Russian and global markets for machine-to-machine communications and the Internet of Things by the end of 2020, preliminary estimates for 2021 and forecast until 2025
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Analytical Report (full version)
Russian and global markets for machine-to-machine communications and the Internet of Things by the end of 2020, preliminary estimates for 2021 and forecast until 2025
J'son & Partners Consulting has completed the preparation of a study of the Russian and global market for machine-to-machine communications and the Internet of Things. The volume of the Russian market in 2021, according to preliminary estimates, reached 93.5 billion rubles, and the number of connected IoT/M2M devices increased by 16% to 29.6 million. According to the forecast made by J'son & Partners Consulting, the number of connected devices in 2025 will exceed 62 million, while in monetary terms the market will grow to 183.5 billion rubles (CAGR 21%). The main driver of market growth will be cloud Ott services, whose consumption growth will determine the dynamics of the market as a whole. At the same time, the consumption of communication services and system integration in IoT/M2M projects will stagnate in rubles and decrease in currency terms, and the consumption of proprietary hardware and software complexes for processing machine data will grow at a moderate pace below the market (CAGR 17%).
Definitions, boundaries and research methodology
In this study, IoT/M2M systems are understood as distributed telemetry and remote control systems, for which the data source is data generated and transmitted by telemetry objects (IoT/M2M devices) automatically, without or with minimal human participation.
Most common types of distributed telemetry and remote control systems existing in Russia:
- the market for transport monitoring systems and services, including the so-called "smart insurance";
- emerging markets for platform-based cloud IT services in industry and agriculture;
- the market for remote control and video surveillance systems and services is so far the only major segment of the smart home market;
- the emerging market for systems and services for commercial energy consumption accounting for industrial enterprises and households, which can also be considered as a segment of the smart building market;
- the market for payment systems with an appropriate set of connected devices: ATMs, payment terminals, network WAN connection cash registers and mobile payment terminal modules.
Based on this definition, the study does not include personal devices intended for human use: mobile (mobile phones and smartphones, phablets, tablets, other personal gadgets) and stationary (connected televisions, including via STB, stationary PCs).
However, the study includes POS terminals, the functionality of which allows to automatically generate and transmit data to external information systems (payment and fiscal).
Another limitation coming from this definition is considering only those IoT/M2M devices that are capable of interacting with telemetry and remote control systems via global (WAN) networks. Therefore, the present study does not include:
- Local industrial automation systems (automated control systems) and building management systems (BMS), also called smart home systems that are not connected to external communication networks.
- Isolated (on-site) video surveillance systems and their elements, including video cameras.
- POS terminals connected to the local network of the sales point, but not interacting with information systems external to the local network, such as payment systems, OFD, USAIS.
Thus, the report includes only connected IoT/M2M devices with WAN access, and using all types of technologies for such connection: cellular, wired fixed and wireless fixed. At the same time, one connected device can use more than one connection, for example, wired and wireless.
Connected objects are also counted. One connected object, such as a vehicle, may have more than one connected device on board.
The indicator of the number of connected devices is important for calculating the revenue of WAN operators, and the number of connected objects is important for calculating the revenue of cloud platforms for collecting, storing and analyzing data from connected objects.
The assessment of the total number of IoT/M2M devices installed/used in Russia and its distribution by type, scope and connection technologies is based on the "bottom-up" principle, and is based on the analysis of information both publicly available (data from the main corporate consumers of IoT/M2M devices in Russia) and received from key market players during in-depth interviews.
The forecast of the dynamics of the total number of IoT/M2M devices in Russia is made on the basis of an analysis of real-life, currently implemented corporate and state programs in this area, as well as by analyzing the prospects for the development of mass segments of the IoT/M2M market.
