Russian IoT/M2M market by the end of 2019, forecast to 2025
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Analytical Report (full version)
Russian IoT/M2M market by the end of 2019, forecast to 2025
J'son & Partners Consulting has completed a study of the Russian market for machine-to-machine communications (M2M) and the Internet of Things (IoT). The estimated market volume in 2019 reached 64 billion rubles. The number of IoT/M2M devices connected to the WAN was slightly less than 23 million (21% more than in 2018). According to J'son & Partners Consulting, the number of connected devices in 2025 will grow to 56 million, while in monetary terms, the market will grow to 86 billion rubles (CAGR = 5%). Cloud IIoT platform services will be the main market growth driver. Such services' consumption dynamics will determine market dynamics as a whole. At the same time, the consumption of proprietary hardware and software systems for processing machine data will be reduced both in relative and absolute terms. The presented forecast includes an inertial scenario in which the existing obstacles to the development of IIoT platform ecosystems in Russia will not be overcome in the period 2020-2025.
Definition, boundaries, and methodology of the study
This study considers IoT/M2M systems as distributed telemetry and remote-control systems. Their data source is data generated and transmitted by telemetry objects (IoT/M2M devices) automatically, without or with minimal human participation. The main types of distributed telemetry and remote-control systems that exist in Russia are the following:
- the market for transport monitoring systems and services, including smart insurance;
- emerging markets for platform-based cloud IoT services in industry and agriculture;
- the market for systems and services of remote security and video surveillance, which is still the only major segment of the market for smart home systems and services;
- an emerging market for commercial energy consumption accounting systems and services for industrial enterprises and households, which can also be considered as a smart building segment;
- the market for payment systems including a set of connected devices: ATMs, payment terminals, cash registers with a WAN connection, modules for mobile payment terminals, etc.
Basing on this definition, the study does not include personal devices intended for human use: mobile phones, smartphones, phablets, tablets, and other personal gadgets, stationary connected TVs (including via STB), stationary PCs, etc. However, the study includes POS-terminals (specialized PCs) whose functionality allows to automatically generate and transmit data to external information systems (payment or fiscal services). Another limitation of this definition is considering only those IoT/M2M devices that are capable of interacting with telemetry and remote-control systems via global WANs. Therefore, this study does not include:
- Local industrial automation 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 that are connected to local retail point networks, but do not interact with information systems that are external to the local network (payment systems, fiscal data operators, and USAIS).
 In the report you can find the number of smart wearables connected to WAN
Thus, the report considers only connected IoT/M2M devices with WAN access that use all technology types for this connection: cellular, wired fixed, and wireless fixed. However, a single connected device can use more than one connection, for example, a wired and wireless. Connected objects were also taken into consideration. A single connected object, for example, a vehicle, may have more than one connected device on board. The number of connected devices is important for calculating the revenue of WAN operators, while 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 their distribution by type, application, and connection technologies is done on the "bottom-up" principle and according to the analysis of publicly available information (data from the main corporate consumers of IoT/M2M devices in Russia), as well as that received from the main market participants during in-depth interviews.
The forecast of the dynamics of the total number of IoT/M2M devices in Russia is based on the analysis of existing corporate and state programs that are being currently implemented in this area and 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 a penetration level analysis that considers the share of objects connected to cloud platforms in the total number of corresponding types of objects. This penetration level assessment is done by experts and analyses the correspondence of the costs of connecting and using cloud platform functions on the one hand, and the economic effect of their use on the other. If the effect is significantly higher than the cost, the experts predict a rapid increase in penetration; if it is insignificant and slow and if the cost exceeds the effect, there is no increase in penetration.
The total volume and cost structure of on-premise IoT/M2M systems are estimated according to data on the structure of distributed telemetry systems for each type of application considered in the report. When evaluating the cost of hardware:
- the cost of IoT/M2M devices included only the cost of communication modules,
- the cost of hardware and software on-premise complexes, such as situation centers, included only that part of them that is directly intended for collecting, storing, and processing telemetry data from IoT/M2M devices.
