Global spending on the Internet of Things (IoT) is projected to reach $805.7 billion in 2023, indicating a 10.6 percent increase from the previous year, according to the latest IDC report.
The report also forecasts that investments in the IoT ecosystem will exceed $1 trillion by 2026, with a compound annual growth rate (CAGR) of 10.4 percent over the 2023-2027 period.
Carlos M. Gonzalez, research manager for the Internet of Things at IDC, highlighted the significance of investing in IoT projects for organizations to excel in data-driven operations. Leveraging IoT to gather insights, expand operations, and enhance performance has become a defining characteristic of implementing an IoT ecosystem.
The industries making the largest investments in IoT solutions in 2023 and the entire forecast period are Discrete and Process Manufacturing, accounting for more than one third of global IoT spending. Professional Services, Utilities, and Retail follow closely, representing approximately 25 percent of the total worldwide spending. State/Local Government and Telecommunications are expected to demonstrate the highest spending growth rates over the five-year forecast, with CAGRs of 12.0 percent and 11.7 percent respectively.
Investing in IoT is essential for organizations aiming to establish a digital and distributed organizational footprint. Most of these investments target solutions that can help organizations achieve business goals or address customer challenges, such as cost savings and supply chain efficiency.
The two most heavily invested IoT use cases in 2023 are related to the manufacturing industries: Manufacturing Operations ($73.0 billion) and Production Asset Management ($68.2 billion). Other significant use cases include Inventory Intelligence ($37.6 billion), Smart Grid (Electricity) ($36.9 billion), and Supply Chain Resilience ($31.6 billion), benefiting from substantial investments from the Retail and Utilities sectors.
The report highlights that spending on Video Analytics solutions across all industries is anticipated to exceed $23.5 billion in the current year. Future versions of the IoT Spending Guide will encompass additional widely adopted use cases, including smart buildings.
IoT services will account for the largest share of spending in 2023 and throughout the forecast, representing nearly 40 percent of global IoT spending. Hardware spending, primarily driven by module/sensor purchases, occupies the second-largest technology category. Software is expected to be the fastest-growing technology category, with a five-year CAGR of 11.0 percent, with a particular focus on application and analytics software purchases.
Western Europe, the United States, and China will collectively contribute to over half of the global IoT spending during the forecast period.
