Internet of Things Heading Toward $1.7 Trillion by 2020, Set to Rock 'IT Status Quo'

• By Dian Schaffhauser
• 06/22/15

As the Internet of Things (IoT) infuses life and work, the dimensions of the market are coming into clearer focus for those who study its momentum. According to IT research firm International Data Corporation (IDC), IoT is expected to grow from $656 billion in 2014 to $1.7 trillion in 2020, representing a compound annual growth rate of nearly 17 percent. That's considerably smaller than IDC forecasted in 2013, when IoT was anticipated to generate global revenues of $8.9 trillion by 2020.

More than two-thirds of the current 2020 market value will be made up of devices, connectivity and IT services. Modules and sensors (the devices) will single-handedly represent almost 32 percent of the total.

The latest numbers are reported in IDC's recently published "Worldwide Internet of Things Forecast, 2015–2020," which provides data on revenue projections at the regional and technology category level.

IoT, according to the research company, is a network of "things" or endpoints that communicate via the network without human intervention (thereby leaving out smartphones, tablets and PCs). Use cases surface among smart appliances, wearables, the automation of public transit, remote health monitoring, digital signage, connected vehicles and traffic monitoring, among other areas. On school campuses, embedded sensors and wireless technology are already used to run security devices, environmental controls and building access. But alongside modules and devices, connectivity and IoT purpose-built platforms, the anticipated trillion-dollar ecosystem also contains a multitude of additional technologies: storage, servers, security, analytics software and IT services.

When IDC published its first forecast two years ago, it was a "nascent market," said Vernon Turner, IDC senior vice president and research fellow for enterprise systems. IDC analysts used three sources to "triangulate the numbers": the semiconductor group's embedded/intelligent systems forecast, a telecommunications usage model to calculate subscriptions and data from a seven-year "digital universe" research project. The forecast that came out of that work provided a strong idea of the number of connected devices (212 billion "things" globally by the end of 2020) as well as expected revenue.

Over the next year, "customers and market guidance" influenced the company to put less value on the telco model for subscriber forecasting and more on the use of the IDC "Black Book," a quarterly analysis of the status and projected growth of the worldwide information and communications technology industry. "This represented a more correlated model to IT and GDP spending (which all of our customers felt was fair in this emerging market)," explained Turner. While the number of devices remained the same, revenue projections were reduced.

Over the last year, the company has chosen to not put so much emphasis on the embedded/intelligent systems forecast, since it "overshadowed the technology stack," noted Turner. "So the latest forecast is very representative of a pure IoT technology stack that is correlated to IoT usage/deployments by industry as we aligned the vertical industry use models with the technology stack."

In fact, while wearable devices may be the "consumer face" of IoT, "the real opportunity remains in the enterprise and public sector markets," Turner said in a prepared statement. "The ripple effect of IoT is driving traditional business models from IT-enabled business processes to IT-enabled services and finally to IT-enabled products, which is beginning to disrupt the IT status quo."

The full report is available from IDC for $4,500.