Global spending on the Internet of Things (IoT) is forecast to reach $772.5 billion (£579.5 billion) in 2018, an increase of 14.6 per cent on the $674 billion that is likely to be spent in this year.

In a new update to the International Data Corporation (IDC) Worldwide Semiannual Internet of Things Spending Guide, researchers have forecast that worldwide IoT spending will sustain a compound annual growth rate (CAGR) of 14.4 per cent through the 2017-2021 forecast period, surpassing the $1 trillion mark in 2020 and reaching $1.1 trillion in 2021.

According to the guide, IoT hardware will be the largest technology category in 2018, with $239 billion going largely toward modules and sensors. Services are expected to be the second largest technology category, followed by software and connectivity.

The researchers explained that software will also be the fastest growing technology segment, likely recording a five-year CAGR of 16.1 per cent. Services spending is also predicted to grow at a faster rate than overall spending, with a CAGR of 15.1 per cent.

Carrie MacGillivray, vice president of Internet of Things and Mobility at IDC, said: “By 2021, more than 55 per cent of spending on IoT projects will be for software and services. This is directly in line with results from IDC’s 2017 Global IoT Decision Maker Survey, where organisations indicate that software and services are the key areas of focused investment for their IoT projects.”

She went on to say that software “creates the foundation” upon which IoT applications and use cases can be realised.

However, she added, the services are expected to help bring the technology elements together in order to create a “comprehensive solution that will benefit organisations and help them achieve a quicker time to value”.

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