The growth of new technologies, such as IoT, robotics and augmented and virtual reality will add almost US$1.8 trillion to the overall size of the IT industry in terms of annual sales by 2020 according to IDC, which says Asia Pacific will lead the way.
The analyst firm says ‘innovation accelerators’ – its term for new technologies – will provide almost US$7.4 trillion in aggregate revenue from 2015 to 2020, adding the $1.8 trillion to the annual sales by the end of the forecast period and enlarging the market opportunity to $5.5 trillion.
A large proportion of that spending will come from IoT, which is forecast to hit almost $1.3 trillion in annual revenue come 2020, more than $1 million of which is new opportunity outside of traditional technology market categories of devices, infrastructure, software, services and telecom, IDC says.
Robotics, AR/VR, security, cognitive/artificial intelligence and 3D printing will contribute the rest.
The growth in the new technologies will however come against a backdrop of declining legacy markets, with the traditional revenue streams beginning to decline in the face of cannibalisation, substitution and the shift to cloud-based offerings.
Stephen Minton, IDC program vice president of customer insights and analysis, says within the traditional taxonomy of technology products and services, all of the growth is now coming from just four segments: cloud, mobility, big data and analytics, and social business.
“The rest of the industry is already declining, which represents a huge challenge for vendors that are dependent on legacy markets and technologies,” Minton says.
He says the writing is on the wall for legacy products and services with all growth over the coming five years and beyond being driven by third platform and innovation accelerators.
“Device sales are now dominated by mobile devices and cloud service providers represent a growing proportion of all infrastructure hardware and software sales, while big data and analytics are at the heart of the fastest growing opportunities,” he says.
IDC says while overall ICT spending, excluding innovation accelerators, will see a compound annual growth rate of just 1% in constant currency terms between 2015 and 2020, including the innovation accelerators increases that growth by 5%.
“In total, the innovation accelerators will post a CAGR of 18%,” IDC says.
IDC says Asia Pacific, excluding Japan, represents the biggest market for innovation accelerators, with the company forecasting the market to reach more than $600 billion by 2020.
The United States will folllow.
The fastest growth over the forecast period will come from Latin America, followed by Central and Eastern Europe and the Middle East and Africa.
IDC says cloud will continue to cannibalise tradition spending on infrastructure, software and IT services.
“Big data and analytics is also still expanding at a double-digit rate of growth and is forecast to see a 12% CAGR between 2015 and 2020.
“Public cloud services and big data analytics will each provide more than $200 billion in annual revenue by 2020.”
Minton notes that there is a lot of overlap between old technologies and new opportunities, meaning even the growth of traditional products such as servers and storage are dependent on third platform and innovation accelerators for future growth.
“The challenge for technology vendors is how quickly they can pivot from large, slowly declining markets in order to acieve their full growth potential,” he says.
“The second platform still represents more than $1 trillion in annual ICT spending today, but the only way ahead is down.”