Where the Five-Year TCO Goes

Ada re-derives this chapter’s own numbers step by step, at full precision

ADA · CALCULATION AUDIT

Where the Five-Year TCO Goes

The chapter’s top budgeting mistake is pricing an IoT fleet on its Year-1 sticker and then meeting a $200,000 five-year bill — $100,000 in Year 1 and another $100,000 across Years 2 to 5. Device hardware is only $50,000 of that, a quarter of the total, while connectivity, cloud, and maintenance make up the rest. This audit rebuilds the ledger and tests the “hardware is one quarter” claim to ask where the five-year cost actually goes.

Companion to the chapter Why IoT Projects Fail — every number here comes from that chapter.

Ada: The chapter’s headline pitfall is budgeting only Year 1 and then being surprised by a $200,000 five-year bill for a 1,000-sensor fleet. Let me rebuild that total and test the “hardware is only a quarter” claim against the cost breakdown.

• Years 2 to 5 operating cost: 25,000 per year x 4 years = 100,000 dollars
• Five-year TCO: 100,000 (Year 1) + 100,000 (Years 2-5) = 200,000 dollars

Now the category shares from the breakdown — connectivity $60K, devices $50K, cloud $40K, installation $25K, maintenance $25K:

• They sum to 60,000 + 50,000 + 40,000 + 25,000 + 25,000 = 200,000, matching the total exactly.
• Hardware (devices) share: 50,000 / 200,000 = 0.25 = 25%, precisely the “hardware is one quarter” claim; connectivity is the largest single slice at 60,000 / 200,000 = 30%.

The arithmetic makes the trap visible: three-quarters of the lifetime cost is the connected-service tail — connectivity, cloud, and maintenance — that a hardware-only budget never counts, so approving a fleet on its Year-1 sticker price under-funds it by roughly a factor of two.

Every number above is taken from the chapter’s own material and re-derived step by step.