IOT spending is tipped to reach nearly US$1.4 trillion by 2021, with Asia/Pacific tipped to lead the spending. This is according to new research from IDC, who said the key metric is now dollars spent rather than devices connected.
Previous forecasts have focussed on how many devices would be connected, but the discussion is now about spending, said IDC.
The IDC Worldwide Semiannual Internet of Things Spending Guide forecasts worldwide spending on the Internet of Things (IoT) to grow 16.7 per cent year-over -year in 2017, reaching just over $800 billion. By 2021, global IoT spending is expected to total nearly $1.4 trillion as organisations continue to invest in the hardware, software, services, and connectivity that enable the IoT.
“The discussion about IoT has shifted away from the number of devices connected,” said Carrie MacGillivray, vice president, Internet of Things and Mobility at IDC.
“The true value of IoT is being realised when the software and services come together to enable the capture, interpretation, and action on data produced by IoT endpoints. With our Worldwide IoT Spending Guide, IDC provides insight into key use cases where investment is being made to achieve the business value and transformation promised by the Internet of Things.”
Asia/Pacific (excluding Japan) will be the IoT investment leader throughout the forecast with spending expected to reach $455 billion in 2021. The second and third largest regions will be the United States ($421 billion in 2021) and Western Europe ($274 billion).
The IoT use cases that are expected to attract the largest investments in 2017 include manufacturing operations ($105 billion), freight monitoring ($50 billion), and production asset management ($45 billion). Smart grid technologies for electricity, gas and water and smart building technologies are also forecast to see significant investments this year ($56 billion and $40 billion, respectively).
While these use cases will remain the largest areas of IoT spending in 2021, smart home technologies are forecast to experience strong growth (19.8 per cent CAGR) over the five-year forecast. The use cases that will see the fastest spending growth are airport facilities automation (33.4 per cent CAGR), electric vehicle charging (21. per cent CAGR), and in-store contextual marketing (20.2 per cent CAGR).
Investment by industry
The industries making the largest IoT investments in 2017 are manufacturing ($183 billion), transportation ($85 billion), and utilities ($66 billion). Cross-industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, will be $86 billion in 2017 and rank among the top segments throughout the five-year forecast.
Consumer IoT purchases will be the fourth largest market segment in 2017 at $62 billion, but will grow to become the third largest segment in 2021. Meanwhile, the industries that will see the fastest spending growth are insurance (20.2 per cent CAGR), consumer (19.4 per cent), and cross-industry (17.6 per cent).
From a technology perspective, hardware will be the largest spending category until the last year of the forecast when it will be overtaken by the faster growing services category. Hardware spending will be dominated by modules and sensors that connect end points to networks, while software spending will be similarly dominated by applications software.
Services spending will be about evenly split between ongoing and content services and IT and installation services.
“As enterprises are adopting to new and innovative services provided by different vendors a lot of new threats are introduced, so it’s very important to upgrade existing security systems to ensure that an optimal business outcome can be reached and ROI can be justified,” said Ashutosh Bisht, research manager for IT Spending across APeJ.