Global spending on the Internet of Things (IoT) continues to increase and the momentum doesn’t look to be slowing down any time soon, according to a recent International Data Corporation (IDC) Worldwide Internet of Things Spending Guide. IoT spending is expected to be $805.7 billion in 2023, a more than 10 percent increase from the year before, and pass the $1 trillion mark in 2026.
“The last few years have shown that connecting with a digital infrastructure is no longer a luxury, but a necessity,” said Carlos M. González, research manager for the Internet of Things at IDC. “For organizations to excel in data-driven operations, investing in IoT projects is essential. Connecting devices to data networks to gather insight, expand operations, and increase performance are the hallmarks of executing an IoT ecosystem.”
The discrete and process manufacturing industries are expected to see the largest investment in IoT solutions both in 2023 and during the forecast period, according to the study. The industries will account for more than one-third of all global IoT spending. Meanwhile, professional services, utilities and retail are the next largest industries in terms of overall IoT spending. These sectors will comprise approximately 25 percent of the worldwide total.
State and local government as well as telecommunications are expected to deliver the quickest spending growth over the five-year forecast with CAGRs of 12 percent and 11.7 percent, respectively.
IoT investment is seen as a critical building block to supporting an increasingly digital and distributed organizational footprint, according to IDC. Most IoT investments are looking for solutions that can help organizations achieve a specific business goal or customer challenge, whether it’s reducing costs or making their supply chain more efficient.
Manufacturing operations ($73 billion) and production asset management ($68.2 billion) are forecasted to receive the most IoT investment this year.
The next largest use cases – inventory intelligence ($37.6 billion), smart grid electricity ($36.9 billion), and supply chain resilience ($31.6 billion) – will see strong investments from the retail and utilities industries.
Electric vehicle charging (30.9 percent CAGR), next generation loss prevention (14.5 percent CAGR), agriculture field monitoring (13.9 percent CAGR), and connected vending and lockers (13.8 percent CAGR) are among the use cases expected to experience the fastest IoT spending growth.
“Updates to the IoT use case taxonomy in this release of the IoT Spending Guide reflect the evolving digital transformation investment objectives of enterprises,” said Marcus Torchia, research vice president with IDC’s Data & Analytics Group. “Thematically, greater investment in goods production and supply chains resulting from the COVID-19 pandemic and global reactions that caused massive business and societal disruptions are evident in the new use cases.
“These production and supply chain related use cases can be seen in the discrete manufacturing, process manufacturing, retail, and transportation industries,” said Torchia. “Meanwhile, digital business investments are ramping up in other industries such as the resource industries. For example, IoT is helping to improve upstream supply chain processes in agriculture, such as growing, harvesting, and delivering higher quality produce to market.”
The IoT Spending Guide also covered video analytics to forecast artificial intelligence (AI) use as well as other advanced algorithms designed to recognize, detect and analyze live or stored video feeds used for things such as business analytics and security surveillance. IDC expects spending on video analytics solutions across all industries to be more than $23.5 billion this year.
From a technology perspective, IoT services will be the largest area of spending in 2023 and through the end of the forecast, accounting for approximately 40 percent of all IoT spending worldwide. Hardware spending is the second largest technology category. Software is expected to be the fastest-growing technology category with a five-year CAGR of 11.0% and a focus on application and analytics software purchases.
Geographically, Western Europe, the U.S. and China will comprise more than half of all IoT spending throughout the forecast, according to IDC. Western Europe and the U.S. currently have similar levels of spending, but Western Europe is expected to expand its lead with an 11 percent CAGR over the 2023-2027 forecast, compared to an 8 percent CAGR for the United States. China’s IoT spending is forecast to surpass the U.S. by the end of the forecast due to its 13.2 percent CAGR.