Did you know that worldwide spending on the Internet of Things (IoT) is projected to exceed $1 trillion in 2026? According to the International Data Corporation (IDC) Spending Guide, investments in the IoT ecosystem will experience a compound annual growth rate (CAGR) of 10.4% from 2023 to 2027.
The Digital Necessity
In today’s world, connecting with a digital infrastructure is no longer a luxury, but a necessity. Carlos M. González, research manager for the Internet of Things at IDC, emphasizes the importance of investing in IoT projects for organizations to excel in data-driven operations. Connecting devices to data networks enables organizations to gather insights, expand operations, and enhance overall performance, forming the foundation of a successful IoT ecosystem.
Industries taking the lead
The IoT revolution is gaining momentum across various industries. Discrete and Process Manufacturing will witness the largest investments in IoT solutions, accounting for over one-third of global IoT spending in 2023 and beyond. Professional Services, Utilities, and Retail are projected to be the next largest industries in terms of overall IoT spending, making up approximately 25% of total worldwide investments. State/Local Government and Telecommunications are expected to experience the fastest spending growth, with CAGRs of 12.0% and 11.7%, respectively.
Focus on use cases
IoT investment serves as a crucial building block for supporting digital and distributed organizational footprints. Organizations are seeking solutions that can help them address specific business goals and customer challenges, such as cost savings and supply chain efficiency. As a result, use cases are at the forefront of most IoT investment plans.
In 2023, the two leading use cases for IoT investment are Manufacturing Operations and Production Asset Management, closely tied to the manufacturing industries. Other significant use cases include Inventory Intelligence, Smart Grid (Electricity), and Supply Chain Resilience. These use cases will benefit from substantial investments from the Retail and Utilities industries. Moreover, the use cases with the fastest spending growth include Electric Vehicle Charging, Next Generation Loss Prevention, Agriculture Field Monitoring, and Connected Vending and Lockers.
Evolving investment objectives
The IoT Spending Guide’s updated use case taxonomy reflects the evolving investment objectives driven by Digital Transformation. The COVID-19 pandemic and subsequent global disruptions have led to increased investments in goods production and supply chains, evident in the Discrete Manufacturing, Process Manufacturing, Retail, and Transportation industries. Additionally, digital business investments are on the rise in other sectors like the Resource Industries. For example, IoT is playing a pivotal role in improving upstream supply chain processes in Agriculture, ensuring higher quality produce reaches the market.
Unlocking the potential with IoT
When it comes to technology spending, IoT services will dominate, accounting for nearly 40% of global IoT spending in 2023 and beyond. Hardware spending, largely driven by module/sensor purchases, ranks second. However, software is the fastest-growing technology category with a five-year CAGR of 11.0%, focusing on application and analytics software purchases.
Global leaders in IoT spending
Western Europe, the United States, and China will collectively represent over half of global IoT spending throughout the forecast period. While Western Europe and the United States currently have similar spending levels, Western Europe is expected to widen its lead with an 11.0% CAGR from 2023 to 2027, compared to an 8.0% CAGR for the United States. China’s IoT spending is forecasted to surpass the United States by the end of the forecast period, due to its impressive 13.2% CAGR.
Looking beyond
The Worldwide Internet of Things Spending Guide (V1 2023) provides comprehensive insights into IoT spending across technology categories, use cases, industries, and regions. It covers 18 technology categories, 70 named use cases (87 including sub-use cases), 19 industries, and nine regions in 53 countries. Additionally, the guide includes an IoT connectivity forecast, enabling tech buyers and providers to understand the different connectivity types required for various IoT use cases.
Investment in the IoT holds tremendous potential to revolutionize industries and transform the way businesses operate. To learn more about how your brand can leverage IoT technologies and stay ahead in the digital age, visit investment.
About IDC:
International Data Corporation (IDC) is a leading global provider of market intelligence, advisory services, and events for the IT, telecommunications, and consumer technology markets. With over 1,300 analysts worldwide, IDC offers insights on technology, IT benchmarking and sourcing, and industry trends. Founded in 1964, IDC is a wholly owned subsidiary of International Data Group (IDG), the world’s leading tech media, data, and marketing services company. Follow IDC on Twitter at @IDC and LinkedIn, and subscribe to the IDC Blog for industry news and insights.
