January 5, 2016
Forrester has just published our global tech market report for 2016 and 2017 (see “The Global Tech Market Outlook For 2016 To 2017- The Five Themes That Will Define Tech Spending In The Next Two Years”). For the first time, our January 2016 global forecast includes telecommunication services (voice and data, wireline and wireless), which increases the overall size of the global market for tech purchases by business and government by $625 billion to a total of $2.9 trillion in 2016. However, even the addition of telecomm services cannot pull the global tech market out of the 4%-5% growth track, with growth at 4.5% in 2016 and 4.7% in 2017 when measured in exchange-rate-adjusted US dollars.
The five main themes that define the global tech market over the next two years are:
- Moderate overall growth remaining below 5%. The global tech market in constant currency terms will continue to grow modestly throughout 2016 and 2017 at 4.5% and 4.7%, respectively. The strong US dollar will persist in 2016, resulting in lower dollar-denominated growth rates. However, we expect the dollar to lose some steam by 2017, so we project 4.9% growth in US dollar terms.
- While not posting the strongest growth, the US tech market will grow by 5% and more. The largest tech market by far, US will post steady 5.1% growth in 2016 and 5.9% in 2017. Elsewhere, individual country-level growth rates will be all over the map. India, Mexico, Sweden, China, Poland, and Israel will have the fastest tech market growth of 6% or more in 2016, while Canada, Australia, South Korea, and most others European countries will grow more slowly. Japan, Brazil, and South Africa will barely grow, while Russia’s tech spending will shrink.
- Business Technology (BT) acts as a growth engine in growing markets. In 2016 and 2017 spending on what Forrester calls the Business Technology agenda — tech that helps firms win, serve, and retain customers — will account for over half of total new project spending in 2016 and 2017. In steady-growing industrial countries, technology and business leaders will invest heavily in new projects that support the BT Agenda. While traditional information technology (IT) spending will continue to dominate total tech spending, especially in emerging markets, total BT spending will reach $827 billion worldwide by 2017.
- Cloud and analytics adoption means software and services spending will grow fastest. SaaS will carry the overall software market over the next two years, with adoption spreading from CRM to human capital management, ePurchasing, financial management, and analytics. Indeed, SaaS subscription revenues for applications will come close to equaling combined software license and maintenance revenues by 2017. CIOs and their business leaders will also spend heavily on analytics in the form of BI apps, cognitive solutions, and analytics-embedded applications. Software spending in these areas will pull in tech consulting and systems services spending to implement and maximize the value and security of these software products.
- If anything, our forecast could be too conservative. Our 2016 and 2017 forecasts are based on assumptions that the US economy will grow at a steady rate, with the European and Japanese economies improving slightly and the Chinese economy growing at a 6% rate. Certainly, there are risks that a renewed recession in Europe and/or Japan or miscalculation by the US Federal Reserve in its monetary tightening could cause actual tech market growth to be lower than our forecasts. However, we think the more likely alternative to our tech market forecast would be better-than-expected growth should Europe’s and China’s economies post stronger growth and if the launch of Microsoft 10 turns out to be more successful in restoring growth to the PC market than its recent predecessors have been.