The current situation in Russia
The distributed telemetry systems market, also called machine-to-machine (M2M) communications systems market, as well as the Internet of Things (IoT) market has been developing in Russia for more than 15 years already (figure 1 shows the actual indicators for the last 5 years – 2015-2019) and its individual segments, for example, the remote security service market, has existed for over 40 years. As a result, there has been installed a significant base of connected devices, for example, in 2019 there were 22.5 million telemetry devices connected to the WAN using all types of connection technologies: cellular, wired fixed, wireless fixed and their combinations. It should be noted, however, that this is almost 10 times lower than the widely known estimates of the number of M2M devices connected to the WAN in Russia, in particular, the Cisco VNI report stated that there were 194 million M2M devices in Russia in 2017.
In the segment structure of the market for distributed telemetry systems, there is an extremely low share of IoT applications for monitoring and managing 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. Such market structure by IoT/M2M application areas has formed due to the fact that the main drivers for the growth of the number of installed and connected IoT/M2M devices in Russia are still the same — mandatory state programs, among which there are no programs for digitalization of the industry.
Main drivers and constraints
The analysis of actual quantitative data on the Russian IoT/M2M market shows that despite a number of government initiatives aimed at implementing IoT tools to control the economic and even personal lives of citizens, and even though some of them were meant to be quite big, these initiatives cannot replace the economic drivers of IoT implementation to improve the efficiency of enterprises of various sizes, including microenterprises and households.
The long-term stagnation of final consumption, which has turned into a pronounced decline since the second quarter of 2020, contributes to the fact that both commercial consumers and households are beginning to be interested in the possibility of improving resource efficiency through IoT solutions and services. That is, they are interested in the opportunities to save money without compromising the quality of life that the IoT provides. Thus, the key potential driver of the Russian IoT/M2M systems market growth aimed at improving the efficiency of economic relations is the request of consumers of such systems to implement scenarios for monitoring distributed objects, which imply intensive and complex processing of data received from objects using more economical (based on telemetry devices), flexible and functional methods instead of specialized hardware and software systems, which currently prevails.
As for the distributed telemetry systems market which is currently formed mostly by proprietary closed systems, from a technical point of view, the main constraint to the development of this market towards open cloud IoT ecosystems, is the technical and organizational unreadiness of large distributed telemetry systems’ users to transition to a fundamentally new concept based on the use of IoT cloud platforms as a replacement for proprietary specialized hardware-software complexes. In addition, a significant barrier is the presence of legal restrictions for the use of open cloud IoT platforms for processing data collected from connected telemetry devices. However, these restrictions can be successfully overcome in the coming years.
One of the significant constraints to the development of M2M/IoT networks in Russia is the high cost of end devices for consumers (transport telematics, smart meters, etc.), which in some cases tends to increase even though the cost of communication modules used in them is steadily decreasing. Thus, the purchase price of 2G, NB-IoT, LoRaWAN, and Sigfox communication modules has decreased to $3-6 (depending on the batch), while the cost of conventional and smart devices differs significantly. For example, prices of connected water meters start from almost 3000 rubles per unit (in November 2017 — 1000 rubles), while the cheapest conventional water meters cost 350 rubles. The high cost of smart devices seems to be associated with unreasonably high prices from manufacturers due to their desire to get profit from selling devices as quickly as possible, as well as complex and expensive certification and installation procedures.
In this regard, connecting objects in a number of segments (smart meters for housing and utilities, insurance telematics, etc.) becomes economically inefficient and can only be implemented using administrative, but not market methods. Examples of such projects are the heavy truck tolling system "Platon", the upcoming mandatory replacement of conventional utility meters with smart ones, etc. However, in cases where the economic effect is much higher than the cost of connecting, the spread of connected devices is relatively high. These segments include, for example, fleet management (with the exception of SME transport companies), mobile employees, video surveillance, etc. Some other M2M/IoT segments are also developing, first of all, those in which the cost of the communication module is insignificant compared to the price of the end device, and the connection itself is necessary to provide the service (ATMs and connected cash registers).
Forecast for 2020-2025
According to J'son & Partners Consulting, the total volume of the IoT/M2M market in Russia in monetary terms will increase from 64 billion rubles in 2019 to 86 billion rubles in 2025. This will significantly change its structure. In particular, the share of the revenue from data transfer services will decrease and the share of cloud services provided on the basis of IoT platforms will more than double. Increasing the consumption of cloud services will lead to a twofold reduction in the share of system integration services and proprietary hardware and software systems. Increasing the consumption of cloud services will increase the number of connected devices, which will lead to an increase in the cost of communication modules in the overall cost structure for IoT/M2M by almost one and a half times.
