There are several reasons why iot enterprise spending growth has been slower than expected. According to the report, the three main reasons include slowing GDP growth, persistent inflation, and high interest rates.

According to IoT Analytics’ latest IoT Enterprise Spending Dashboard and Tracker update, the global iot market will grow by 19% in 2023.

In 2022, the enterprise iot market will grow by 21.5% to reach $20.1 billion. Growth in this market is slightly lower than last year’s forecast of 23%, and growth is expected to be even slower in 2023.

Philipp Wegner, principal analyst at IoT Analytics, said: “In our last forecast, we expected the world economy to recover faster, supply chains to be stronger, and continued investment in new technologies to ease Labour shortages. We end up projecting a 24 percent increase in spending in 2023.”

“However, nine months after the last update, we have to cut our 2023 forecast to just 19 per cent.” Currently, IoT Analytics forecasts that the IoT market will grow at a compound annual growth rate of 19.4% to $483 billion from 2022 to 2027.” .

“As a result, Asia-Pacific is expected to outpace the rest of the world at a CAGR of 22% between 2022 and 2027. North America (20% CAGR) is projected to grow at a slower rate than APAC through 2027, but significantly faster than Europe (16% CAGR).”

Reasons for the downward revision of the forecast

There are several reasons why iot enterprise spending growth has been slower than expected. According to the report, the three main reasons include slowing GDP growth, persistent inflation, and high interest rates.

1. Slowing GDP growth

A key reason for slower-than-expected growth in iot enterprise spending in 2023 is slow economic growth. In its latest World Economic Outlook growth projections for January 2023, the IMF projected real GDP growth of 2.9% in 2023, down from 3.4% in 2022. To put this into context, at the end of January 2022, the IMF projected real GDP growth of 4.4 percent in 2022 and 3.8 percent in 2023.

According to the IMF, real GDP growth in almost all major world economies will be lower in 2023 than in 2022:

Asia-pacific region

India (+6.1% projected GDP growth in 2023) and China (+5.2%) are the fastest growing major economies. China will grow even faster than in 2022 (+3.0%), an exception after the end of the blockade.

Europe

The eurozone (which includes Germany, France and Italy) is expected to grow by just 0.7%, while the UK economy is likely to shrink by -0.6%.

North America

Growth in the United States is expected to be slower in 2023 (+1.4%) than in 2022 (2.0%) and likely to be even slower in 2024 (+1.0%).

2. Persistent inflation

In January 2023, inflation finally showed a downward trend. However, in most advanced economies, inflation remains higher than in the past decade. Like many businesses, tech companies will encounter employees seeking higher wages to cope with the rising cost of living and customers struggling to control spending. In addition, with more office staff, travel and on-site events, operating expenses will gradually increase, leading to profit pressure.

3. High interest rates

Last year, the central bank raised interest rates to fight inflation. The US Federal Reserve raised the federal funds target rate from 0.125% at the beginning of 2022 to 4.375% at the end of 2022. To combat inflation, other central banks have followed suit (e.g., the European Central Bank [0%2%], the Bank of England [0.1%3.5%]). Higher interest rates have multiple effects, as they increase the cost of borrowing capital and put pressure on corporate profit margins. Higher interest rates make it more expensive for companies to borrow money, which can reduce their ability to invest in new projects or technology.

Amid economic uncertainty, spending on digital transformation and new technologies has been put on the back burner.

Eventually, the growing uncertainty spills over into corporate investment, digital transformation, and the Internet of Things. For example, in recent earnings calls, the ceos of Microsoft and PTC reported that customers were more cautious about spending on technology. They reported that most consumers would expand their spending rather than cut back entirely.

However, while overall IT spending declines in 2022 and is expected to grow slowly in 2023, enterprise IoT spending is still expected to grow 19% in 2023 (according to the January 2023 update to the IoT Analytics Global iot Enterprise Spending Dashboard). In the longer term, the large backlog of automation vendors such as ABB and Rockwell Automation highlights the healthy need for digital transformation and enterprise iot solutions.