The forecast of the dynamics of connected objects is based on an expert analysis of the penetration level – the share of objects connected to cloud platforms from the total number of corresponding types of objects. Expert assessment of the level of penetration, in turn, is based on an analysis of the compliance of the costs of connecting and using the functions of cloud platforms on the one hand, and the economic effect of their use on the other. With a significant excess of the effect over the costs, a rapid increase in penetration is predicted, with a slight increase – slow, with an excess of costs over the effect - no increase in penetration.
The assessment of the total volume and cost structure for on-premise IoT/M2M systems is based on data on the TCO structure of distributed telemetry systems for each of the types of applications of such systems considered in the report.
When assessing the cost of hardware:
- the authors considered only the cost of communication modules when calculating the cost of IoT/M2M devices;
- when considering the cost of hardware and software on-premise complexes, for example, situational centers, the authors took into account only those directly intended for collecting, storing and processing telemetry data from IoT/M2M devices.
Global IoT/M2M market
According to the Ericsson Mobility Report (June 2021), the number of connected IoT/M2M devices in the world (excluding short-range technologies – Wi-Fi, Bluetooth, Zigbee, etc.) will increase from 1.7 billion in 2020 to 5.8 billion in 2026. The highest growth rates are predicted in the segment of cellular communication technologies of all standards (CAGR 23%). The main drivers of growth in the segment of cellular IoT connections will be the active introduction of NB-IoT /LTE-M networks and smooth migration towards 5G. By the end of the forecast period, the number of cellular connections will grow to 5.4 billion. By the end of 2026, the share of mobile broadband (4G/5G) connections is expected to reach 44% of the total volume of cellular IoT connections.
The largest number of IoT/M2M cellular connections outside of China (the leader in this indicator, which, according to Berg Insight, accounts for about 2/3 of all connections in the world) in 2020 was recorded by such operators as Vodafone (an increase of 23% to 102.9 million IoT SIM cards), AT&T (more than 80 million, including 43.5 million connected cars from 33 brands, of which almost 10 million were connected in 2020), Verizon - 45-48 million (according to Berg Insight), Telefonica (26 million cellular connections, a total of 35 million, taking into account other connection technologies - fixed and satellite communications, etc.), etc.
While most major operators are actively developing NB-IoT networks, Japanese operator NTT DoCoMo has stopped commercial operations based on this technology since March 31, 2020 "in light of the current business environment" and "to concentrate management resources". However, the company said it will continue to support devices and services based on other LPWAN technologies - Cat 1 and LTE-M. The NB-IoT network was launched by NTT DoCoMo on April 25, 2019, i.e. it lasted less than one year. It can be suggested that the success of the business case related to NB-IoT is not obvious. With extremely low connectivity rates, monetization of this technology seems to be possible only with a very large number of connections. In addition, NB-IoT has a number of significant limitations (there is no roaming support, i.e. it is intended for fixed connections, binding to one operator for an indefinite period, etc.).
By the end of 2020, LPWA non-3GPP technologies in the unlicensed spectrum (LoRaWAN, Sigfox, etc.) accounted for no more than 10% of all IoT/M2M connections, but growth rates in this segment in 2020-2025 are expected to be significantly higher than the market. Thus, the annual growth in the supply of LoRaWAN devices is projected at the level of CAGR = 32.3%, and Sigfox devices - with a CAGR =49.2% (positive scenario).
Since 2020, global operators, together with cloud providers, have been offering distributed private cloud services including edge computing and a managed access network, focused on deploying industrial IoT applications critical to availability, latency and security parameters. These are extremely complex services that bring telecoms to a fundamentally new level of development.
At the same time, along with innovative services for IoT, global telecom operators offer a wide range of traditional solutions in the field of IoT/M2M: from M2M SIM cards and connectivity tariffs to complete platform solutions involving a wide pool of partners.
The current situation in Russia
According to a preliminary estimate by J'son & Partners Consulting, in Russia by the end of 2021, almost 30 million IoT/M2M devices were connected to global networks (WAN) using all types of connection technologies (cellular, wired fixed and wireless fixed, and their combinations), which is 16% higher than in 2020.
