Worldwide spending on the Internet of Things is projected to exceed $1 trillion in 2026

Worldwide spending on the Internet of Things is projected to exceed $1 trillion in 2026

According to International Data Corporation’s Worldwide Internet of Things Spending Guide, Worldwide spending on the Internet of Things (IoT) is projected to be $805.7 billion in 2023, an increase of 10.6 percent from 2022. Investments in the IoT ecosystem are expected to exceed $1 trillion dollars in 2026 with a compound annual growth rate (CAGR) of 10.4% over the forecast period 2023-2027.

“Recent years have shown that connecting with a digital infrastructure is no longer a luxury but a necessity,” said Carlos M. Gonzlez, research manager for the Internet of Things at IDC. “For organizations to excel in data-driven operations, it is essential to invest in IoT projects. Connecting devices to data networks to gather insights, expand operations, and increase performance are the hallmarks of running an IoT ecosystem.”

Discrete and process manufacturing are the industries that will experience the largest investment in IoT solutions in 2023 and throughout the forecast period, accounting for more than a third of all IoT spending globally. Professional services, utilities, and retail are next in line for overall IoT spending, accounting for about 25% of the global total. State/Local Government and Telecom will deliver the fastest spending growth over the five-year forecast with CAGRs of 12% and 11.7%, respectively.

Investment in the IoT is a key element in supporting an increasingly digital and distributed organizational footprint. Most of these investments are looking for solutions that can help organizations achieve a specific business goal or customer challenge, such as cost savings or supply chain efficiency. Therefore, use cases are at the heart of most IoT investment plans.

The two IoT use cases that will receive the most investment in 2023 are both closely related to manufacturing operations ($73.0 billion) and manufacturing resource management ($68.2 billion). The next top use cases are inventory intelligence ($37.6B), smart grid (electricity) ($36.9B), and supply chain resilience ($31.6B) will benefit from strong investment by the retail and utilities sectors. Use cases that will experience the fastest growth in spend include EV charging (30.9% CAGR), next generation loss prevention (14.5% CAGR), agricultural field monitoring ( CAGR of 13.9%) and connected vending machines and lockers (CAGR of 13.8%).

“The updates to the IoT use case taxonomy in this release of the IoT Spend Guide reflect evolving investment goals for enterprises’ digital transformation. Thematically, the increased investments in the production of goods and supply chains resulting from the COVID-19 pandemic and the global reactions that caused massive business and social upheaval are evident in the new use cases. These manufacturing and supply chain use cases can be seen in the discrete manufacturing, process manufacturing, retail and transportation industries,” said Marcus Torchia, research vice president with the data and analytics group of IDC. “Meanwhile, investments by digital businesses are increasing in other sectors, such as those of resources. For example, the IoT is helping to improve processes upstream of the supply chain in agriculture, such as growing, harvesting and the delivery of superior quality products to the market”.

This release of the IoT Spending Guide also includes a forecasting video analytics overlay that is intended to provide high-level insight into a widely adopted (i.e., present in most or all business sectors) use case. Video analytics refers to the use of artificial intelligence (AI) and other advanced algorithms to recognize, detect, and analyze live or archived video feeds for a variety of uses, including business analytics, security surveillance, and other adaptations rapidly evolving technology. These uses are found in a number of contexts (e.g. business analytics in manufacturing and retail, government for crowd and congestion management, and general security surveillance). Video analytics requires IP network capable cameras to support advanced software, either built into the hardware or provided by third-party vendors.

IDC expects spending on video analytics solutions across all industries to exceed $23.5 billion this year. Future versions of the IoT Spend Guide will include additional widely adopted use cases, such as smart buildings.

From a technology perspective, IoT services will be the largest area of ​​spending in 2023 and through to the end of the forecast, accounting for nearly 40% of all IoT spending globally. Hardware spending will be the second largest technology category, dominated by module/sensor purchases. Software will be the fastest growing technology category with a five-year CAGR of 11% and a focus on applications and analytics software purchases.

Western Europe, the US and China will account for more than half of all IoT spending during the forecast. While Western Europe and the US currently have similar spending levels, Western Europe will extend its lead at an 11% CAGR over the 2023-2027 forecast versus an 8% CAGR for the US. China’s IoT spending is expected to surpass the US by the end of the forecast thanks to its CAGR of 13.2%.

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