Tech Spending Growth Revised To 3.2% In 2017

Forrester reported Wednesday that global technology spending will grow at a rate of between 3% and 4% in 2017 and 2018. The analyst firm lowered its forecast for business and government purchases of tech goods and services to show growth of 3.2% in 2017 and 3.9% in 2018, as measured in constant- or local-currency terms. 

The 2017 projection was lowered from the 3.6% rate forecast in September 2016, citing cautions about businesses making tech investments following the U.K.’s Brexit vote, the U.S. presidential election and Italy’s rejection of President Matteo Renzi's referendum.

Growth should lift to 3.9% in 2018. The U.S. and a handful of countries will experience stronger growth, but Japan, most of Europe, and many emerging economies will see weaker growth in tech spending.

U.S., China, and India will lead growth, with Europe and Japan lagging. Forrester estimates that technology spending in a handful of other countries will see at least 4.5% growth, with another dozen seeing around 3%.

Forrester forecasts global tech purchases in U.S. dollars in 2017 at 2.8% growth, up from 2.3% in 2016

Tech spending in most Western European countries, Japan, and most of Latin America will rise at slower rates of 2% or less. Oil exporters like Russia and Saudi Arabia will cut tech spending in 2017 and then expand spending in 2018 as prices stabilize, according to the report.

Forrester calls out spending in various categories. One interesting factor is the amount global businesses and government will spend on mobile apps built by contractors and consultants, which will reach $22.5 billion.

Software will take the largest piece of the pie at $640 billion, followed by global tech spending at $605 billion. Tech consulting and systems integration at $572 billion will take the top three spots.

Forrester says the forecast for the global technology market relies on certain assumptions about the underlying forces of economic growth and technology adoption. They include:

* Some but not all of Donald Trump's fiscal stimulus will be adopted with a modest increase in U.S. trade restrictions, causing U.S. real GDP growth of 2.2% in 2017 and 3% in 2018.

*A weaker British pound and uncertainties about the ultimate UK/EU relationship will hurt UK consumer spending and business investment, bringing UK real GDP growth down to around 1%.

*China will sustain 6% growth in real GDP.

*Japan’s and Europe’s economic growth will remain in the 1% to 2% range. If growth in these economies turns out to be weaker or stronger than we assume, tech market growth would be lower or greater than it forecast.

Cloud services will reshape the technology market in 2017, but changes for artificial intelligence won't have a strong influence until after 2018.

Forrester calls out software-as-a-service (saas) applications and cloud platform services as the growth drivers. The U.S. will have an influence in services spreading to Europe, Asia and Latin America.

"In some categories, cloud is depressing growth as the drop in spending on licensed software and on-premises hardware offsets the rise in cloud spending," according to the report.

In CRM, ePurchasing, and other apps high rates of cloud adoption continue to cause double-digit growth. Analytics in the form of business intelligence (BI), cognitive solutions, and embedded analytics will also drive software growth, though BI’s slow transition to saas will hold down the increase.

Artificial intelligence and machine learning will not show up in meaningful numbers in tech spending until after 2018.

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