nice to do this, but there's not a real hard driver around why they're trying to do what they're trying to do. In those cases, if you're trying to solve something where the dollars and cents just don't make sense, we're going to tell you right up front, don't do it. So you just have to be careful there, but I would say most of our customers are seeing between three to twenty X return very quickly as they roll out that IoT project.

Carson: Yeah. And I think being in sales, I see it a lot with the different customers that, you know, inquire about Link Labs and inquire just about our asset tracking technology. We don't want to put them in the wrong driver's seat, right? We want to give them what fits them, and we want to make sure that the ROI's there, always. So that makes a lot of sense, because we want to make sure that everything is in place for them to succeed. So, yeah, that's absolutely true. 

Jennifer: And that's part of our integrity, which I think is core to who we are as a leadership team and as a company. 

Carson: Absolutely.

Jennifer: Right, we're gonna do the right thing for our customers, even if that means sending them to a direct competitor. We're going to find what works for their solution and be the trusted advisor that points them in the right direction. 

Carson: Yeah. Well, even with these cost concerns, I've seen that IoT has grown in necessity over the past couple of years. And I've heard that it's leading to the cost of IoT solutions decreasing. Is this true? And how is this affecting the industry as a whole?

Jennifer: IoT demand is definitely coming back up. We're seeing those companies that were slow to move, now that they're rolling out like industry 4.0 and industry 5.0, they're moving and considering IoT. When you look at the Gartner hype cycle, IoT is moving into what they call the slope of enlightenment. So that means you've passed the peak of inflated expectations, you've passed the trough of disillusionment. That's moving behind us. More and more companies are recognizing their need for IoT. That creates more demand and what it does is it drives down costs as companies become more competitive and as more mass-produced items are available.

Carson: How would you say that this effect has been seen in our company? Or do you think that it's been seen in our company as well?

Jennifer: I'd say absolutely. We're able to secure better pricing for our customers when it comes to mass-produced hardware. We're also constantly focused on driving down all the costs, so each one of those layers of costs that we talked about, we do that with our own technological innovations, but also by using what's already available in the marketplace.

Carson: Yeah.

Jennifer: An example would be in the evolution of open source solutions for backend architecture. We've been able to significantly drive down data and data lake costs through massive scalability and new technologies that didn't even exist a couple years ago. So now with that, we can drive down those costs, and we pass those cost savings through to our customers. We really believe that IoT cost is a critical driver for our customers. As you drive down the cost of IoT, it opens up the marketplace, and it opens up those use cases so that more things can be tracked and customers can get more information and make better decisions.

Carson: Yeah, so it seems like the goal would be to not stay complacent, to always be searching for different ways to drive down costs and make sure that the solution is where it should be.

Jennifer: Right, and to do that in a way that's most affordable. So sometimes that's inventing something, and we hold a lot of patents around this technology. In other cases, it is using something that's already been in the marketplace and putting it into the system. And it's that combination that really drives down that cost.

Carson: Yeah. Well, with all these components that go into these systems, it makes sense that the different IoT companies are going to change in different ways. How are these pricing models designed, and how do they affect the overall cost of the system?

Jennifer: You're going to find IoT priced in one of two ways. Some companies have a large purchase model where you purchase all your tags and all your infrastructure upfront. You're making that large investment that you're going to recognize value over time, often years, while you're continuing to pay for both annual support and maintenance. Link Labs is different. We've got a simple subscription pricing for those who qualify for financing. This enables you to realize that ROI every month without a large upfront purchase. Companies can decide if they're going to use their capital lease budget or their opex budget so it's super flexible. And it means there's no hidden costs. The entire platform, infrastructure, tags, installation, data cloud, transport, cloud costs, maintenance costs, everything's included in that low monthly fee.

Carson: Yeah, yeah, that's great. And I think having that ability to put it all together is great for the customer because it really, you know, saves on that cost. And I don't mean to call anybody out, but many times, I think companies try to create their own asset tracking solution. In sales, I see it a lot when people come to us and they said they've tried the Apple AirTag or they tried the Tile tag, and it just doesn't seem to work as well. We did a whole podcast on this, and it's our most viewed podcast for a reason. Because I think a lot of people first seek these crowdsource technology devices before they want to invest in something so big. Do you think this has led to a positive outcome for companies trying out these different technologies and trying to create their own solution?