The total number of M2M/IoT devices connected to global networks (WAN) using wired and wireless technologies in Russia will grow from 23 million in 2019 to 56 million in 2025. In 2025, the market for vehicle and road infrastructure monitoring systems 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 of distributed video surveillance systems and photo/video recorders, the most promising services are cloud storage and video data processing, whose consumption volume is estimated to be 13.7 billion rubles in 2025. Proprietary hardware and software systems for video surveillance in the commercial sector will be replaced with cloud services. In the public sector, hardware and software complexes (like the “Safe city” complex and others) will remain in the coming years, even though their price/functionality ratio is significantly worse than that of cloud platforms.
The potential of the segment of IoT/M2M connected devices used for payments and banking transactions is rather in the ability to create analytical IoT services with high business value than in the growth of the number of connected devices.
The market for 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 is individual housing and, unlike apartment buildings, smart home systems can be quite effective and the decision to use them is made by the homeowners themselves, not by the utility company.
The trigger that converts the potential demand into the real is the emergence of cloud services for monitoring and optimizing the management of building engineering equipment. These cloud services can work with already installed security, fire, and engineering systems controllers.
In 2018-2019, the first cloud-based IIoT platforms and applications for processing data from connected machines and other types of industrial equipment appeared in Russia. This data is mainly 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 platforms 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 foundation of digital agriculture. Proven in practice, the economic effect of such systems is tens of percent increase in productivity, reducing losses and unit costs per unit of production. However, the volume of cloud agricultural IoT applications and services consumption in Russia in monetary terms is currently extremely insignificant. In 2020-2025 consumption of cloud-based IoT applications and services in agriculture will grow at a high rate of 44% CAGR, but in absolute terms will remain insignificant. The reason is the presence of powerful inhibiting factors, such as a great lack of high-quality data on the Russian agricultural segment that has accumulated over a long historical period, a small number of means of mechanization in agriculture, a virtual absence of means of production process automation, information closeness of rural farms, the limited presence of global application providers in Russia and the lack of the Russian developers’ ecosystem around these platforms. An additional problem is the extremely limited financial capacity of Russian agricultural producers.
In general, it can be noted that in 2015-2019, the foundation was laid (in terms of government programs and initiatives) for further development of the IoT/M2M market. The state has a significant influence on the Russian IoT/M2M market as a major customer, approbator of new products and technologies and as a market regulator that forms the regulatory framework, stimulates market development and investment activity of its participants. The market prospects in the segment of government customers are largely determined by government initiatives aimed at implementing digitization programs and projects. At the same time, some projects are at the level of declarations or pilot projects that have not got further development.
The most promising areas are:
- monitoring and management of transport infrastructure and vehicles (projects like ERA-GLONASS or Platon, requirements for equipping vehicles with tachographs, requirements for monitoring transit traffic of sanctioned goods, perishable goods transportation control);
- improving territorial management and energy efficiency;
- introduction of the procedure for using cash registers;
- requirements for creating a system of reliable measurements and accounting of energy consumption and a number of other regulatory initiatives.
This information note was prepared by the J'son & Partners Consulting. We work hard to provide factual and prognostic data that fully reflect the situation and available at the time of release. J'son & Partners Consulting reserves the right to revise the data after publication of new official information by individual players.
