The Russian market of M2M/IoT by the end of 2017, forecast until 2022
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Analytical Report (full version)
The Russian market of M2M/IoT by the end of 2017, forecast until 2022
At the end of 2017, the volume of the Russian market of services and solutions for M2M communications and the Internet of Things (IoT) exceeded 60 billion rubles. It is expected that by the end of 2022 its volume will reach almost 90 billion rubles, and its structure will undergo significant changes. Thus, the share of data transmission services and proprietary hardware and software systems will decrease from more than 70% to a little more than 40%, and the share of cloud services will grow by almost five times.
Boundaries, basic concepts and methodology of the study
In the research conducted by J’son & Partners Consulting 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 participation or with minimal human participation.
It should be noted that currently, the market of IoT/M2M in Russia as something single just does not exist. There is a set of virtually unrelated markets that can be attributed to IoT/M2M in one way or another. The main ones:
● The market of transport monitoring systems and services, including so-called "smart insurance" (UBI).
● The market of systems and services of panel protection and security video surveillance, currently the only major segment of the market of "smart home" systems and services.
● The emerging market of systems and services of commercial accounting of energy consumption by industrial enterprises and households, which can also be considered as a segment of the "smart home" market.
● The market of payment systems with a corresponding set of connected devices: ATMs, payment terminals, cash registers with network WAN connection, modules for mobile payment terminals.
The estimation of the total number of IoT/M2M devices installed/used in Russia and its distribution by types, fields of application and connection technologies is based on the "bottom-up" principle and on the analysis of information both publicly available (data from the main corporate consumers of IoT/M2M devices in Russia) and obtained from the key market players during in-depth interviews.
The study takes into account all types of connection technologies: cellular, wired fixed and wireless fixed.
The dynamics forecast for the total number of IoT/M2M devices in Russia is made basing on the analysis of existing, currently implemented corporate and government programs in this area, as well as on analyzing the development prospects of mass segments of the IoT/M2M market.
The total volume and cost structure of IoT/M2M is estimated on the basis of the total cost of ownership (TCO) structure of distributed telemetry systems for each of the types of applications of such systems considered in the study.
The Russian market of distributed telemetry systems at the end of 2017
The market of distributed telemetry systems (also “market of M2M communication”), as well as the market of IoT systems has been developing in Russia for more than 15 years, and some of its segments, such as the market of remote control services, are over 40 years old. As a result, there has been formed a significant installed base of connected devices and in 2016 it amounted to 15.9 million telemetry devices connected to WAN and using all kinds of connection technologies: cellular, wired fixed and wireless fixed, as well as their combinations.
Due to the moderate growth of the number of connected devices in the Russian market of distributed telemetry systems on the one hand, and the significant size of the installed base of IoT/M2M devices in this market (relative to the absolute values of annual growth) on the other hand, the share of communication services in the volume of consumption IoT/M2M solutions in Russia is extremely high – it exceeds 50%.
Another reason for such a high share of communication services is the underdevelopment of IoT/M2M services and cloud platforms and, as a result, the small amount of added value of IoT/M2M solutions generated on such platforms. This distinguishes the Russian market of IoT/M2M solutions and services from the world market and indicates its underdevelopment in terms of value-added processing of data received from telemetry devices.
Another reason for this high share of communication services in the overall cost structure of IoT/M2M solutions is that data services, especially in cellular networks, are still relatively expensive for M2M applications. For example, the cost of 1 GB of traffic in cellular tariffs M2M in Russia is on average 1500 rubles, which is almost 20 times more expensive than the cost of 1 GB of traffic in conventional tariffs for smartphones of private users (75 rubles). For comparison, in the world, ARPU for M2M-connectivity services is currently $1.5-$2.0/month, which is comparable to the Russian indicators (90 rubles/month), while the ARPU of the Russian cellular communication is significantly lower than the ARPU in the world market, especially in the developed countries (4-7 times), which indicates a significant potential for a multiple reduction of ARPU on M2M-connections.
