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IDC TRENDSPOTTER

IoT in CEE: Plenty of Opportunities for All

February 8, 2018 Milan Kalal, Program Manager

IoT in CEE

IoT has been around for a while, but the recent explosion in interest is down to the massive price drops for sensors, combined with near ubiquitous connectivity – we are heading towards everything being smart and connected. This is directly in line with results from IDC’s 2017 IoT Decision Maker Survey, which reveals a growing number of companies in Central and Eastern Europe are testing IoT projects or have already fully deployed the technology. Organizations’ awareness that IoT can help them innovate, compete more effectively, and generate additional revenues is stronger every day.

You might wonder how this trend translates into numbers. Spending on the Internet of Things in Central and Eastern Europe is forecast to reach $11.2 billion in 2018, an increase of 15.5% over the $9.7 billion recorded in 2017. IDC forecasts CEE IoT spending to sustain a compound annual growth rate (CAGR) of 18.8% through the 2017‒2021 forecast period, thus surpassing the $20 billion mark in 2021.

Some industries are far ahead in IoT implementation and are expected to spend the most on IoT solutions in 2018. These are manufacturing ($2.2 billion), transportation ($1.6 billion), and utilities ($1.2 billion). IoT spending among manufacturers will be largely focused on solutions that support manufacturing operations and production asset management. In transportation, almost two thirds of IoT spending will go toward freight monitoring, followed by fleet management. IoT spending in the utilities industry will be dominated by smart grids for electricity, gas, and water. IoT is also gaining traction among consumers, as they become more aware of its functionality. The leading consumer use cases will be related to smart homes, such as home automation, security, and smart appliances.Cross-industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, are quickly picking up steam in the region, and rank among the fastest growing areas of spending. The various connected-vehicles use cases (e.g., infotainment, emergency, vehicle-to-vehicle solutions) will record very strong spending growth over the forecast period and exceed a half billion dollars in 2018.

While the IoT market in CEE is made up of billions of devices and billions of dollars in revenue, the adoption levels and growth rates vary widely across the spectrum of industries and use cases. Here’s a closer look at few of them.

In the transportation sector, for example, freight monitoring is the top IoT solution, as the number of sensor-equipped vehicles continues to expand. The Russian global positioning satellite system, GLONASS, is at the center of this growth, supported by numerous companies offering transportation monitoring solutions based on this system. These solutions include installations of tracking devices and custom-built software applications that visualize tracked information and integrate it with back-end corporate systems. In addition to vehicles engaged in pure logistics and transportation services, there is a growing trend for using freight monitoring solutions for municipal communal services such as waste management, snow removal, and other road cleaning routines.

Utilities’ move to smarter networks is enabling IoT to play a pivotal role in automating transmission, transport, and distribution (i.e., optimizing flow and making service more efficient and reliable). European Union member states have committed themselves to moving all electricity customers to smart meters. In Romania, most electricity companies have either deployed smart metering systems or have launched pilot projects. Romanian energy regulators have said that 30% of consumers will have smart meters by 2020, with 100% projected to be using smart meters in 2026. Electricity providers in Romania, including Electrica and CEZ, have adopted smart grid solutions in partnerships with companies such as Siemens and Schneider Electric.

Throughout Central and Eastern Europe, local municipalities have emerged as leaders of IoT Smart Cities projects. Initial implementations are usually related to the creation of intelligent transport systems. These are often followed by smart public parking, smart lighting, and public WiFi projects. In the interest of increasing quality of life for citizens (arguably the raison d’etre of Smart Cities), CCTV installations have resulted in improved safety monitoring of public spaces. XTrack's installation of "smart bins" in Gdansk shows that even waste management can be impacted by IoT.

IDC expects an expansion of Smart City projects across CEE, partially due to the availability of EU funding. Several EU funds are dedicated to research and innovation, such as the multi-billion-euro "Program Horizon," which serves as a funding vehicle in several areas, including Smart Cities and Smart Communities. The European Commission has established a funding initiative as part of its European Strategic Energy Technology Plan (SET-Plan) to support the development of cost-effective low-carbon technologies. European Structural and Investment Funds 2014–2020 also play an important role in funding Smart Cities projects.

There are various industry sectors and technological segments that could provide a foothold for vendors to enter (or expand in) the IoT market and options for technological footholds for vendors, yet this may also represent a double-edged sword. Given the wide array of sensors, devices, integration platforms, applications, and services, the market is too diverse for most companies to address comprehensively. Rather than having one overall IoT product strategy, most technology suppliers should address the market by identifying a few industry (or cross-industry) use cases with requirements that match their experience and proven capabilities, while playing to their strengths in terms of products, channels, and customers.

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International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. With more than 1,100 analysts worldwide, IDC offers global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. IDC's analysis and insight helps IT professionals, business executives, and the investment community to make fact-based technology decisions and to achieve their key business objectives. Founded in 1964, IDC is a wholly-owned subsidiary of International Data Group (IDG), the world's leading media, data and marketing services company. To learn more about IDC, please visit www.idc.com.

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