The growing need for real-time, localized artificial intelligence (AI) processing power drives demand for Generative AI (GenAI) solutions on public cloud edge computing platforms.
Worldwide spending on edge computing is forecast to reach $232 billion in 2024 -- that's an increase of 15.4 percent over 2023, according to the latest market study by International Data Corporation (IDC).
Combined enterprise and service provider spending across hardware, software, professional services, and provisioned services for edge solutions will sustain strong growth through 2027 when spending is forecast to reach nearly $350 billion.
Edge Computing Market Development
IDC defines edge as the information and communications technology (ICT) related actions performed outside of the centralized data center, where edge computing is the intermediary between the connected endpoints and the core enterprise IT environment.
Characteristically, edge computing is distributed, software-defined, and flexible. The value of edge is the movement of computing resources to the physical location where data is created, transacted, or stored, thereby increasing the enablement of business processes, decisions, and intelligence outside the core IT environment.
"Edge computing will play a pivotal role in the deployment of AI applications," said Dave McCarthy, research vice president at IDC.
Organizations will adopt the distributed approach to architecture that edge computing provides to meet scalability and performance requirements. OEMs, ISVs, and service providers are taking advantage of this market opportunity by extending feature sets to enable AI in edge locations.
In the service provider industry, investments for edge services delivery are built on infrastructure spending for multi-access edge computing (MEC), content delivery networks, and virtual network functions. These three use cases will account for nearly 22 percent of all edge computing investment in 2024.
For enterprise adopters, including the public sector, examples of edge computing use cases with large investments and rapid growth through 2027 include augmented maintenance (augmented reality), production asset management, AI-augmented supply and logistics, augmented diagnosis and treatment systems, supply chain resilience, in-home remote patient monitoring, and in-store contextualized marketing.
Examples of emerging edge computing use cases that are forecast to have the fastest spending growth over the 2022-2027 period include autonomous mining operations, site design and management (construction), pipeline inspection (utilities), augmented training (multiple industries), and expert shopping advisors & product recommendations (retail).
Enterprise investments have shifted over the past 24 months toward infrastructure expansion and greenfield deployments. Companies are acting on plans to build more robust local computing infrastructure capabilities.
"And through it all, customer-facing new services and products and enabling new business processes are top enterprise drivers," said Marcus Torchia, research vice president at IDC.
Over the next two years, the share of planned investments moderately favors MEC offerings. Yet on balance, enterprises are looking to rationalize total service provider outlays. This sets up a dynamic market of capex and opex-based edge offerings competing for investment through 2027.
Across enterprise end-user industries, the sheer size of discrete and process manufacturing will account for the largest portion of investments in edge solutions this year, followed by the retail and professional services industries.
IDC expects all nineteen researched industries will see five-year compound annual growth rates (CAGRs) in the low-to-mid teens over the forecast period. Meanwhile, the service provider segment will see the greatest CAGR of 19.1 percent.
The largest investment share will continue to be led by hardware, at close to 40 percent of total spending, to build edge computing capabilities especially driven by service provider infrastructure.
Outlook for Edge Computing Infrastructure Investment
Hardware spending will be driven by investments in edge computing gateways, servers, and network equipment. Over the forecast period, adoption of provisioned services by enterprises will surge, surpassing hardware share by 2026 for the first time.
Within provisioned services, connectivity and Infrastructure-as-a-Service (IaaS) will represent the greatest share and fastest growth categories, respectively. On-premise software will be a critical component of edge computing infrastructure but remain the smallest category in terms of overall spending.
North America will be the edge spending leader throughout the forecast period capturing more than 40 percent of the worldwide total share, followed by Western Europe and China, respectively. China and Middle East & Africa will experience the fastest spending growth over the five-year forecast with CAGRs of 16.2 and 15.3 percent, respectively.
That said, I believe as compelling use cases for Generative AI solutions at the edge emerge across many industries, we can expect an ongoing surge in demand for optimized large language models and purpose-built edge computing infrastructure.