The European Internet of Things (IoT) market has faced numerous challenges that have slowed its growth, including the disruptive effects of COVID-19, geopolitical tensions from the Russia-Ukraine War, supply chain disruptions, inflation, and rising energy prices.
Despite these formidable obstacles, the European IoT sector is poised for significant growth, with spending expected to rise from EUR 172.3 billion in 2022 to EUR 260.0 billion in 2026, representing a 10.8% compound annual growth rate (CAGR).
IoT remains a driving force in businesses' digital transformation initiatives. For businesses looking to streamline operations, improve customer experiences, and achieve strategic goals, IoT emerges as a critical enabler of operational efficiency, process optimization, and function automation.
Driving Industry Transformation: The Focus of European IoT Spending
At the heart of the global digital transformation, the IoT sector, alongside artificial intelligence (AI) and big data, plays a pivotal role in reshaping the world’s economy. The integration of IoT involves the collection of data from sensors, enabling real-time monitoring and feedback to initiate actions or provide insights, even across vast distances. Shifting processing capabilities to the edge allows for the reduction of unnecessary communication and storage costs. This decentralized approach, coupled with the application of machine learning and AI, facilitates the identification of critical data patterns, influencing physical processes and enhancing operational efficiency for businesses.
Manufacturing, utilities, and professional services organizations will be the primary drivers of European IoT spending. Prominent use cases will include production asset management, distribution automation, and smart building infrastructure. The most rapid adoption of IoT will occur in use cases such as irrigation management in the resource industry and fleet management in transportation.
Furthermore, organizations plan to focus on modules and sensors, as well as ancillary services like industrial maintenance, vertical business process outsourcing, infrastructure as a service (IaaS), and data as a service (DaaS). Notably, investments in low-power wide area networks (LPWANs) are expected to increase significantly.
LPWANs provide power-efficient, long-range, and cost-effective connectivity for IoT devices that send small amounts of data infrequently. Examples of devices that benefit from LPWANs include smart meters, asset trackers, environmental monitors, and smart agriculture tools, according to the International Data Corporation (IDC).
The Crucial Role of IoT
The strategic integration of edge computing, IoT, and cloud solutions offers Europe a unique opportunity to strengthen its technological sovereignty. By bringing data processing closer to the source at the edge and device levels, this approach addresses critical issues such as latency, security, privacy, and environmental sustainability. As Europe strives to assert its digital independence, the adoption of these technologies becomes critical in meeting the demands of next-generation data processing infrastructure.
Given the rapid advancements in cloud, edge, and IoT technologies worldwide, Europe must prioritize R&D investments to remain competitive. This is especially important for small and medium-sized businesses (SMEs), which play a critical role in the region's economy. Quick results can be achieved by creating a favorable environment for cognitive Cloud-Edge-IoT technologies powered by artificial intelligence (AI). These investments not only strengthen Europe's position in the data economy but also pave the way for future hyper-distributed applications.
