IDC’s latest report on worldwide spending for the Internet of Things (IoT) pegs investments on hardware, software, services and connectivity at $737 billion in 2016. This translates into 17.9 percent growth last year. The industries expected to make the largest IoT investments include manufacturing, transportation and utilities.
Growing at a compound annual growth rate (CAGR) of 15.6 percent over the forecast period of 2015-2020, global IoT spending will reach $1.29 trillion in 2020, according to the International Data Corporation (IDC) Worldwide Semiannual Internet of Things Spending Guide.
Manufacturing is forecast to spend $178 billion on IoT enabling technologies in 2016. The largest IoT use case is manufacturing operations, which will see an investment of $102.5 billion last year. Other big manufacturing investments include production asset management and maintenance and field service.
The second largest use case cited by IDC is freight monitoring. Although the transportation industry’s total spend on IoT is $78 billion in 2016, the sector spent $55.9 billion on freight monitoring.
The utilities sector invested $69 billion on IoT tech in 2016. Combined investments in the smart grid for electricity and gas is expected to total $57.8 billion last year. IDC forecasts that consumers will more than double their spending on smart home tech over the forecast period, reaching more than $63 billion by 2020. This will drive consumer IoT purchases to the third largest segment by 2020, up from fourth in 2016.
However, IDC analysts said cross-industry investment will be some of the top growth segments during the forecast period. These include connected vehicles and smart buildings. The fastest spending growth industries include insurance (telematics), consumer, healthcare (remote health monitoring) and retail (omni-channel operations & digital signage).
“A fairly close relationship exists between high growth IoT use cases in consumer product and service oriented verticals like retail, insurance, and healthcare,” said Marcus Torchia, research manager, IoT, with IDC’s Customer Insights and Analysis team, in a statement. “In some cases, these are green field opportunities with tremendous room to run. In other verticals, like manufacturing and transportation, large market size and more moderate growth rate use cases characterize these verticals. As a whole, the IoT opportunity is a diverse developing market place for vendors and end users alike.”
The largest spend on technology over the forecast period remains hardware, followed by services, software, and connectivity, said IDC. Although hardware spending will double over the five years, reaching nearly $400 billion by 2020, it is the slowest growing IoT technology group, according to the market research firm. Software and services spending is expected to grow faster than hardware and connectivity.
“Modules and sensors, that connect end points to networks, will dominate hardware purchases, while application software will represent more than half of all IoT software investments,” said IDC.
By region, Asia/Pacific (excluding Japan) is forecast to see the largest IoT spend over the forecast period, followed by the U.S., Western Europe, and Japan. Nearly a third of IoT purchases will be in the manufacturing industry, followed by utilities and transportation.
In the U.S., manufacturing also will be the industry with the largest IoT investments but at a lower 15 percent share of total spending. In Western Europe, consumer IoT spending is expected to surpass transportation and utilities to become the second largest IoT industry in 2020.
“It is great to see that the Internet of Things will continue to fuel both business transformation and innovation acceleration markets such as robotics, cognitive computing, and virtual reality,” said IoT research fellow and senior vice president Vernon Turner, in a statement. “The investments by China and the United States in IoT solutions is driving these two countries to account for double-digit annual growth rates and over half of the IoT spending.”
IDC will hold a web conference on the updated Worldwide IoT Spending Guide on January 11, 2017. Details and registration for the complimentary event can be found at http://www.idc.com/getdoc.jsp?containerId=IDC_P35508.