Jennifer: So the crowdsourced things like Apple work really great for individuals. However, they're not scalable for a business. Unless, you know, if you've got less than 20 items. Then go for it; it's a great, inexpensive solution if you're very limited on what you need to track. Most companies are not in that spot. And, you know, we used to get this very frequently because it wasn't so much about Apple AirTags as it was around, “Well, I can pull all these components together. Why can't I just go buy off-the-shelf BLE tags?” and “I'm going to put my own IoT platform together and it's going to be a whole lot less expensive” and “it'll be easier to do this on my own.” You know, “If it's all mass-manufactured, how hard can this be?”

Carson: Yeah.

Jennifer: And while I still get that occasionally, Companies have learned a lot over the last couple of years that IoT platforms are much more difficult to scale than expected. Anybody can get a pilot project to work, but when you're talking about deployment and management of tens of thousands or hundreds of thousands of tags, it's a completely different scope. I think one of the reasons IoT hit that Gartner trough of disillusionment previously was because too many companies tried to do it on their own, and they found out that it was a whole lot more difficult than they thought it was going to be. Now there's companies like Link Labs to manage the entire end-to-end platform in a cost-affordable way, and we're seeing companies utilize what's available in the marketplace instead of trying to build their own.

Jennifer: I can say we've spent millions and millions of dollars, years, and we're the global leader in IoT location services technology because of it. We've got a lot of patents around it. The technology works in an unbelievable way. It's very differentiated. And so when companies try to pull all of this together, it becomes very expensive and very time-intensive to recreate something that's already available in the marketplace. I would also say as a side note, the companies that did try it on their own, they usually come back 12 to 18 months later because they were never able to get their project going.

Carson: Yeah, yeah. And that seems like just a lot of wasted time that they could have spent, you know, already invested in trying to set up a solution that's already there, already ready to go. 

Jennifer: Right.

Carson: But I think the maturation of the IoT market is something that would just come with time, right? You know, as time keeps going on, people are going to keep learning and keep growing. And so I think that's right on the head. That's right. 

Jennifer: Definitely. But it's, you know, one thing to consider, too, is where do you want to be in that spectrum? Do you want to be the company that's ahead of your competitors and already implemented the technology because you move super quickly? Or do you want to be running behind everybody because you tried to do it and reinvent the wheel?And I think that’s a big consideration as well.

Carson: Yeah. And I think many companies have different needs when it comes to IoT. So that's a big thing too, having those different needs. But do you think that means that they're gonna see different kinds of ROI? And what are some types of ROI that different companies might experience depending on the industry?

Jennifer: So there are both hard costs and soft costs in ROI. Hard costs are those things that you can easily quantify. Soft costs are sometimes even more important than the hard costs, but they're harder to quantify. They're harder to put dollars to. So let's talk about some examples and some of the ways that this is applied in different industries.

Jennifer: Ghost assets are the assets on company records that don't exist or they're unusable. A shrinkage from assets is when assets are stolen, they're lost, they're missing, they're thrown away. These can create some of those ghost assets. So when we think about missing assets, a hard cost related to this is going to be the replacement cost, insurance deductibles, or increased insurance costs. The company's spending more budget dollars replacing lost items than they should be. But there are soft costs related to this, too. Those might be audit costs or legal fees or compliance costs. I'm thinking of one healthcare customer who almost lost their licensing, because in a regulatory audit, they couldn't find their equipment. They didn't have the calibrations completed because those machines couldn't be found. On the election side of things, we have customers who see a significant reduction in their legal costs because the election commission can prove the chain of custody of that election equipment.

Jennifer: Labor is another component that has both hard and soft cost implications. Customers often find a direct labor savings component as employee time spent for something is significantly reduced. The soft cost implication on that is that now employees can spend their time on work that's more fulfilling and you see retention and employee satisfaction is higher because the company's enabling them to do their job and to do it well.

Carson: Yeah, and one thing that I'd like to add is in the logistics world, I think that's a big push for our company right now is transportation and things of that sort, but cold chain monitoring. I think that's a really, really big one in terms of compliance and keeping track and making sure that the food that's on the road and the reefer trailers aren't spoiling easily. And so I think that's a really good one as well to add to making sure that, you know, an ROI fits what they need, right?

