In Russia, the market of the Internet of Things is growing slower than anticipated. At least, in the big business segment. iKS-Consulting and Orange Business Services forecast the growth rates will in the near future reach 12% (the current market value was assessed at RUR 20.8 billion or $ 350 million). Nevertheless, according to the 2017 PwC Digital IQ global survey, IoT was the main breakthrough innovation technology leaving far behind the artificial intelligence, robotics and augmented reality. The IoT market growth prospects are quite impressive too, since by 2020 it may exceed $ 7 trillion. Industry players, Russian and global markets analysts met last week at a roundtable at Kommersant Publishers to discuss the place Russia currently has in the market and the prospects of the technology implementation in the country.
Outset
As PwC notes, according to the 2016 results 65% of all Russian companies invest in IT solutions in mobile communications, cloud infrastructure and data protection technologies. Majority of the Russian managers and business owners (85%) link the future of their companies to their digitalization.
But compared to the international IoT markets, Russia’s corporate sector falls behind.
“We see that the share of the companies that invest in IoT in Western Europe and Asia-Pacific, is currently much greater than in Russia”, Christoph F. Strnadl, CTO Central & Eastern Europe, Software AG, says.
A similar situation is in digital economy. As Dr. Strnadl notes, its share in national GDP is 2.6% in Russia and twice as much in the said regions.
Nevertheless, even with the currently modest scale of the Internet of Things in Russia, that does not make it less important for the national economy, experts claim. It is a promising and growing market which quite recently was non-existent at all.
“Internet of Things, digital economy, and digitalization are all fairly new notions and expanding markets”, Christoph Strnadl specifies.
Even in the US and Western Europe it is still not easy to take advantage of the IoT and use its full potential, partially due to outdated equipment and reluctance to invest in its overall upgrading. Hence even though the present-day assessment of the IoT market in Russia does not seem to be significant, the figure is most essential for the market itself since it demonstrates, among other things, a positive growth dynamics.
Russian trace
It may happen though, that Russia is quite able to emerge in the IoT world market. That may be the case of the new Russian IoT standard, NB-Fi. Its main purpose is narrowband access data exchange (for small data volumes license-free 868 MHz band is used). The new technology may help to collect and transmit data in housing and utilities, power supply, logistics and transportations, at minimum costs.
The technology is a basis for a startup. It employs a protocol of a Russian company Waviot. The standard allows IoT devices exchange data at distances of up to 10 kilometers. By now, all respective technical documentation has been submitted to the Federal Agency on Technical Regulation and Metrology.
Currently, NB-Fi standard is supported in the market by Internet of Things Association (IOTAS), its Director Andrei Kolesnikov says. The new Waviot standard is fully open.
“Can there be a closed IoT standard in a separate country? It can, but in that case it will be a niche standard intended for military purposes”, Kolesnikov explains.
He finds it possible the new standard, once it undergoes certification, may enter global market since there is no generally accepted standard yet.
“It will be a precedent if a protocol developed by a Russian company is standardized and promoted by ourselves. It is essential and I would like to see more projects like that”, IOTAS Director notes.
There are chances for that as the project can occupy its own niche in the market due to its low cost and operation in the narrowband range.
Small data
IoT market devices generate some volume of data which may be used by businesses as an additional monetization option. Currently, data generated by IoT devices, is called small data, as opposing to BigData.
For businesses it is certainly a possibility to understand consumer’s behavioral pattern, first of all, in order to see what is consumed and where geographically that happens, Alexander Petrov, assistant to Member of the Board (Minister) for Internal Markets, Information Support, Information & Communication Technologies at Eurasian Economic Commission, says.
There are many patterns like that, he notes. Over the past decade, UK companies actively monitor consumer loyalty by, among other things, processing small data. That is useful for providing additional services.
In the transportation industry small data analysis will be most useful for insurers, Alexander Petrov believes, as on the basis of analysis of the data generated by telematics decisions for the vehicles, insurers can make personalized offers to their clients. Within the frameworks of such projects insurance companies worldwide, in South Korea, for instance, partially participate in infrastructure investments, Alexander Petrov specifies.
Small data analysis will certainly be useful for agriculture. Petrov specifically notes the successes of Kazakhstan and Belarus where livestock chipping program has bene implemented, electronic grain receipts introduced, and the agricultural producers funding is effected via digital systems.
“There, producers were forced to join a common digital system. It is not like that in Russia”, Alexander Petrov says. “We can observe a good progress in Tatarstan, but there it is advanced by various companies only and is not linked to the general industry upsurge”.
In this regard, many applications can be used and small data monetization can be quite sizeable. Respective efforts should be supported on the level of national authorities.
IoT risks
As the number of Internet-connected devices grows, so does the risks of cyberattacks. The readiness to repel an attempted attach is not very high. According to estimates by Avast, one of the largest security companies in the world using next-gen technologies to fight cyberattacks in real time, 23.7% of IoT devices in Russia are vulnerable. The least protected are routers, web-cams, baby monitors and printers. Andrei Beshkov, independent cybersecurity expert, reminds the 2016 infection of Internet-connected devices with Mirai malware.
“Less than a year ago, it was discovered that users do not change the passwords set by manufacturers, at their IoT devices such as video cameras, routers, etc. That is why Mirai virus came to existence and affected 560,000 devices”.
The intruders had a very tangible goal of mining Bitcoins at the hacked equipment of the unaware users. As a result, 900,000 commutators and routers were knocked offline at DeutscheTelekom.
“More so, Mirai developers posted in the Internet the source codes of the malware program, so anyone could make a similar botnet and plan an attack on some equipment”, Andrei Beshkov says.
Another bug, hajime, helps in defeating this botnet. Even though it similarly infects computers, it nevertheless prevents Mirai infection. Vendors are now certainly patching up the existing breaches.
“Security solutions should certainly be included in the architecture of the devices”, Christoph Strnadl believes.
For that, government regulation will be required, as equipment vendors and suppliers meet security requirements at the minimal level since they are not ready to make any major investments in security.
For Russia, one of the main risks in IoT development is a nearly absolute dependence on manufacturers and vendors operating in the growing IoT market. The dependence exists even at the most basic level, as most of the modules for the devices developed and even assembled in Russia are supplied from abroad, from Asia in particular.
“We depend on European vendors, we buy spare parts in China. So we face serious geopolitical challenges”, Georgy Gajiev, custom architecture specialist, thinks. “If we do nothing now, we will be eaten up by other countries. We must oppose that. If it is decided that Moscow should become a smart city, US made components will have to be used for that. That hardly makes sense and will hardly be allowed at all”.
By Olga Blinova