New Delhi: Worldwide spending on the internet of things (IoT) is set to grow 16.7% year-on-year, reaching over $800 billion in 2017 and nearly $1.4 trillion by 2021, as organisations continue to invest in the hardware, software, services and connectivity that enable IoT, according to a forecast by market intelligence firm International Data Corporation (IDC).
The Asia-Pacific region, excluding Japan (APeJ), will be the IoT investment leader with spending expected to reach $455 billion in 2021, followed by the US ($421 billion in 2021) and western Europe ($274 billion). Manufacturing will be the leading industry for IoT investments in all three regions, followed by utilities and transportation in APeJ and western Europe, and transportation and consumer in the US. Cross-Industry IoT spending will be among the leading categories in all three regions as well.
The regions that will experience the fastest growth in IoT spending are Latin America (21.7% compounded annual growth rate or CAGR), the Middle East and Africa (21.6% CAGR) and central and eastern Europe (21.2% CAGR).
“The discussion about IoT has shifted away from the number of devices connected. The true value of IoT is being realized when the software and services come together to enable the capture, interpretation, and action on data produced by IoT endpoints," said Carrie MacGillivray, vice-president, internet of things and mobility at IDC.
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% CAGR) over the five-year forecast. The use cases that will see the fastest spending growth are airport facilities automation (33.4% CAGR), electric vehicle charging (21.1% CAGR), and in-store contextual marketing (20.2% CAGR).
According to IDC, 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, industries that will see the fastest spending growth are insurance (20.2% CAGR), consumer (19.4%) and cross-industry (17.6%).
From the 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. The fastest growing areas of technology spending are said to be in the software category, where horizontal software and analytics software will have five-year CAGRs of 29.0% and 20.5%, respectively. Security hardware and software will also see increased investment, growing at 15.1% and 16.6% CAGRs, respectively.