Jennifer: Exactly. In the transportation and cold chain space, we'll see reduction in logistics costs. So making sure that the right driver has the right load, we'll see reduction in spoilage. So it's not just tracking the temperature of a load, it's alerting before a load is damaged so that corrective action can be taken and you don't have that spoilage. Improved compliance, improved safety of the products, and higher customer satisfaction through visibility and certifiable chain of events. There's a lot of conversation right now also about stolen cargo and how much the numbers have really increased over the last year on an increase in stolen cargo. And so IoT can definitely have an impact even on hiding some of these sensors so that, you know, it's not discovered when a load is stolen by the bad guys. They don't discover the tag, but then law enforcement can use it to track it down. And we've had some successful use cases there.

Jennifer: Work in progress would also be another area where we see significant ROI. So a company, a manufacturing company can use IoT to manage their work in process in real time. So in traditional Six Sigma, you're gonna look back, you're gonna do a review, what happened, why did it happen. But with IoT, you can now do that in real time, and you can solve problems in real time without having to do a lookback multiple weeks after the fact where you're relying on people's memories and trying to figure out what happened. IoT can provide real ROI with improved cycle time and velocity, fewer bottlenecks, fewer downtime or defects. And that improves the output, which is the goal, right? Higher output, higher productivity, generate more efficient labor allocation, reduce the waste and scrap, improve inventory forecasting, manage the supply chain, and increase that overall production. There's hard dollars to be found here, but there's also soft value with increased both employee and customer satisfaction.

Carson: Well, and I think in a lot of cases, our solution will pay for itself, right? Also, we have so many different benefits that we can bring for our customers, like customized reports and all of these different things that we can do to help companies and their different use cases, you know, to get that ROI so that they don't.

Jennifer: Yeah. And we help them figure that out right up front. And if it's not an ROI, we're going to tell them right up front. Um, but I would say in, you know, for all of our customers, they're seeing that real impact very quickly because they're making a monthly payment and they're getting that impact right away to their business, which is great.

Carson: Yeah, and one thing I did want to bring up is that you're the first one to wear our new Link Labs polos. I've been waiting for mine to arrive, but I haven't gotten it yet. So I wanted to be the first one to wear it, but you beat me to it.

Carson: Well, I guess my last question to you, and I think you're a great one to answer this because it's a budget question, but how does the potential ROI impact the company's budget for investing in IoT technology? Because do you think that it also impacts their decision to scale usage?

Jennifer: Yeah, so once you've established ROI, finding a budget is the easy part. Who isn't going to spend $10 to save $20 right away? Like it's a no brainer. And we talked about how our team helps our customers prove out that ROI and then guaranteeing performance to that specification, and we find that customers love the technology and scale happens very quickly. Because once you save more quickly, you want to accomplish that savings as quickly as you can. We called this podcast, The True Cost of IoT. And we talked a lot about costs, but really what that does is it leads us to is the true ROI in IoT. Because when you do things right, IoT brings an ROI that far exceeds the cost.

Carson: Wow, yeah, that's great. And I think that that goes back to making sure that, you know, ahead of time that the customer has the right ROI. And, you know, again, not putting them in the wrong driver's seat and just making sure that you understand the customer's use case, understand what they need and absolutely

Carson: Thank you so much for joining me. I know that we learned so much, I learned so much through this podcast. And you know, that's something I'm gonna use to go back to whenever I talk to customers, so I hope anyone who's listening was able to get something from this as well. If you have any use case that you would like for, you know, just to talk about with our sales team or with anyone from our team, you know, be sure to go on our website and click the book, the demo button, and we'll be sure to book a meeting with you, dive into your use case, and make sure that you are getting what you need from a cost perspective.

Carson: So Jennifer, thank you so much for joining me. If you could just tell our listeners how they could get in touch with you if they have any questions about IoT technology or cost of IoT technology.

Jennifer: Yep, you can reach out to me via LinkedIn or at jennifer.halstead@link-labs.com.

Carson: Awesome, thank you so much for joining.

Jennifer: Thanks, Carson.

Carson: Thank you guys so, so much for listening to our episode this week. Link Labs is a leading innovator in all things and other things. Link Labs offers an asset tracking solution that uses technology to improve companies efficiencies. If you want to learn more about Link Labs and asset tracking and all the many benefits that we can provide to your company, visit our website at link-labs.com and be sure to follow us on all of our social media platforms at Instagram, Twitter, LinkedIn, and Facebook, subscribe to our YouTube channel, and of course, subscribe to this podcast for more episodes to come in the future. We look forward to seeing you next time, and as always, thank you so much for listening in.