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Detailed research results are presented in the full version of the report:
“Russian IoT/M2M market by the end of 2019, forecast to 2025”
Contents (133 pages)
INTRODUCTION: DEFINITION OF IOT/M2M, BOUNDARIES AND METHODOLOGY OF THE STUDY
1. RUSSIAN M2M MARKET IN QUANTITATIVE TERMS, 2018-2025
1.1. Number of M2M devices (modules)
1.2. Number of M2M SIM cards
- AVERAGE COST PER M2M DEVICE BY INDUSTRY
1.1.1. Fleet management
1.1.4. Insurance telematics
2.2. ATMs and POS terminals
2.3. Security systems and controllers for engineering systems of buildings
2.4. Energy and utilities
2.4.1. Smart electricity meters
2.4.2. Smart water meters
2.4.3. Smart gas meters
2.4.4. Smart heat meters
- IOT/M2M MARKET VOLUME IN MONETARY TERMS, 2018-2025
3.1. Connectivity services
3.2. M2M platforms and cloud IoT services – the Russian market against the background of the global market
3.3. Proprietary hardware and software systems for storing, processing and visualizing data from telemetry devices
3.4. Equipment for connecting telemetry devices to the WAN (communication modules)
3.5. System integration in IoT/M2M projects
- 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 recorders
4.3. Using IoT/M2M devices for managing engineering systems for buildings and structures ("Smart house", "Smart building")
4.4. Using IoT/M2M devices to make payments
4.5. Using IoT/M2M devices and platforms in industry
4.6. Using IoT/M2M devices and platforms in agriculture
- ESTIMATION OF THE MARKET POTENTIAL IN THE PUBLIC SECTOR
5.1. The state as a customer of IoT/M2M products. Promising directions of the IoT/M2M market development in the B2G segment
5.1.1. Security systems
5.1.2. Systems for monitoring and management of transport infrastructure and vehicles
5.1.3. Systems for ensuring energy and territory management efficiency
5.1.4. Development of the social sphere
5.2. The state as a regulator and initiator of the IoT/M2M services market development. Government initiatives as a service market generator
- MAIN DRIVERS AND CONSTRAINTS
6.1. Main drivers of the market
- PROSPECTS FOR IOT IMPLEMENTATION IN RUSSIA
7.1. Terms of implementation
7.2. LPWAN technologies
7.2.1. Basic LPWAN technologies
7.2.2. Development of LPWAN in Russia
7.2.3. LPWAN application areas
7.2.4. Main drivers and barriers
APPENDIX 1. COST AND BASIC FUNCTIONALITY OF GLONASS/GPS ON-BOARD EQUIPMENT FOR FLEET MANAGEMENT, PRESENTED ON THE RUSSIAN MARKET (SELECTED)
APPENDIX 2. WHOLESALE PRICES FOR OBD-DONGLES BY NYITECH (CHINA)
APPENDIX 3. MAIN IOT/M2M PRODUCTS AND TARIFFS OF TELECOM OPERATORS
APPENDIX 4. COST OF SMART ELECTRICITY METERS WITH BUILT-IN GSM MODEMS
APPENDIX 5. COST OF SMART ELECTRICITY METERS WITH BUILT-IN LPWAN MODULES
APPENDIX 6. LARGE CONTRACTS OF STATE CUSTOMERS (SELECTED) IN 2016-2020
List of figures
Fig. 1. Number of M2M SIM-cards in Russia, 2015-2025
Fig. 2. Estimation of the number of IoT/M2M devices connected to WAN* in Russia, actual for 2015-2019 and forecast for 2020-2025, thousand units
Fig. 3. Estimation of the total volume and structure of the IoT/M2M solutions market in 2019 and 2025 by main cost item
Fig. 4. Estimation of the revenue structure of telecom operators from connecting IoT/M2M devices (including wearable devices) by connection technology, actual for 2019 and forecast to 2025, million rubles and %
Fig. 5. Estimation of the share of major connectivity technologies in the total number of IoT/M2M connections, actual for 2019 and forecast to 2025, thousand connections and %
Fig. 6. Estimation of the revenue structure of telecom operators from connecting IoT/M2M devices by device application type, actual for 2019 and forecast to 2025, million rubles and %
Fig. 7. The role of IIoT platforms and applications in solving the problem of end-to-end optimization of the value chain of cyber-physical systems
Fig. 8. Volume, dynamics and industry structure of the global market for cloud based industrial IoT platforms and applications, actual for 2014-2019 and forecast for 2020-2022, million dollars
Fig. 9. Volume, dynamics and structure of the global market for cloud based industrial IoT platforms and applications by platform type (basic and applied), actual for 2015-2019 and forecast for 2020-2022, million dollars
Fig. 10. Volume, dynamics and industry structure of the Russian market for cloud based industrial IoT platforms and applications, actual for 2019 and forecast to 2025, million rubles
Fig. 11. Changing the enterprise management principles and business application appearance
Fig. 12. Changing the quantification of the need for edge computing, zettabytes per year, 2016-2021
Fig. 13. Estimation of the sales structure of hardware and software systems for storing, processing and visualizing machine data by application, actual for 2019 and forecast to 2025, million rubles and %
Fig. 14. Estimation of the sales structure of communication modules for connecting telemetry objects to WAN by application, actual for 2019 and forecast to 2025
