To integrate multiple vendors, or to choose a single end-to-end provider – that is the question many companies face when they embark on adopting an Internet of Things (IoT) solution. For logistics organizations, IoT has transformed the industry, providing real-time monitoring, tracking, and management of assets across the supply chain, making the decision of which provider to use even more crucial.

Working with multiple vendors or solutions may seem appealing, but often results in increased complexities, operational inefficiencies, and higher costs – not just in your initial investment – but in your overall operating expenses (OpEx), negating the expected financial benefits of IoT adoption. These hidden costs can include:

• Margin stacking and increased overhead burden 
• Higher integration costs and cybersecurity risks 
• Slower speed to new features, eroding market advantage
• Loss of benefit of economies of scale 

These potential financial and operational pitfalls must be considered before adopting a multi-vendor solution. A single, end-to-end solution provider can help mitigate the hidden financial risks of IoT through streamlined operations, reduced integration costs, optimized resource allocation, and enabling the customer to benefit from economies of scale. These benefits help customers realize the full value of their IoT adoption and allow them to reach a higher ROI sooner.

Margin Stacking and Overhead Burden

Businesses that opt for a multi-vendor strategy may not even recognize the various hidden costs that come with it. The cost of synchronizing disparate systems often outweighs the perceived benefits of choosing lower-cost devices from different providers. 

Additionally, customer support teams for a multi-vendor IoT system must be trained to handle different platforms, interfaces, and devices, and resolving an issue often requires escalating tickets across multiple vendors. The team responsible for handling these issues may experience decreased productivity and efficiency, which may result in excess business expenses. Any downtime of your IoT stack while resolving issues could lead to financial loss and potential erosion of trust with customers. 

Some of these hidden costs include: 

• Each vendor creates margins on each of its components – the hardware, software licenses, connectivity services, and ongoing maintenance.  Known as “margin stacking,” this approach can significantly inflate the overall cost of adopting an IoT solution. 
• Managing multiple vendors can also lead to inefficiencies in resource allocation. Separate billing cycles, differing support contracts, and assorted subscription models can all put unnecessary stress on accounts payable. 

That’s why consolidating all aspects of the IoT ecosystem in an end-to-end system can create myriad benefits, including: 

• More cost-effective connectivity plans, improved operational efficiency, and streamlined maintenance services.  
• Businesses benefit from scaling up because the provider can reduce operational costs and pass these savings on to the customer.  
• Unified billing and service contracts simplify financial management and reduce administrative burdens. 
• Simplified troubleshooting and faster issue resolution. 
• Customer success teams that have full visibility into the ecosystem, making it easier to identify and address problems. 

Higher Integration Costs and Cybersecurity Risks

Using multiple IoT vendors can significantly heighten financial risks due to potential hardware and software failures. Whether from firmware glitches, connectivity breakdowns, or incompatibility issues, each layer of a multi-vendor solution creates the potential for vulnerabilities. When problems arise, businesses must navigate through multiple vendors to identify the root cause, often delaying resolution, and resulting in significant downtime. This downtime not only disrupts operations but results in higher costs from lost productivity and repairs.  

Multi-vendor IoT solutions also elevate security risks, which can have severe financial consequences. Each layer of the IoT stack may present a potential vulnerability, which can expose your business to cyberattacks. Some of the financial consequences include: 

• Security breaches from misconfigurations during integration can result in gaps for bad actors to exploit, and potentially expensive remediation efforts. 
• A lack of unified oversight may delay threat detection, increasing the likelihood of unnoticed breaches, and escalating the financial impact. 
• A security compromise at any vendor during production, distribution, or deployment could create vulnerabilities throughout your entire IoT solution. This increases the potential for a security breach and downtime and could result in lost revenue, trust among customers and prospects, and even regulatory fines. 
• If security and data protocols are misaligned, any one vendor’s mishandling of sensitive data could result in regulatory fines, compliance violations, or data breaches. 
• Cyber insurance is costly, and like all types of insurance, using it in the event of a breach could, at minimum, increase the cost of your premiums – or may result in the insurer refusing future coverage of your business altogether. 

While the initial savings from choosing multiple vendors may seem appealing, the financial fallout from these risks can quickly outweigh the benefits. Short-term cost reductions upfront can lead to greater expenses down the line – from remediation and downtime to potential regulatory fines – a multi-vendor solution could end up costing you more long-term than you thought you were saving at the outset. 

Speed to Market of New Features

Coordinating firmware updates, software integrations, and new feature rollouts from multiple vendors can impact your bottom line. Getting each vendor on the same page to ensure compatibility between upgrades and integrations can take time. In a dynamic logistics landscape, the ability to deliver a new feature or integration to market on time could mean the difference between winning new business or losing a customer to a competitor that can. The longer time-to-market and operational disruptions may also lead to increased labor costs, extended downtime, and missed customer expectations. 

End-to-end solution providers are responsible for all the pieces of the IoT stack which enables faster implementation of updates and new features and diminishes the risk of compatibility issues. A single provider can also work with customers to plan any scheduled maintenance or upgrades during off-hours to reduce or eliminate downtime, further reducing any potential financial risk. The ability to capitalize on new opportunities is essential for businesses to stay competitive in the marketplace. 

Loss of Benefit of Economies of Scale 

When it’s time to scale up, a multi-vendor IoT solution may not be able to meet your needs – and it may not be financially feasible. Each new device added to a multi-vendor solution introduces increased complexity, along with integration challenges that can drive up costs. Moreover, many multi-vendor solutions lack scalability, forcing businesses to invest in expensive upgrades or replacements when their current IoT stack can no longer meet their needs. This can result in total loss of return on investment (ROI), operational inefficiencies, and inability to meet customer expectations.  

With an end-to-end IoT solution provider, the ability to scale and economies of scale are built into the system. A single provider enables businesses to expand seamlessly without expensive reconfigurations, complex integrations, or the need for an entirely new solution. This future-proof approach minimizes costs while ensuring the system continues to perform as expected. Because you benefit from streamlined processes, and lower overhead, production, and long-term operational costs, your business can experience maximized return on investment (ROI) on your IoT solution as you continue to grow. 

The Case for a Single-Solution Provider 

An end-to-end provider takes the guesswork out of designing, integrating, deploying, and implementing an IoT solution across the enterprise and creates the potential for significant cost optimization. By offering a wholly owned, designed, and fully integrated system – the hardware, software, and network components are designed to work harmoniously – and a single team managing the entire process from creation to operationalization creates a single point of accountability for better security, risk mitigation, and faster resolution of any issues.  Want to learn more about the hidden costs of multi-vendor IoT solutions? Read more about how using an end-to-end provider can help mitigate integration risks.