Domestic IoT market up 8%

23 / 12 / 2019

The Russian Internet-of-Things (IoT) market grew 8.3% year-on-year to $3.7 billion in 2019, according to the annual IDC survey. For the first time in the history of the Russian IoT, production surpassed transport and ranked first by the scope of application.

IDC Russia & CIS Research Director Elena Semenovskaya presented tentative results of 2019 for the Russian Internet-of-Things market at a prospective technology forum organised by the Internet Initiatives Development Fund and the Internet-of-Things Association.

According to the IDC, the domestic IoT market grew 8.3% year-on-year to $3.7 billion. Semenovskaya described 2019 as a year of awareness, which saw a fairly modest growth. The challenges of integration and scalability faced by the first isolated projects slowed down the market, she said.

The research showed that services ranked first amongst elements of the market structure (37%), compared to equipment, which was the leader of last year. However, in Semenovskayas words, the IDC disregarded services provided by insourcing companies or IT divisions. She noted that internal suppliers can generate at least 15% of the market volume. The demand for these types of services will continue to grow.

Another segment equipment accounted for 35% of the domestic IoT market. The substantial share is explained by the implementation of additional devices and sensors supplying information from stages of business processes, which have not been covered before, Semenovskaya said as she explained the research results.

The IDC expert said that the software segment was insignificant, considering the domestic markets focus on hardware and services. In this field [the software segment ComNews], we see a 21% proportion, which is slightly below the worlds average, Semenovskaya said. We are expecting companies to invest more in analytical platforms, IoT platforms, etc. The company believes that the significance of in-house products will reduce a bit when it becomes clear that it is difficult to scale them and to create a fully functional solution on their basis.

Given disconnection of the domestic IoT market, multiple actors, and non-transparency of projects, the IDC assessed the market using global methods based on IoT usage scenarios. There were 46-50 such scenarios at first [the IDC started to analyse the Russian IoT market three years ago ComNews]. Their number has grown to 82 by now. We rely on the basic set of technologies implemented in these scenarios, and local costs of services, hardware, and software. We view them in the context of economic factors and indicators, Semenovskaya said in her comments on the assessment techniques.

As for sector breakdown, the correlation of forces also changed this year, the IDC expert said. Production took the lead; it was followed by transport and the consumer segment. Other industries, such as energy, wholesale and retail trade, and the public sectors programs Smart City and Safe City, also have a growth potential.

The first place occupied by production evidences its huge potential, Director of the Ministry of Industry and Trades Department for Digital Technologies Vladimir Dozhdev said. Compared to energy, transport, and agriculture, the Internet of Things has demonstrated an impressive growth in the processing industries. This is a truly unique moment for industries and developers. Enterprises are ready and reach out to developers; enterprises are searching for industry solutions. Everyone is focused on small or medium aspects of addressed problems, he said.

For his part, Internet-of-Things Association Director Andrey Kolesnikov deems the third place occupied by the consumer segment to be important, since its share on the Russian IoT market has been traditionally modest in contrast to the ones of the United States and Europe. The IDC conclusion that production has surpassed transport is another pivotal moment highlighted by the Association head.

Nonetheless, Kolesnikov compared the growth on the Russian IoT market with the affiliated segment, online retail, where the growth had been much more pronounced. There is a feeling that we are doing a crouch start but it is unclear what should be done for leaping and attaining a growth of 20-25%, he said. In the opinion of Semenovskaya, companies need to be economically interested in the advantages of implementation. Investments do not repay as long as the effect is low, she said.

The IDC has a rather optimistic outlook for the Russian Internet-of-Things market in 2020 the company is expecting a 19.7% growth. The Russian Internet-of-Things market will be fostered by corporate digital initiatives, fragmentation of IoT device usage scenarios and technological development. IoT platforms and applications will eventually spread. The introduction of low-frequency standards and 5G projects will also have an influence on the market. First and foremost, the IoT is a tool of receiving additional data for business digitalisation needs, Semenovskaya said.

The IDC thinks that both vendors and big companies will boost the development of the domestic IoT market. The latter will create corporate industrial platforms and foster other market actors. The government will also play a role: its position is important in the field of standardisation, funding, best practices, and national programmes.