Worldwide spending on blockchain solutions is forecast to reach $2.1 billion in 2018, more than double the $945 million spent in 2017.
This is according to the inaugural Worldwide Semi-annual Blockchain Spending Guide from International Data Corporation (IDC).
The market analyst firm expects blockchain spending to grow at a robust pace over the 2016-2021 forecast period with a five-year compound annual growth rate (CAGR) of 81.2% and total spending of $9.2 billion in 2021.
"Interest and investment in blockchain and distributed ledger technology (DLT) is accelerating as enterprises aggregate data into secure, sequential and immutable blockchain ledgers, transforming their businesses and operations," says Bill Fearnley, Jr, IDC's research director, Worldwide Blockchain Strategies.
Innovative solutions
He explains that many technology vendors and service providers are collaborating and working with consortiums such as the Enterprise Ethereum Alliance and the Hyperledger Projects to develop innovative solutions that improve processes such as post-trade processing, tracking and tracing shipments in the supply chain, and transaction records for auditing and compliance.
"Also, multiple regulators and central banks have made positive comments about blockchain and DLT, and this will help to accelerate demand in regulated industries such as financial services and healthcare," Fearnley says.
IDC notes the US will see the largest blockchain investments and deliver more than 40% of worldwide spending throughout the forecast.
It points out that Western Europe will be the next largest region for blockchain spending, followed by China and Asia-Pacific (excluding Japan and China).
All nine regions covered in the spending guide will see phenomenal spending growth over the 2016-2021 forecast period, with Latin America and Japan leading the way with CAGRs of 152.5% and 127.3%, respectively.
"2017 was the year of experimentation as enterprises realised both the benefits and challenges of blockchain," says Stacey Soohoo, IDC's research manager for customer insights and analysis.
She notes that 2018 will be a crucial stage for enterprises as they make a huge leap from proof-of-concept projects to full blockchain deployments.
"As a leader in blockchain innovation and integration, the US will continue to invest in blockchain throughout the forecast, spending heavily in financial services, manufacturing and other industries. The US will look to improve efficiencies in existing operations while promoting new applications in others, creating new streams of revenue and areas of spend. With increased investments driven by pressures to keep up with the accelerating pace in innovation, the world will continue to look to the US for guidance as other regions forge ahead in their own blockchain projects and initiatives."
According to IDC, blockchain spending will be led by the financial sector ($754 million in 2018), driven largely by rapid adoption in the banking industry.
It adds that the distribution and services sector ($510 million in 2018) will see strong investments from the retail and professional services industries, while the manufacturing and resources sector ($448 million in 2018) will be driven by the discrete and process manufacturing industries. In the US, the distribution and services sector will see the largest blockchain investments.
The financial services sector will be the leading driver in Western Europe, China and Japan. The market research firm believes the industries that will see the fastest growth in blockchain spending will be professional services (85.8% CAGR), discrete manufacturing (84.3% CAGR) and the resource industries (83.9% CAGR).
Common use cases
Within the financial sector, says IDC, blockchain lends itself to a number of common use cases, including regulatory compliance, cross-border payments and settlements, custody and asset tracking, and trade finance and post-trade/transaction settlements.
In the distribution and services sector and the manufacturing and resources sectors, the leading use cases include asset/goods management and lot lineage/provenance, it points out.
Cross-border payments and settlements will be the use case that sees the largest spending in 2018 ($242 million), followed by lot/lineage provenance ($202 million) and trade finance and post-trade/transaction settlements ($199 million). These three use cases will remain the largest in terms of overall spending in 2021 as well, IDC notes.
"There are a multitude of potential new use cases for blockchain, as transactions and records are the lifeblood of just about every organisation," says Jessica Goepfert, IDC's programme director, customer insights and analysis.
"However, we are seeing initial blockchain spending to transform existing highly manual and inefficient processes such as cross-border payments, provenance and post-transaction settlements. These are areas of existing pain for many firms, and blockchain presents an attractive value proposition."
From a technology perspective, IDC points out that IT services and business services (combined) will account for roughly 75% of all blockchain spending throughout the forecast, with spending fairly well balanced across the two categories.
Blockchain platform software will be the largest category of spending outside of the services category and one of the fastest growing categories overall, along with security software, it concludes.
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