Key takeaways

Industrial IoT refers to the connection of industrial machinery allowing for machine-to-machine communication, resulting in increased data insights and subsequently improved decision-making, efficiency and safety. The industrial IoT market comprises businesses that engage in the development and/or manufacturing of hardware and software, as well as players that provide related services (e.g. consultancy and implementation). In this research report, we segmented the European market into: (i) hardware, (ii) software and (iii) services.


The emerging European industrial IoT market is still highly fragmented across all segments, with several industrial technology (e.g. Siemens Group, Bosch Group) and software (e.g. Microsoft (US), SAP Group) giants leading in front of a long tail of start- and scale-ups. Industry executives (interviews by Gain.pro) see the need for consolidation and standardisation to boost adoption across the board.


Sponsor-led interest has been present but considerable, with >40% of identified assets being backed by a financial sponsor (October 2022). Interest is mainly driven by the market’s vast growth expectations (i.e. +12% global market CAGR 2020-2025), recurring sales nature (e.g. IoT SaaS), high degree of client lock-in (i.e. high switching costs) and open playing field to become a market leader (e.g. through buy-and-build in a fragmented landscape). As of July 2021, industrial technology companies were valued at ~14.4x EV/EBITDA, with industrial software businesses seeing the highest valuations at ~27.0x EV/EBITDA.


ESG topics primarily relate to environmental and social issues. The environmental impact of the hardware segment mainly relates to the energy-intensive manufacturing process, the pollution associated with the mining of raw materials and the increase in e-waste. However, from a customer’s perspective, the introduction of industrial IoT comes with significant efficiency improvements and decreased raw materials waste. Potential breaches of human rights throughout the supply chain constitute a key social topic. The mining of key raw materials (e.g. mica, cobalt) is notorious for the use of child labour. However, industrial IoT improves safety in customers’ factories, resulting in fewer work-related injuries.

Company benchmarking

Market growth

McKinsey & Company (February 2021) estimates that global industrial IoT spending will increase from ~$290bn in 2020 to ~$500bn by 2025 (+12% CAGR)

Software AG Group (January 2022) expects the total addressable market for its industrial IoT software division to grow at a CAGR of ~26% from 2022 to 2024

A CEO interviewed by Gain.pro foresees a tenfold increase of the European industrial IoT market in the next five years (~60% YoY), while a CTO interviewed by Gain.pro expects the market to grow at ~20-30% YoY in the medium term

Positive drivers

Global digitalisation trend further drives demand as more and more digital integration opportunities arise, with enormous potential for customers to increase (i) process efficiency and optimisation, (ii) waste reduction, (iii) preventive maintenance to decrease downtime and (iv) advanced safety, on the back of an ever-growing amount of data insights (interviews by Gain.pro; McKinsey & Company, June 2020; SECO Group, March 2022; Software AG Group, January 2022)

EU-backed investment programmes such as ‘Productive 4.0’ and ‘Horizon Europe’ provide significant funds to existing incumbents to further accelerate the development of IoT and industrial technology (European Commission, October 2022)

Increasing adoption of AI pushes industrial IoT capabilities as the piles of data gathered can be better analysed and acted upon. Accordingly, identified incumbents will be able to offer more advanced IoT technologies in the medium run, providing more significant operational or financial benefits to (potential) customers (interview by Gain.pro; McKinsey & Company, 2019)

Negative drivers

Lack of standardisation resulting from the fragmented market landscape continues to hamper the adoption of industrial IoT, as potential clients cannot see the wood for the trees (interviews by Gain.pro; TechTarget, April 2021)

General knowledge deficit about industrial IoT amongst (potential) clients slows down adoption, thereby requiring significant monetary and time investments from incumbents to properly educate prospects (interview by Gain.pro; Altamira, October 2021)

Ongoing shortage of skilled (IT) personnel needed for expansion, product development and data security. As data breaches become more prevalent, cybersecurity compliance requirements weigh down on the immature industrial IoT market characterised by a long tail of small players (interviews by Gain.pro; Fortune, October 2021)

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