January 9, 2017
In our just-published forecast for the global market for business and government purchases of technology goods and services (The Global Tech Market Outlook For 2017-2018: 3% to 4% Growth As Forces Of Disruption Battle With Forces Of Continuity), Forrester is projecting modest growth of 3.2% in 2017 and 3.9% in 2018 measured in constant currencies. With the US dollar strengthening against most currencies in 2017 but likely to lose ground in 2018, global tech market growth in US dollars will be 2.8% in 2017 and 4.7% in 2018.
One of the main forces of disruption is the shift toward populist, anti-globalization governments in the US, UK, and other European countries, The Brexit vote in the UK and the election of Donald Trump in the US have introduced major uncertainties in the economic outlook for these key tech markets, and for their trading partners — uncertainties that will lead to caution in firms' tech buying. The prospects for better economic growth are brighter for the US due to the stimulus from likely tax cuts and increases in infrastructure spending. As a result, we project that the US tech market will have one of the strongest growths at 4.3% in 2017 and 4.8% in 2018. But the outlooks for the UK and Latin American economies are not as positive, due to weakened currencies and the prospect of increased trade barriers. The rest of Europe and Japan are still struggling with deflationary pressures and poor economic growth, which will hold down their tech spending. Low oil and commodity prices will hurt economic growth and tech spending in Russia, the Middle East, and Africa. On the other hand, Canada and the rest of the Asia Pacific region will have similar growth to that of the US, with India's and China's tech market posting the strongest growth rates of any country.
A second force of disruption is the widening adoption of cloud solutions, whether in the form of cloud platform services or as Software-as-a-Service (SaaS). Growth in infrastructure-as-a-service (which we include in the outsourcing category) will be 38% in 2017 and 24%, and growth in SaaS applications will be over 20%. But cloud is often replacing spending that would otherwise have gone for hardware, traditional outsourcing, and licensed software. So, declines or lack of growth in spending in these areas will offset much of the growth from cloud platforms and SaaS applications, leaving overall spending on hardware, outsourcing, and software in low-to-mid single digits. Similarly, SaaS implementations require less spending on systems integration services than traditional on-premises software deployments, so cannibalization will also limitgrowth in these categories. Overall, software will have the best growth of 5% to 7%, followed by tech consulting and systems integration services with 3% to 5% growth. Computer equipment spending will increase by3% to 4%, driven by demand for PCs and tablets. Spending on cmmunications equipment and telecommunications services will be weakest, in the 1% to 2% range,
An unusually high number of risk factors mean that tech market growth could be better or worse than our forecast. The tax, spending, trade, and immigration policies that the Trump Administration will actually propose and the US Congress enacts have a wide range of potential outcomes, ranging from stronger growth with higher inflation and higher interest rates to weaker growth from increased trade barriers and lower exports. Similarly, whether the UK government opts for a soft exit that preserves existing trade arrangement or a hard exit that sacrifices those arrangements will determine both its own growth, and potentially the fate of European Union and its economic growth. Questions about the sustainability of China's economic growth at a time of rising debt loads is another risk factor. The right combination of US, UK/EU, and China economic policies could lift global tech market growth to the 6% to 8% range; a different combination could cause tech market spending to slump to the 1% to 2% range. As the year progresses and policy decisions get made, it will become clearer as to what actual global spending will be over the next two years.