The Internet of Things in Central and Eastern Europe – Driving Change, Bringing Opportunity
The Internet of Things (IoT) market in Central and Eastern Europe (CEE) is gaining significant momentum as both vendors and end-users — businesses, governments, and other organizations — have begun to make concrete plans to capture the opportunity this technology represents.
International Data Corporation (IDC) forecasts that organizations in CEE will invest more than $11.2 billion in IoT hardware, software, services, and connectivity this year, reflecting 19.5% growth from the prior year and outstripping all major technology markets. IDC further expects that IoT revenues in the CEE region will post a compound annual growth rate (CAGR) of 20.9% over the 2016‒2020 forecast period, reaching $24 billion in 2020 (see figure below). IDC also predicts that the installed base of IoT endpoints connected to networks across CEE will reach approximately 1.4 billion autonomous "things", thus outnumbering the local population more than three times.CEE Internet of Things Market Forecast ($M)
"The Internet of Things is one of a handful of technology areas that are set to drive IT growth and innovation in the coming decade, and it both enables and is fueled by digital transformation," says Milan Kalal, program manager of Internet of Things research with IDC CEMA. "The IoT market is driven by companies' focus on business optimization and productivity, the increasing attention to customer experience, and the growing availability of technologies, while security concerns and budget constraints inhibit adoption," adds Kalal.
IDC defines the Internet of Things (IoT) as an aggregation of endpoints (or "things") that are uniquely identifiable and that communicate bi-directionally over a network using some form of automated connectivity, without human interaction. Objects become interconnected, make themselves recognizable, and acquire intelligence in the sense that they can communicate information about themselves and access information that has been provided by another source. An IoT use case then represents a detailed composition of a technology investment that is made to produce a set of end-user benefits.
While IoT is discussed as a single concept, the market for IoT is better described as a combination of many very different industry use cases with their own separate decision makers, stakeholders, market structures, drivers, and inhibitors. In 2015, the largest-spending vertical markets in terms of IoT in the CEE region were manufacturing, transportation, and utilities, which collectively accounted for over 50% of IoT investments. The IoT use cases receiving the greatest levels of investment from CEE organizations across these three industry segments are:
- Freight Monitoring — which uses radio frequency identification (RFID), GPS, GPRS, and geographic information system (GIS) technologies to create an intelligent, Internet-connected transportation system. This system carries out the intelligent recognition, location, tracking, and monitoring of freight and cargo through information exchange and real-time communications via wireless, satellite or other channels.
- Manufacturing Operations — which supports digitally-executed manufacturing or how manufacturers use intelligent and interconnected I/O tools (e.g., sensors, actuators, drives, vision/video equipment) to enable the different components in the manufacturing field (e.g., machine tools, robots, conveyor belts) to autonomously exchange information, trigger actions, and control each other independently.
- Smart Grid (Electricity) – where smart field devices owned by the electric utility are used to control and optimize power flow to assure efficient, safe, and reliable service. The devices are used throughout the electricity distribution grid for tasks including line sensing, substation automation, feeder and line equipment control, and optimization. Utility-owned, in-home devices are included in this category when used for grid operations.
In addition to these use cases, production asset management (where IoT is used to remotely track, monitor, and maintain industrial manufacturing devices that are part of the production value chain) and smart home projects will see significant levels of IoT investment over the next several years. The IoT use cases that will experience the greatest revenue growth over the 2016-2020 forecast period are smart buildings, smart grid (gas), insurance telematics, and connected vehicles. In addition, eight other IoT use cases will see revenue growth of more than 100% during this time.
As we move through 2016, we expect IoT will be an increasing priority for CEE organizations as they understand more about the technology and witness the payback that it can provide. We will see a greater number of real-life deployments taking place as organizations strive to undergo digital transformation with IoT as a key enabler.
"Companies will spend large amounts on IoT solutions, and the market potential is significant for vendors that have the right capabilities and understand how to position themselves in the emerging ecosystems,” says Kalal. “IoT adoption and use cases strongly vary across industry sectors, with flourishing opportunities both on the business and consumer sides. There has been an explosion of industry-specific pilots in the past months — the next steps now for adopters is understanding how to make IoT have a deeper impact on their business activities and extrapolating bang for the buck from their IoT investments."