IT vendors that are pinning their hopes on a hyper-connected future have a new reason to optimistic.
A forecast from IDC predicts that the market for Internet of Things (IoT) technology products and services will reach $772.5 billion in 2018, a 14.6-percent jump compared to the estimated $674 billion the industry is expected to rake in this year. By 2021, that figure will reach $1.1 trillion after rising past the $1 trillion mark in 2020.
Looking further down the road, software and services are poised to soak up more than half of all IoT-related sales.
"By 2021, more than 55 percent of spending on IoT projects will be for software and services," said Carrie MacGillivray, vice president of Internet of Things and Mobility at IDC, in a statement. She added that the forecast is in line with a previous survey where organizations indicated "that software and services are the key areas of focused investment for their IoT projects."
Just like application servers are practically useless without software, so are expansive networks of IoT devices.
"Software creates the foundation upon which IoT applications and use cases can be realized, added MacGillivray. "However, it is the services that help bring all the technology elements together to create a comprehensive solution that will benefit organizations and help them achieve a quicker time to value."
The IoT hardware category will be the biggest moneymaker in 2018, generating $239 billion in sales, followed by the services software and connectivity segments. Manufacturers will spend the most on IoT solutions in 2018, $189 billion in total as the technology spreads across an increasing number of factory floors.
Transportation and utilities are expected to spend $85 billion and $73 billion, respectively, next year. Spending on use cases that are shared by all industries, like smart buildings and connected vehicles, will hit $92 billion, estimated IDC.
Although demand for IoT solutions in these industries is rising fast, it's households that will lead the charge.
Consumers will spend $62 billion in 2018, according to the analyst firm. Over IDC's five-year forecast period (2016-2021), the consumer segment will expand at a compound annual growth rate (CAGR) of 21 percent, thanks, in part, to the rise of smart appliances.
Pedro Hernandez is a contributing editor at Datamation. Follow him on Twitter @ecoINSITE.