IoT Forecasts Augur Well for Software and Services, a $226 Billion Market by 2023

K. Weldon
K. Weldon

Summary Bullets:

  • According to GlobalData, the global market for business-focused Internet of Things (IoT) technology, which consists of software, services, connectivity, and devices, reached $130 billion in 2018, and it is projected to reach $318 billion by 2023, a CAGR of 20%.
  • This forecast has implications both for IoT vendors and service providers as well as for the enterprises that will use their products and services to achieve operations improvements, cost reduction, and eventually revenue-generating products and services of their own.

GlobalData’s latest IoT forecast splits out technology into three segments: software and solutions, connectivity, and devices.

While IoT devices and connectivity get a lot of airplay from vendors and operators, software and services clearly comprise the largest opportunity. The category includes engineering, installation, maintenance, and project management, as well as IoT platforms, application development services, and software. It also includes cloud computing, machine learning, and security services associated with IoT deployments. While software and services still clearly lead in revenue by the end of the period, the growth rate from 2018 to 2023 is slightly higher for connectivity and devices, as new LPWAN and 5G services and the rise of edge computing, respectively, will drive higher revenue growth in these segments.

The diverse ecosystem of providers offering software and services makes this segment especially competitive. Operators are vying to offer value-added services beyond connectivity, while network and infrastructure vendors are branching out into IoT platforms and applications. IT service providers, systems integrators, and consultants are providing a wealth of consulting and integration services, while business software vendors and vertical VARs and specialists are providing IoT application development and ‘pre-shrunk’ applications. It is too soon to say whether there is room for all of the different vendors chasing many of the same verticals with, in many cases, overlapping capabilities. What is clear is that IoT remains a highly strategic growth market in the eyes of all of these vendors, and in spite of the fact that some form of IoT has been around for over 20 years, the real high growth cycle for this market is just beginning.

On the enterprise adoption side, companies are just beginning to use IoT for more than cost control or productivity and operations enhancements. Deployments are getting larger, and more lines of business within a given company are seeing opportunities. Capabilities enhanced by new technologies such as augmented and virtual reality and machine learning/AI are going to change the way companies use the IoT, with the eventual goal of enabling them not only to improve their current products and processes, but also to generate new revenue streams through the development of new products and services.

The GlobalData forecasts also show that solutions for government, utilities, and manufacturing dominate the market, with a total of 58% of the opportunity in 2018 and a slighter smaller 55% of the market in 2023, as others such as travel and leisure and retail grow their respective shares. Energy and transportation are other major verticals, with a combined 15% of the market in both 2018 and 2023.

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