European businesses will spend US$227 billion on IoT this year alone, as cost-cutting initiatives spur spending on technology and services.

Mary Lennighan

June 30, 2023

3 Min Read
Lots of various Euro cash notes covering the photo.

European businesses will spend US$227 billion on IoT this year alone, as cost-cutting initiatives spur spending on technology and services.

That figure comes from IDC, which also predicts that IoT-related spending will continue to increase at a five-year compound annual growth rate (CAGR) of 11%, to reach almost $345 billion by 2027.

These big sums of money have to be good news for the myriad players in the Internet of Things value chain, including telecoms operators and equipment makers. And it’s particularly telling that we’re looking at a pretty strong growth rate going forward, despite ongoing economic uncertainties across the continent.

Indeed, to an extent those economic issues are actually driving the market. IDC notes that IoT development in Europe “reflects enterprises’ evolving digital transformation investment objectives related to cost reduction, process streamlining, automation, and enhanced customer experience.” Or to put it another way, many of the reasons businesses are deploying IoT are linked to lowering costs, one way or another.

On the other hand, economic difficulties are also holding back the market in some areas, for now at least.

Companies’ investments in IoT in Central and Eastern Europe are significantly below the overall European market average, IDC said, adding that growth rates over the forecast period are expected to be in the single digits. Many investments have been put on hold over the past three years due to the Covid-19 pandemic, the war in Ukraine, and macro-economic pressures in general, the analyst firm’s data shows. However, it sees an uptick coming. IoT investments in CEE will start to accelerate by the end of the forecast period, it predicts, citing those same drivers linked to cost-reduction, optimisation, and management and monitoring capabilities.

“Due to the uncertain macroeconomic context, European organizations are expected to continue feeling pressure on budgets, with additional investments restrained in the short and medium term,” said Alexandra Rotaru, senior research analyst with IDC’s European Data & Analytics Team. “However, IoT will remain a critical tool for improving performance and efficiency and increasing automation capabilities. It will continue to be a key investment area, helping organizations to reduce costs and enhance productivity despite challenges.”

The analyst firm identified the usual key areas of traction for IoT. Spending in Europe will be driven by investments from manufacturing, utilities, and professional services organisations, with prominent use cases including production asset management, distribution automation, and infrastructure for smart buildings, it said.

The fastest adoption of IoT will come in areas such as irrigation management in the resources industry and fleet management in the transport sector, it added.

From a technology perspective, modules and sensors will continue to drive IoT-related investment, followed by related services, IDC said, citing industrial maintenance to support device hardware, vertical business process outsourcing services, infrastructure as a service (IaaS), and data as a service, as examples.

The fastest-growing area of technology investment will be in low power wide area networks (LPWAN), which will prove a critical area for telecoms providers in the coming years, it noted.

IDC’s headline figures suggest there is plenty of money swilling around in the European IoT space at present, and that this is likely to be the case for years to come. However, there is a lot of competition amongst the various industry players – telcos, vendors, specialist firms and so on – for a slice of that cash. Connectivity will always be a requirement, which is good news for the telcos, but grabbing a bigger chunk of the market will continue to be a challenge.


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About the Author(s)

Mary Lennighan

Mary has been following developments in the telecoms industry for more than 20 years. She is currently a freelance journalist, having stepped down as editor of Total Telecom in late 2017; her career history also includes three years at CIT Publications (now part of Telegeography) and a stint at Reuters. Mary's key area of focus is on the business of telecoms, looking at operator strategy and financial performance, as well as regulatory developments, spectrum allocation and the like. She holds a Bachelor's degree in modern languages and an MA in Italian language and literature.

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