Driven by the continued digitalization and modernization of businesses, the International Data Corp. (IDC) projected that spending on the Internet of Things (IoT) will reach surpass $1 trillion in 2026 with a compound annual growth rate (CAGR) of 10.4% expected during the 2023-2027 forecast period.
For 2023, IDC sees global spending on the IoT may reach $805.7 billion in 2023, reflecting a 10.6% growth compared to 2022. These figures highlight the increasing significance and potential of IoT technologies in various industries worldwide.
“The last few years have shown that connecting with a digital infrastructure is no longer a luxury, but a necessity,” said Carlos 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.”
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In 2023, the manufacturing industry will witness significant investments in two primary IoT use cases. The first is Manufacturing Operations, which is projected to receive $73 billion in funding. The second is Production Asset Management, which will receive $68.2 billion in investments. These use cases highlight the close relationship between IoT and the manufacturing sector.
Important use cases
Following closely behind in terms of investment are several other important use cases. Inventory Intelligence is expected to receive $37.6 billion in funding, while Smart Grid (Electricity) will receive $36.9 billion. Supply Chain Resilience will also benefit from strong investments, totaling $31.6 billion. These use cases are anticipated to receive considerable support from the Retail and Utilities industries.
When considering spending growth, several diverse IoT applications are expected to experience rapid expansion. Electric Vehicle Charging, with a projected compound annual growth rate (CAGR) of 30.9%, is set to witness substantial investment. Next Generation Loss Prevention follows closely, with a CAGR of 14.5%. Agriculture Field Monitoring and Connected Vending and Lockers are also expected to grow significantly, with CAGRs of 13.9% and 13.8% respectively. These fast-growing use cases demonstrate the wide-ranging applications of IoT technologies across various industries.
Technology
According to Marcus Torchia, a research vice president at IDC’s Data & Analytics Group, digital business investments are also gaining momentum in other sectors like Resource Industries. IoT is playing a crucial role in enhancing upstream supply chain processes in Agriculture, including activities like growing, harvesting, and delivering higher-quality produce to the market. These developments signify the growing importance of IoT technologies in driving efficiency and innovation across various industries.
In terms of technology spending, IoT services are projected to be the largest area of investment in 2023 and for the duration of the forecast. They are expected to account for nearly 40% of global IoT spending. The second largest technology category is hardware, primarily driven by purchases of modules and sensors. However, software is anticipated to experience the fastest growth. With a five-year compound annual growth rate (CAGR) of 11.0%, the focus will be on acquiring application and analytics software. This indicates a growing emphasis on software solutions to harness the full potential of IoT implementations.