The current structure of WAN connections in Russia, where connection through technologically obsolete cellular networks prevails, combined with the almost complete absence in Russia of carrier-class IoT networks, specialized for the requirements of IoT devices (such networks as LPWAN, NB-IoT, Wi-Fi 802.11 ah, etc.), and it is a significant obstacle to the economically justified use of monitoring modes, requiring high frequency data updates from devices outside the wired network area and/or using a large number of simple IoT / M2M devices with extremely low device connection costs. This, in turn, limits the models of monetization of data from IoT/M2M devices to the simplest cases with low added value.
Forecast until 2022: transformation into the market of IoT services
Currently, the market of distributed telemetry systems that we consider is not an IoT market, as it is formed mainly by proprietary hardware-dependent solutions with extremely limited functionality; in fact, it is telemetric M2H-solutions (distributed supervisory control systems). This market is formed mainly by demand from large projects of state organizations and corporations, and the impetus for the implementation of this market is not economic motives, but rather legislative coercion.
Against the background of stagnation in the Russian economy, this factor, which until recently was actually the only factor of the market development, loses its determining influence, and the factor of economic expediency comes to the fore. That is, both commercial consumers and households are beginning to be interested in the possibility of improving the efficiency of resource use through IoT solutions and services, as well as saving without compromising quality. But this request can be satisfied only by switching from proprietary inefficient solutions to public services, basing on the real principles of IoT. This, in turn, requires formation of ecosystems from solution developers, component vendors (both hardware and software), and business consumers themselves.
Thus, the key driver of the IoT/M2M market growth in Russia is the consumer demand for such systems for the implementation of monitoring scenarios of distributed objects, implying intensive and complex processing of data obtained from objects, more economical (based on telemetry devices), more flexible and functional methods than the use of specialized software and hardware systems, prevailing at present.
Analysis of the development of the global market for IoT/M2M systems shows that the implementation of such methods of data processing is possible through the transition to the use of cloud IoT/M2M platforms, implementing both basic device functionality and connection management, and advanced functionality of telemetry data processing and partner ecosystems from application developers around these platforms. The process of replacing proprietary hardware and software systems in distributed telemetry systems with IoT services on cloud platforms observed in the world is part of the overall process of transition from on-premise solutions to cloud IT in the world as a whole.
That is, we are talking about the market growth not so much due to the increase in the number of connected devices, that is, the increase in the use of IoT/M2M systems in Russia, but due to their qualitative development, which comes from replacing inefficient (in terms of price and functionality) proprietary hardware and software systems with cloud-based IoT services (for example, in distributed video surveillance systems), and formation of completely new cloud services markets in those areas of IoT/M2M applications, where complex processing of telemetry data is not carried out at all (for example, in engineering control systems in buildings and structures, so-called "Smart house").
The study provides a forecast for the volume and dynamics of the IoT/M2M market in Russia for the period up to 2022 in quantitative (connected IoT/M2M devices) and monetary terms. According to the forecast, despite the crisis in the economy, the IoT/M2M market will show steady growth, and in 2022 it will reach the level of 43 million connected devices, and the annual cost of the creation and operation of distributed IoT/M2M systems of 90 billion rubles.
Due to the high "starting" level of prices for connectivity, even with this expected increase in the volume of data transmitted per device by 2022 by more than 10 times and an increase in the number of devices by more than 2 times, the revenue from connectivity in 2022 will not change in relation to 2016.
According to J'son & Partners Consulting, cloud services will be the fastest growing segment of the market. They will both replace proprietary hardware and software systems, for example, in video surveillance systems, and create new markets, such as cloud analytics for Smart home systems and cloud analytics of data from connected cash registers. Moreover, cloud services can develop even faster, since this field does not require installation of specific hardware and software complex of designed telemetry devices, and can rely on the existing base of already installed devices with network connection: installed controllers of engineering and security systems, video cameras and other connected devices.
