In recent years, all major global telecom markets have seen revolutionary advan­cements in communications technology, which are steadily transforming the way industries function. Internet of things (IoT) is one such technology that promises significant benefits to industries and consumers alike. The global IoT market is currently at a turning point, with proofs of concept in­creasingly translating into commercial dep­loyments. Enterprises have recognised the potential of IoT technology and are showing interest in increasing their investments, hence driving the spending required for hardware, software, services and connectivity. Global telecom markets are also gearing up to roll out 5G in the near future, which will provide the much-needed fillip to the global IoT ecosystem.

A look at the global IoT market trends, challenges and prospects…

Regional update

According to the International Data Cor­poration (IDC), global IoT spending is set to grow at a compound annual growth rate (CAGR) of 13.6 per cent during 2017-22, aggregating $1.2 trillion in 2022.

According to the IDC, the Asia-Pacific excluding Japan region will account for the highest IoT spending in 2018, at approximately $312 billion. This will be followed by the North American region (the US and Canada), which is expected to rank second with a total IoT spending of $203 billion. Meanwhile, IoT spending for the Europe, Middle East and Africa region during 2018 has been pegged at $171 billion.

In terms of the highest spending countries, China will account for the largest share of IoT spending in 2018, with a total outlay of $209 billion. Chinese spending on IoT will be primarily driven by investments in the manufacturing, utilities and government sectors. IoT spending in the US is expected to be led by the manufacturing, transportation and consumer segments, and total $194 billion in 2018. Japan and Korea will be the third and fourth biggest investors in IoT in 2018, with investments of $68 billion and $29 billion respectively, driven largely by the manufacturing industry.

Adoption trends across industries

As per IDC, the manufacturing and transportation sectors are expected to be the biggest drivers of IoT investments in 2018. The manufacturing industry is expected to spend approximately $189 billion in 2018 on IoT deployments. This will largely be focused on solutions that support manufacturing operations and production asset management. The transportation industry’s IoT spending in 2018 is expected to amount to $85 billion with around two-thirds dedicated to freight monitoring and fleet management. The utilities industry is expected to spend around $73 billion on IoT solutions in 2018. Spending in this industry will be primarily focused on smart grids for electricity, gas and water. The fourth largest industry in terms of IoT spending will be consumer IoT with a total spending of $62 billion in 2018. Use cases in this segment will be driven by smart homes, home auto­mation and security appliances. As for the long-term outlook, IDC forecasts the consumer segment to experience the biggest growth in IoT spending over the period 2017-22 with a worldwide CAGR of 19 per cent, followed by the insurance industry, which will record a CAGR of 17.5 per cent. Meanwhile, the growth in spending for the healthcare industry and the government sector will take place at a CAGR of 16.9 per cent and 16.1 per cent respectively.

Key trends

Reduced cost of equipment

According to Ericsson, there will be 31.4 billion connected devices in 2023, up from around 17.5 billion in 2017. Approxi­mately 23.3 billion of these total connected devices are expected to be IoT related. A major factor driving this growth in connected devices is the declining cost of hardware equipment, owing to large-scale deployments that are driving down the cost of chipsets and sensors. As a result, devices with sensors are becoming ubiquitous even for the most basic applications. Further, a decrease in the cost per central processing unit of memory and storage enables the collection and analysis of big data, thus contributing significantly to the growth of IoT.

IoT hardware is expected to account for the largest technology category of spending in 2018, with $239 billion being invested. The majority of the funds will be directed to­­wa­r­ds modules and sensors along with infrastructure and security. Services is forecast to be the second largest technology category, with software and connectivity being the third largest. Application and analytics software, IoT platforms and security software will drive spending in the software category. The software category is also expected to be the fastest growing technology segment, with a CAGR of 16.1 per cent over the course of 2017-21. Spending on services will increase at a CAGR of 15.1 per cent over the same period.

Focus on IoT security

According to a Gartner survey, almost 20 per cent of organisations faced at least one IoT-based attack in the past three years. In order to increase protection aga­inst such threats, Gartner estimates that global spending on IoT security will increase by 28 per cent, from $1.17 billion in 2017 to $1.5 billion in 2018. Of the total spending on IoT security in 2018, approximately $946 million will be spent on professional services, $373 million on end-point security and $186 million on gateway security. Further, the demand for solutions to improve discovery and asset management and for software and hardware security assessment is expected to drive spending on IoT security to $3.1 billion in 2021.

Convergence of AI, big data and IoT

The increase in the number of connected devices is leading to an exponential rise in the volume of data being generated from these devices. This data will require analysis and processing to gain valuable insights that can be used to improve business efficiency and decision-making. Therefore, the convergence of artificial intelligence (AI), big data and IoT to manage and analyse data will be crucial in leveraging the data collected from IoT devices for pro­duct and service development. This will also assist in developing business models to monetise the data collected.

Regulatory compliance for IoT

Going forward, regulations regarding IoT are bound to increase and the costs involved in ensuring regulatory compliance will also greatly contribute to the increased spending on security initiatives. With IoT deployment pervading industries, many of which are tightly regulated, enterprises will have to comply with regulations pertaining to the protection of critical infrastructure. Increasing the deployment of operational technology aimed at improving automation and pro­cesses in critical industries (such as energy, oil and gas, transportation and manufacturing) is already affecting security spending. This will intensify the controversial debate around the ownership and misuse of data as well, which is likely to be a major challenge the industry will grapple with.

The way forward

Going forward, the opportunities for vendors, service providers and other stakeholders in the IoT ecosystem are diverse. The potential for what could be achieved is endless, and the industry has barely scratched the surface. With the commercial roll-out of 5G around the corner and with companies bolstering existing long term evolution (LTE) networks, the deployment of IoT networks will rise globally. The establishment of smart cities – with connectivity as their foundation – will contribute significantly to the uptake of IoT networks and products in the near future. Meanwhile, declining equipment and sensor prices, and enhanced data storage facilities will also assist in building momentum for IoT. That said, ensuring the security of IoT networks and solutions will be crucial for its uptake amongst industries and governments.