Against the background of the global market, Russia's share of connections is about 1.2-1.5%; at the same time, the growth rate of the Russian market in 2021-2025 (CAGR 19%) in quantitative terms is expected to lag behind the global indicator (CAGR 22%), which will lead to a decrease in Russia's share to 1% or lower by the end of the forecast period.
At the same time, what is especially important, Russia is noticeably lagging behind in introducing innovative approaches to building networks, in particular in deploying hybrid cloud infrastructures with end-to-end customized SLA, necessary for industrial IoT platforms and applications. Such processes are already taking place in North America and a number of other regions, but are not yet present in Russia. These services are radically more complex than the existing IoT/M2M communication services in the portfolio of Russian operators, they require achieving a high level of automation of NMS/OSS/BSS processes and the introduction of new functionality. In this regard, operators focused on the development of the IoT/M2M direction, in order to avoid further technological lag, should actively participate in industrial pilot projects for the deployment of hybrid cloud infrastructures.
In the industry structure of the market for distributed telemetry systems, there is an extremely low share of IoT applications for monitoring and controlling industrial equipment and engineering systems of buildings and structures, that is, those objects whose optimization gives the greatest economic effect, against the background of the prevalence of technical security systems (video surveillance, automatic detection of violations, remote security), connected infrastructure for making payments and transport monitoring systems. The reason for such a market structure by IoT/M2M application areas is that the main drivers in the growth of the number of installed and connected IoT/M2M devices in Russia have been and remain mandatory state programs, among which there are no programs for the digitalization of industry.
Key drivers and constraints
In the transport industry, ERA-GLONASS, the state automated information system for emergency response in case of an accident, continues to be a significant driver of the market for new connections. The project is open for cooperation with potential partners to add new functionality to the system and develops commercial services (independently or under car manufacturers' brands) – "Roadside Assistance", etc. As of mid-August 2021, the number of registered cars with this system exceeded 7.7 million.
Another factor in the growth of the connected vehicles market was the requirement to equip, from September 1, 2021, all vehicles of categories M2 and M3 (passenger transportation), as well as vehicles of category N used for the transportation of dangerous goods, with satellite navigation equipment (Decree of the Government of the Russian Federation No. 2216 of 12/22/2020). At the same time, the configuration of the ERA GLONASS system allows it to be used not only for transmitting navigation and other data to Rosttransnadzor, but in the interests of commercial customers, for example, for fleet management.
Another important driver of the IoT/M2M market in the automotive transport segment is the long-expected trend of automakers installing telematics systems directly on the assembly line (as opposed to using on-board devices, which are usually installed in dealerships), which began in 2021 and has long been expected. So, in May 2021 in a number of regions, sales of the first LADA - Granta model connected to the LADA Connect telematics platform have started, which allows you to remotely control car systems using a smartphone, as well as, as expected, receive individual service conditions and special insurance programs. The LADA Connect system is offered as an option for various configurations at a price of 12 thousand rubles, including 3 years of service. Another automaker in the mass segment offers a similar Renault CONNECT service for a number of its models based on a SIM chip/eSIM installed in the telematics unit of the head unit. Toyota has been offering similar services for individual car models and other automakers since 2021.
In the segment of proprietary hardware and software complexes, moderate growth will be provided, first of all, due to new and ongoing large-scale "Safe City" projects. For example, in 2021, a tender was announced for the supply of a license for a video surveillance system of the law enforcement segment of the agro-industrial complex "Safe City" (the customer of the Nizhny Novgorod Region State Institution "Center for Coordination of Digital Economy Projects", the initial cost of the contract is 33.6 billion rubles). Also this year, a tender was announced for services for streaming video from video surveillance facilities to a single data storage and processing center (the customer is from Moscow, the contract value is almost 3 billion rubles). Until 2023, the project continues to provide services to ensure the smooth functioning of the equipment that is part of the intelligent transport system of Moscow (the customer of the GKU data center, the contract value is 18.5 billion rubles.).
