This week, quantitative market research firm IDC released its Worldwide Semiannual Internet of Things Spending Guide, that at the surface, provides strong evidence of meaningful IoT related IT spending this year, and in future years.

Within the announcement are important validation for our supply chain management community, namely that the broadest appeal, value, and attraction for current IoT efforts rests in areas of manufacturing and supply chain focused business processes.

The industry analyst firm now predicts that worldwide spending on IoT focused technology is expected to grow 16.7 percent this year, reach a level of $800 billion. The firm now forecasts that spending on hardware, software, services, and connectivity that enable IoT will reach $1.4 trillion in five years.

According to the analyst firm, technology hardware, manifested by sensors and modules that connect end points to networks, will be the largest spending category until the last year of the current forecast, when overtaken by the faster growing services category. The forecast indicates that software, namely horizontal and analytics focused, will represent the highest five-year technology growth rates at 29.0 and 20.5 percent CAGR respectively.

IDC indicates that the industrial use cases expected to attract the largest investments this year include $105 billion in manufacturing operations, $50 billion in freight monitoring, and $45 billion in production asset management. According to the forecast, the industries with the largest investments will be Manufacturing ($183 billion), Transportation ($85 billion), and Utilities ($66 billion).

Interesting enough, IDC indicates that the Asia Pacific region (excluding Japan) will represent the leading investment region, followed by United States and Western Europe. From our lens, these regional based forecasts are an indication that Asia-Pac firms view IoT as a core disruptive technology, and are taking an aggressive investment view to leverage such technologies.

On the consumer focused IoT side, the firm now forecasts this area to be the fourth largest market segment this year, and grow to become the third largest segment by 2021. The largest spending growth areas over the five-year window indicated to be 33.4 percent CAGR in airport facilities automation, 21.1 percent CAGR in electric vehicle charging stations, and 20.2 percent CAGR in in-store contextual marketing.

Within our own specific 2017 supply-chain focused technology predictions, we declared that IoT focused technology would continue in early stage pilots or line-of-business driven efforts to prototype new business models. We believed that industry competitor drives need needs to achieve forms of first-mover advantage in either developing new forms of digital-driven business process and achieving newer top-line revenue streams. Early efforts also help in developing required competencies in data security and interoperability among various edge and core business systems.

Judging from the latest IDC forecast data, manufacturing, asset management and transportation processes are garnering the highest interest levels in 2017. Each has a foundational aspect. A further takeaway, again from our lens, is that the near-term investment use-cases for IoT remain in the industrial sector, many of which reflect the digitization of business processes.

Bob Ferrari

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