It is also important to note that all IoT/M2M cloud services without exception, which implement complex scenarios of intensive data processing from distributed telemetry devices, are B2B2X services. That is, the creation of such services requires implementation of a so-called two-way business model, which assumes not a one-time, but constant, throughout the service life cycle, participation of partners, that are external to the operators, both IT companies and companies not from the ICT sector, such as, for example, car manufacturers, utilities, financial and trade organizations.
From a technical point of view, the main limiting factor in the development of the market of distributed telemetry systems, which is currently formed mainly by proprietary closed systems and moving towards open cloud IoT-ecosystems, is the technical and organizational unreadiness of developers of solutions and distributed telemetry systems for the transition to a fundamentally new concept based on the use of cloud IoT-platforms as a replacement for proprietary highly specialized hardware and software systems.
In addition, a significant limitation is the existence 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.
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 results of the study are presented in the full report:
"The Russian market of M2M/IoT by the end of 2017, forecast until 2022”
INTRODUCTION: Definition of IoT/M2M, research methodology and boundaries
1. The Russian M2M market in quantitative terms, 2015-2022.
1.1. Number of M2M devices (modules)
1.2. Number of M2M SIM-cards
2. Average cost of a M2M device by sectors
2.1.1. Fleet management
2.1.4. 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 electric meters
2.4.2. Smart water meters
2.4.3. Smart gas meters
2.4.4. Smart heat meters
3. The IoT/M2M market size in monetary terms, 2015-2022.
3.1. Communication services (connectivity)
3.2. M2M platforms and cloud IoT services
3.3. Proprietary hardware and software systems and cloud services for storage, processing and visualization of data from telemetry devices
3.4. Equipment for connecting telemetry devices (communication modules) to WAN
3.5. System integration in IoT/M2M projects
4. Analysis of the most promising segments for M2M
4.1. Using IoT/M2M devices in transport
4.2. Distributed video surveillance systems and photo / video event recording
4.3. Using IoT/M2M devices for management of engineering systems in buildings and structures ("Smart house", "Smart building»)
4.4. Using IoT/M2M devices to make payments
5. Assessment of the market potential in the public sector
5.1. State as a consumer of IoT/M2M products
5.2. Perspective directions of the IoT/M2M market development in the B2G segment
5.3. State as a regulator and initiator of the IoT/M2M market development
5.4. Government initiatives as a generator of the IoT/M2M market
6. Competitive environment analysis: market shares of mobile operators in the M2M segment
6.1. Number of M2M SIM-cards
7. Main drivers and constraints
7.1. Main market drivers
8. IoT implementation prospects in Russia
8.1. Introduction timing
8.2. Main segments
8.3. LPWAN technologies
8.3.1. Basic LPWAN technologies
8.3.2. Development of LPWAN networks in Russia
8.3.3. LPWAN applications
8.3.4. Main drivers and constraints
8.4. Market volume in monetary terms
9. Impact of IoT on the main indicators of mobile operators
9.3. Data traffic
10. Key system integrators and M2M equipment suppliers on the Russian market
10.1. Profiles of key market participants
10.1.2. System integrators
10.2. IoT development policy at key market participants
10.2.1. Telecom operators
10.2.2. Device manufacturers
10.2.3. IT-companies and suppliers of IoT platforms
10.2.3.1. Mail.Ru Group
10.2.4. System integrators and distributors
11. Distribution of consumers of M2M services (large business, SME, SoHo) by average number of SIM cards per customer
11.2. ATMs and POS terminals
11.3. Building security and engineering systems
11.4. Energy and utilities
Annex 1. Cost and basic functionality of GLONASS/GPS onboard equipment for fleet management presented on the Russian market (selectively)
Annex 2. Wholesale prices for OBD-dongles from Nyitech (China)
Annex 3. Basic mobile operators tariffs for telemetry and M2M services
Annex 4. Cost of smart electricity meters with built-in GSM modems
Annex 5. Major contracts with government customers (selectively) 2016-2017.
Annex 6. Major distributors in the M2M/IoT market
Market reviewIoT, M2M, platforms, LPWAN Open
Market reviewIoT, M2M, platforms, LPWAN Open