A significant constraint on the development of the IoT/M2M market in Russia in 2020-21 was the decline in business activity associated with COVID. As a result, even the most dynamic market segments, for example Fleet Management, "sank" – in 2020, the number of new connections decreased to 235 thousand (it was less only in 2015-2016, after the collapse of the ruble). In addition, due to the shortage of semiconductors, sales of new passenger cars fell significantly – by 13% by the end of 2021 to less than 1.4 million, and automakers for the same reason were temporarily allowed not to install ERA-GLONASS on new cars until the end of 2021.
Forecast for 2022 – 2025
According to the forecasts of J'son & Partners Consulting, the total volume of the IoT/M2M market in Russia in monetary terms will double by 2025 compared to 2021 and reach 183.5 billion rubles; at the same time, its structure will change significantly. In particular, the share of cloud IoT platforms and services will significantly increase, which by the end of the forecast period will account for more than half of all costs, and the share of costs for connectivity and on-premise system integration services, on the contrary, will decrease to 23% and 3%, respectively.
The total number of M2M/IoT devices connected to global networks (WAN) using wired and wireless technologies in Russia will grow from 29.6 million in 2021 (preliminary estimate) to 62.4 million in 2025.
The market of monitoring systems for vehicles and road infrastructure in 2025 will remain the largest IoT/M2M market in Russia in terms of the number of connected devices and one of the largest in monetary terms.
In the segment "Distributed video surveillance systems and photo/video recording of events", the most promising services for cloud storage and processing of video data, the volume of consumption of which will grow by more than 4 times in 2025 compared to 2020. Proprietary hardware and software video surveillance systems in the commercial sector will be replaced by cloud services. In the public sector, hardware and software complexes (AIC "Safe City" and others) will be maintained in the coming years, even though the price/functionality ratio is significantly worse than that of cloud platforms.
The prospects of the segment of connected IoT/M2M devices used for payments and banking transactions consist not so much in the growth of the number of connected devices, as in the possibility of creating analytical IoT services with high business value.
The market of Smart Home systems and services, which is currently in its infancy, has significant potential in Russia. There is a large volume of unsatisfied demand for such systems, since a significant part of housing in Russia falls on individual housing, where Smart Home systems, unlike apartment buildings, can be quite effective, and the decision on their use is made by the homeowners themselves, and not by the management company.
The trigger that translates potential demand into real demand is the emergence of cloud services for monitoring and optimization management of engineering equipment of buildings that can work with already installed controllers of security and fire and engineering systems.
In 2018-2020, the first examples of using cloud IIoT platforms and applications for data processing from connected machines and other types of industrial equipment appeared in Russia. Basically, these data are used by global manufacturers of industrial equipment installed in Russia to fulfill their obligations to Russian customers for technical support and life cycle contracts. It is expected that in 2025 the volume of consumption of IIoT platform services will increase many times, as well as the number of machines and industrial equipment connected to cloud IIoT platforms.
Cloud-based IoT platforms and services are the technological basis of digital agriculture. Proven in practice, the economic effect of such systems is tens of percent increase in yield, reduction of losses and unit costs for the production of a unit of production. However, the volume of consumption of cloud IoT applications and services for agriculture in Russia in monetary terms is currently extremely insignificant. In 2021-2025 . The consumption of cloud IoT applications and services in agriculture will grow at a high rate at the level of 44% CAGR, but in absolute terms will remain insignificant. The reasons are the presence of powerful constraining factors, among which one can single out a clear lack of high-quality agronomic data accumulated over a long historical period in Russia, a small number of mechanization tools in rural farms, the practical lack of automation of production processes, the information closeness of rural farms, the limited presence of global application providers in Russia and the lack of ecosystems of Russian developers around such platforms. An additional problem is the extremely limited financial capabilities of Russian agricultural producers.
