IDC Measures 3rd Platform Industry Spend

September 29, 2021

International Data Corporation (IDC) recently published a series of 3rd Platform Industry Spending Guides that provide in-depth forecasts for technology spending. The guides cover nine industries banking, government, healthcare, insurance, manufacturing, oil and gas, retail, securities and investment services, and utilities with detailed spending projections for 3rd Platform technologies (mobility, cloud, big data and analytics (BDA), and social) and Innovation Accelerators (artificial intelligence (AI), augmented reality/virtual reality (AR/VR), 3D printing, Internet of Things (IoT), security, and robotics) as well as traditional, 2nd Platform technologies.

"While IT spending is contracting in some areas, spending on 3rd Platform technologies will see double-digit growth throughout the post-COVID recovery period," said Karen Massey, research manager, Customer Insights & Analysis. "However, the investment priorities are somewhat varied across industries. The financial services sector, which includes the banking, securities and investment services, and insurance industries, relies more heavily on cloud, mobility, and big data and analytics, for example. But the Internet of Things (IoT) is the primary investment focus in the other six industries, especially manufacturing, oil and gas, and utilities."

3rd Platform technologies will become the largest area of technology investment in the banking industry by 2022 with cloud and mobility accounting for 30% or more of all industry spending throughout the forecast. With a compound annual growth rate (CAGR) of 11.5%, spending on big data and analytics will nearly equal mobility by the end of the forecast while cloud spending takes on more prominence with a five-year CAGR of 16.2%. Consumer banking will remain the largest sub-industry, accounting for more than half of all technology spending by the industry throughout the forecast.

The insurance and securities and investment services industries will follow a similar spending trajectory as banking with cloud and mobility investments leading the way, followed closely by big data and analytics. Both industries will also see similar levels of investment in next-generation security and AI systems. One area where the two industries diverge is IoT spending, which will be notably higher for the insurance industry, led by the property & casualty sub-industry.

"In response to the need for resiliency and scalability in financial services operations, our research has shown accelerated growth in spending on infrastructure technologies like cloud and security, and in business areas like digital banking, risk management in insurance, and analytics in the capital markets industry," said Jerry Silva, program vice president, IDC Financial Insights. "And because many areas in financial institutions are limiting budgets in the face of an uncertain lending environment, investments in as-a-Service cloud solutions and platforms will increase their share of the IT dollar."

Rajeev Gupta, Co-founder & Chief Product Officer at Cowbell Cyber added, "The insurance industry is on a fast track towards full digitization - from insurance application to risk rating, underwriting, policy and claim management. This requires investments in cloud technologies, automation, APIs, and artificial intelligence (AI). With data being the lifeblood of underwriting, the industry is a perfect use case for the use of AI."

The manufacturing industry will deliver the largest investments in 3rd Platform technologies with spending growing to more than $800 billion in 2024. IoT will be the largest area of investment, accounting for more than 30% of the industry's IT spending throughout the forecast. Robotics will be the second largest area of spending with strong investments from the automotive, consumer packaged goods (CPG), and aerospace and defense sub-industries. Robotics and AI systems will see some of the fastest spending growth with a five-year CAGRs of 19.2% and 19.9%, respectively.

IoT will also be the largest area of investment in both the utilities and the oil and gas industries as they increase their use of sensors in smart meters and for distribution automation. Cloud and mobility will see similar levels of investment at the beginning of the forecast, but cloud will benefit from significantly stronger spending growth throughout the forecast in both industries. Robotics will also overtake both cloud and mobility by the end of the forecast to become the second largest area of investment in the oil and gas industry.

"Budgets and spending are always under pressure in all sectors of manufacturing, but it's incredibly important to see the quantification of the expected shift in spending," said Kevin Prouty, group vice president for IDC Energy Insights and IDC Manufacturing Insights. "Similarly, Utilities and Oil & Gas companies are always under pressure to maximize capital and operational spending on technology. But the Spending Guides really highlight the shift from transaction-oriented technology spending to digital spending that focuses on markets and automation, showing that CIOs and CTOs at energy companies are under immense pressure to digitize and prepare their companies for transformation."

In retail, IoT investments will account for nearly a quarter of all technology spending as organizations focus on omni-channel operations. Cloud and mobility will account for another quarter of all retail spending while AR/VR, robotics, and AI systems will see the fastest spending growth as companies invest in customer experience and automation. For general merchandise retailers like Walmart and Target, cloud is the top spending priority while the food store sub-industry will focus more of its spending on IoT along with cloud and mobility.

"Tracking spending intent across all types of retailers, we find that strategic investment is still accelerated as retailers want to modernize infrastructure and capabilities to be more resilient and adaptable in the future," said Leslie Hand, group vice president, IDC Retail Insights. "That said, the retailers that experienced growth as a result of their readiness to adapt, are now embarking on new business growth initiatives including data monetization and broadening fulfillment networks, while others continue to implement capabilities including cloud and mobile-based inventory management, self-checkout, fulfillment, demand forecasting, price and promo optimization, and queue and task management."

IoT is also the largest area of spending within the healthcare industry, where providers (hospitals, physician clinics, and other providers) are utilizing remote sensors for bedside telemetry, asset tracking, and remote health monitoring. Mobility and cloud will be the next largest areas of spending with cloud forecast to grow at a notably faster rate (14.0% CAGR). Investments in AI systems and robotics will also experience strong growth over the course of the forecast with five-year CAGRs of 21.0% and 16.8% respectively.

Government spending on 3rd Platform technologies is forecast to grow to nearly $300 billion by 2024 with a CAGR of 11.6%. IoT will be the largest area of spending, accounting for more than one third of all 3rd Platform investments as governments at all levels invest in public safety and emergency response programs, public infrastructure asset management, and intelligent transportation systems. Mobility and cloud will be the next largest areas of investment with cloud spending overtaking mobility by the end of the forecast with a five-year CAGR of 12.9%. AR/VR and AI systems will see the fastest spending growth with CAGRs of 84.0% and 25.8% respectively.

Given the multifaceted nature of IT spending growth, suppliers and service providers must decide whether to invest heavily in existing or new segments, or hedge their bets across several. Large companies like IBM, Oracle and SAP provide a range of purpose-built on-premise and cloud solutions for analytics, IoT and security, as well as packaged apps for vertical markets. Smaller vendors like IRI, The CoSort Company, provide industry-agnostic solutions for high volume data modernization, masking, and munging within a single platform. According to IRI SVP David Friedland, "by supporting IoT and cloud data sources in Voracity, data discovery, integration, migration, and analytics can be addressed at companies whose data and challenges are exceeding the grasp of their budgets."

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