Among the sub-sectors of the XR spectrum — AR, VR and consumer and enterprise segments of each — Enterprise AR has the fastest growth and largest eventual market size. This was uncovered in ARtillry’s latest XR revenue forecast.
One of the biggest questions we’ve gotten since last week’s data release is why Enterprise AR is growing so rapidly. Indeed its growth rate exceeds lots of historical growth benchmarks. There are a few key reasons for this, explored in the full forecast, and we’ll summarize them here.
First, from a market sizing and forecasting perspective, there are often high growth rates associated with sectors that start from such a small base. Enterprise AR’s current revenue levels are early stage, and will see high growth rates if they’re to reach the market potential we expect.
That eventual market size is aligned with lots of signals we’re tracking, and enterprise AR’s inherent ability to scale. For that, we point to wide applicability across enterprise verticals; and a form factor that supports all-day use and clear ROI (e.g. manufacturing efficiencies.).
But that alone doesn’t explain such a large eventual market. One of the sector’s growth drivers will be its composition of both hardware and software. The latter is key: As we’ve seen in historic comps and benchmarks like enterprise Saas, it can have highly scalable and recurring revenue.
Drilling down further on the hardware and software dynamics, near-term revenues will be hardware-dominant as it’s usually the first step in enterprise tech adoption. Hardware growth creates an installed base for software which, again, will gain share of enterprise AR in outer years.
Enterprise hardware will also mature as it’s established in the enterprise, with replacement cycles outpaced by software refresh rates. As software gains share of overall enterprise AR revenues, the sector will benefit from some of the Saas dynamics outlined above.
It’s also worth noting that the $21 billion projected for enterprise AR software in 2021 is about 4 percent of overall enterprise software spending. Given AR’s promise in the enterprise that we and others have spent lots of time examining, we’re confident these projections will bear out.
The question is if we got the timeline right. That’s what we’ll be watching closely as we march towards 2021, while course-correcting the projections as things materialize. There will be lots to examine. Stay tuned for more data, and see more forecast details and methodology here.
Disclosure: ARtillry has no financial stake in the companies mentioned in this post, nor received payment for its production. Disclosure and ethics policy can be seen here.