The state has a significant impact on the Russian IoT/M2M market as a major customer, approbator of new products and technologies, and as a market regulator, forming a regulatory framework, stimulating market development and investment activity of its participants. Market prospects in the segment of government customers are largely determined by government initiatives in the implementation of digitalization programs and projects. At the same time, some of the projects are at the level of declarations, pilot projects that have not received further development. Among the most promising areas:
- monitoring and management of transport infrastructure and vehicles (ERA-GLONASS, Platon projects, requirements for equipping vehicles with tachographs; requirements for monitoring transit traffic of sanctioned goods, control of transportation of perishable goods);
- improving the efficiency of territory management and energy efficiency.
- introduction of the procedure for the use of cash register equipment;
- creating a system of reliable measurements and accounting of energy consumption and a number of other regulatory initiatives.
Thus, in 2015-2021, the Russian IoT/M2M market started being created and developed (in terms of government programs and initiatives).
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Detailed results of the study presented in the full version of the Report:
“Russian and global markets for machine-to-machine communications and the Internet of Things by the end of 2020, preliminary estimates for 2021 and forecast until 2025”
INTRODUCTION: IOT/M2M DEFINITION, BOUNDARIES AND RESEARCH METHODOLOGY
1. GLOBAL IoT/M2M MARKET
1.1. Global IoT/M2M market in quantitative terms, 2020 and forecast for 2026
1.2. Analysis of the product assortment and tariffs of largest IoT/M2M operators
1.2.1. AT&T Wireless
1.2.2. Orange/Orange Business Services
1.2.3. T-Mobile USA
1.2.8. NTT DoCoMo USA
1.2.9. Deutsche Telekom
2. RUSSIAN IoT/M2M MARKET IN QUANTITATIVE TERMS, 2018-2025
1.1. Number of M2M devices (modules)
1.2. Number of M2M SIM cards
2. IoT/M2M MARKET VOLUME IN MONETARY TERMS, 2018-2025
3.2. M2M platforms and cloud IoT services – the Russian market against the global background
3.3. Proprietary software and hardware complexes for storing, processing and visualizing data from telemetry devices
3.4. Equipment for connecting telemetry devices to WAN (communication modules)
3.5. System integration in IoT/M2M projects
4. ANALYSIS OF THE MOST PROMISING INDUSTRIES FOR M2M, CASE STUDIES
4.1. Using IoT/M2M devices in transport
4.2. Distributed video surveillance systems and photo/video recording
4.3. Using IoT/M2M devices for managing engineering systems for buildings and structures ("Smart House", "Smart Building")
4.4. Using IoT/M2M devices for paying
4.5. Using IoT/M2M devices and platforms in industry
4.6. Using IoT/M2M devices and platforms in agriculture
5. ASSESSMENT OF THE MARKET POTENTIAL IN THE PUBLIC SECTOR
5.1. The state as a customer of IoT/M2M products. Promising directions for the development of the IoT/M2M market in the B2G segment
5.1.1. Security systems
5.1.2. Monitoring systems and management of transport infrastructure and vehicles
5.1.3. Systems for ensuring energy efficiency and effective management of territories
5.1.4. Development of the social sphere
5.2. The state as a regulator and initiator of the development of the IoT/M2M services market. Government initiatives as a service market generator
6. KEY DRIVERS AND CONSTRAINTS
6.1. Main market drivers
APPENDIX 1. PROFILES OF WORLD’S LARGEST TELECOM OPERATORS
APPENDIX 2. MAIN IoT/M2M PRODUCTS AND TARIFFS OF RUSSIAN TELECOM OPERATORS
APPENDIX 3. LARGEST IoT/M2M CONTRACTS IN THE PUBLIC SECTOR IN RUSSIA IN 2016-2021.
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Analytic articleIoT, M2M, platforms, LPWAN Open
Market reviewIoT, M2M, platforms, LPWAN Open