Fig. 15. Estimation of the structure of revenues from system integration services and technical support of distributed systems for telemetry applications, actual for 2019 and forecast to 2025, million rubles and %
Fig. 16. Estimation of the structure of the Russian IoT/M2M distributed systems market by application type, actual for 2019 and forecast to 2025, million rubles and %
Fig. 17. Estimation of the volume and structure of the market for distributed telemetry systems for vehicles and road infrastructure, actual for 2019 and forecast to 2025, million rubles and %
Fig. 18. Estimation of the volume and structure of the market for distributed video surveillance systems and photo/video recorders, Russia, actual for 2019 and forecast to 2025
Fig. 19. Volume and structure of the market for video surveillance services (WAN connection of cameras, data storage and processing services), actual for 2019 and forecast to 2025, million rubles
Fig. 20. Estimation of the volume and structure of the market for distributed resource consumption accounting systems, actual for 2019 and forecast to 2025, millions of rubles and %
Fig. 21. Estimation of the volume and structure of the market for distributed remote-control systems (fire alarm systems) and distributed control systems for engineering equipment, actual for 2019 and forecast to 2025, million rubles and %
Fig. 22. Revenue from automatic collection of legally significant fiscal data from cash registers (including marked goods) by fiscal data operators, actual for 2016-2019 and forecast for 2020-2025, million rubles
Fig. 23. Three-tier reference architecture of Industrial Internet of Things
Fig. 24. Estimation of the volume and structure of the market for cloud-based systems for monitoring and control of industrial equipment, actual for 2019 and forecast to 2025, million rubles and %
Fig. 25. Estimation of the volume and structure of cloud systems for monitoring and management of agricultural equipment, actual for 2019 and forecast to 2025, million rubles and %
Fig. 26. Budgets of the federal projects of the national program “Digital economy of the Russian Federation”
Fig. 27. The "ERA-GLONASS" development potential
Fig. 28. Results of the "Platon" project (as for 15 June 2020)
Fig. 29. Stages of the implementation of online registers
Fig. 30. Statistics on the implementation of housing and utility state information systems
Fig. 31. Roadmap of the “Energinet” project
Fig. 32. Classification of the main wireless technologies for IoT
Fig. 33. Number of chipsets supporting 3GPP IoT standards
Fig. 34. Devices Cat-NB1, Cat-NB2, and Cat-M1
Fig. 35. Number (billion units) and share (%) of IoT wireless devices or connections by technology, 2018-2023
Fig. 36. Connected IoT devices market, 2019-2030
List of tables
Table 1. Number of connected M2M/IoT devices in Russia (wired and wireless connection technologies), thousand devices
Table 2. Difference in the amount of payment for using industrial platforms by platform type and application area
Table 3. Key differences between enterprise automation with a hierarchical management model (telemetry, automated process control systems, automated enterprise management systems) and automation of a digital enterprise with a flat management system (digitalization based on IoT principles)
Table 4. Vehicles and transport infrastructure facilities installed and connected to WAN in Russia, thousand units, actual for 2018-2020, forecast for 2020-2025.
Table 5. Analytical and transactional cloud IoT platforms and applications developed by automakers and automotive component suppliers
Table 6. Surveillance cameras and photo/video recorders installed and connected to WAN, thousand units, actual for 2018-2019, forecast for 2020-2025.
Table 7. IoT/M2M devices for monitoring resource consumption installed and connected to WAN, thousand units, actual for 2018-2019, forecast for 2020-2025.
Table 8. Security and fire alarm controllers, engineering systems and connected home appliances installed and connected to WAN, thousand units, actual for 2018-2019, forecast for 2020-2025.
Table 9. IoT/M2M devices used for payments and banking transactions installed and connected, thousand units, actual for 2018-2019, forecast for 2020-2025
Table 10. IoT/M2M devices used for monitoring and managing machines and other types of industrial equipment installed and connected, thousand units, actual for 2018-2019, forecast for 2020-2025
Table 11. IoT/M2M devices used for monitoring and managing agricultural equipment installed and connected, thousand units, actual for 2018-2019, forecast for 2020-2025
Table 12. Basic technologies of narrow-band wireless IoT communication networks in radio frequency bands used in a simplified manner
Table 13. Current state of NB-IoT and LTE-M networks in the world, April 2020
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