worldwide IoT spending
Internet of Things

This is an exciting time for the world of technology. The search for the next dominant computing platform after the smartphone has begun, and we have quite a few promising contenders. Virtual Reality and Augmented Reality are grabbing headlines, and so is machine learning based AI. However, perhaps the most pertinent of these is IoT – the “Internet of Things”. Most of us today will have heard of the IoT, but very few truly grasp what it is. Even a fewer understand the sheer potential and implications that this technology brings with itself. Now, new data from IDC gives us a much clearer picture about the future of this technology, and how it will affect the world.

Revisiting The Conversation Around IoT

The basic idea around IoT involves an ecosystem of physical objects that are interconnected via the internet. Now, this seems deceptively straightforward. However, the implications and the use cases that IoT opens up are near endless. In fact, new use cases are constantly emerging, as research and physical implementations of IoT continue to be made.

The idea behind IoT is not new either. In fact, it has been around longer than many others like VR or AR. However, just like those technologies, the conversation around IoT was largely theoretical and isolated until recently. The past few years have seen a drastic change in that respect; the irrepressible advance of technology has brought us to a point where IoT is no longer a pipe dream. It now has real world applications in a number of industries and is ripe for mass scale adoption.

Data from IDC suggests that worldwide spending on the Internet of Things will top $800 billion in 2017 alone. This represents a growth of nearly 16.7% YoY. Future forecasts on IoT spending are even more spectacular; IDC estimates around $1.4 trillion in spending by 2021! The discussion around IoT is no longer around the number of devices connected. Its value now has to be measured in terms of how big an impact it can have on various verticals.

So why such a sudden boom in IoT spending? The answer is simple that software and hardware technology have finally caught up to levels that enable IoT. RFID sensors, a critical hardware enabler for IoT are finally cheap enough, so that mass deployment is cost-effective. Machine learning and AI development is another critical enabler of IoT. The sheer amount of data generated and processed in real time in some IoT applications point to the need for AI.

IoT: Transforming The Industry

IDC expects large investments in IoT for a number of use cases in 2017. These include manufacturing operations ($105 billion), freight monitoring ($50 billion), production asset management ($45 billion), smart grid technologies for electricity, gas and water ($56 billion) and smart building technologies ($40 billion). On the consumer side of things, airport facilities automation (33.4% CAGR), electric vehicle charging (21.1% CAGR), and in-store contextual marketing (20.2% CAGR) will all experience rapid growth. Significant growth is also expected in Smart home technologies at 19.8% CAGR over the next five years.

However, the largest investments will be made in Manufacturing ($183 billion), Transportation ($85 billion), and Utilities ($66 billion).

Of course, there are two sides to IoT as we know it; hardware and software. Hardware spending is expected to dominate til 2020. This will primarily constitute modules and sensors that connect end points to networks as the infrastructure for IoT is laid down. On the other hand, software spending will be dominated by applications software. The fastest growing categories here will be horizontal software (29% CAGR), Analytics Software (20.5%) and Security Software (16.6% CAGR). The spending on services involves a 50-50 split between content services, and IT and installation.

Some of the applications and convenience that IoT enables is simply astounding. For example, one of the more hopeful applications is the idea of a “smart city”. This could include things like smart lighting, smart parking services, accident prevention, energy conservation, garbage collection/recycling, public transportation and so much more.

A terrific example of this is Pittsburgh’s IoT-enabled and AI-powered traffic lights. These lights can significantly decrease travel time by up to 25%, braking by 30%, and the standing idle time by 40%. Such technology not only helps in reducing traffic congestion but also save a significant amount of fuel contributing to environmental protection. This small example amply demonstrates the sheer potential of IoT; it is not hard to imagine that the future is surely heading in this direction.

APeJ Will Headline IoT Investment

One of the more surprising predictions of the IDC report is regarding investment commitment based on geography. Traditionally, we would expect the US and North America to dominate, as they have with so many of the technologies in vogue today. However, that is not the case with IoT. IDC expects Asia-Pacific (excluding Japan) (APeJ) will be the IoT spending leader, with $455 billion in spending by 2021. Following APeJ will be the US, with $421 billion spending by 2021. Western Europe will also feature on the spending chart, with a net spend of $274 billion. Their considerably larger populations can possibly explain the dominance of APeJ. This warrants a higher spend as it entails much higher instances of end points.

Another surprising feature of the report is that it predicts Latin America, Middle East and Africa and Central and Eastern Europe to experience the fastest growth in IoT spending at 21.7% CAGR, 21.6% CAGR and 21.2% CAGR, respectively.

Given the sheer potential and scale of the technology, it is almost a foregone conclusion that IoT will dominate the future. However, as companies and industries scramble to take advantage of the impending IoT revolution, there remains a considerable lack of clarity, especially among corporates. In fact, only 1.5% of executives at large companies have a clear vision for IoT and its implementation. This clearly demonstrates that for all its magnificence, we can expect considerable growing pains before IoT becomes a mainstream reality.