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IoT Hardware vs. Software Product Development: What Entrepreneurs Must Know

Business.com / Business Basics / Last Modified: May 24, 2018
Image credit: Rawpixel.com/Shutterstock

There are some major differences between developing and launching a hardware product and software. Here's what you need to know about each.

As an entrepreneur specializing in connected devices, I have had multiple learning experiences navigating through the complex process of developing and going to market with both hardware and software. In the IoT field, these two side of the technology equation are inextricably linked in today’s marketplace. Just about every connected device on the market has some kind of corresponding app through which the device is controlled and monitored.

If you are an entrepreneur with a passion for developing a connected device for the consumer market, then you should also be prepared to develop a software application that will make your device functional. Both have their challenges and advantages. Here are a few things you should know about the challenges of developing both hardware and software in today’s market:

Be prepared to manage varying development cycles.

Hardware has longer development cycles, and the timeline for design for production happens much earlier than when your device actually hits the market. With software, however, shorter development cycles mean your product updates have to meet moving target. However, it also means you will have the opportunity of releasing and testing incremental updates focusing on specific product features. Managing both will require sharp planning from all stakeholders, from research and development to engineering to QA and even marketing.

Know your software market.

With software, competition is much higher than in the hardware market, and the value proposition of software is more difficult to differentiate. However, software is the key differentiator for marketing an IoT device; hardware is just an enabler to the experience. This requires a clear understanding of your audience for the product and the ability to articulate the value of the device and its software. Are you helping them solve a problem? What will they be able to do with your software that they haven’t done before?

Future-proof your hardware design.

Because of the differences in development cycles between hardware and software, be sure that your hardware can withstand constant software updates. A good hardware design must be future-ready and should be able to support experiences that will be delivered in software through upgrades.

Understand the resources required for each.

Both hardware and software development require specific resources, but they’re very different. For example, hardware development will require experienced device designers, mechanical designers, and even low-level software engineers. Procurement of materials to manufacture the device will be the key, as it’s important to get access to the latest components at the right price. Companies that don’t have strong procurement abilities will not be able to deliver cutting-edge hardware products.

It’s important for development of both hardware and software to keep costs down. In consumer electronics especially, development is seen as commodity and profit margins are very slim.

Before you begin the design process, there are a few questions you should be asking yourself and your development team. I followed this process recently with the launch of my new startup, Klikkit. The key learning in developing IoT solutions (and consumer electronic products in general) is to avoid “falling in love” with your own product. Instead, your team should keep focusing on the  end user. The question should be, “Why people would want to use this?” In other words, how big is the perceived product value compared with the cost of adoption and behavioral change required?

The IoT market is constantly shifting, and IoT hardware development cycles are long compared to software development. The challenge is to make sure your solution will still be relevant by the launch date. It’s important to maintain a laser-sharp focus on the value proposition. Develop a minimum viable solution to support this to start, and then allow yourself to stay agile and make improvements to the software over time.

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