January 21, 2018
Forrester’s China Tech Market Outlook, 2018 To 2019 report forecasts that business and government purchases of technology goods and services will grow by 8% in 2018 and 9% in 2019 in US dollar terms. In the past two years, weak domestic demand and rapid currency devaluation put critical pressure on China’s economy — but tech spending growth in 2018 and 2019 will remain strong, driven by the Belt and Road Initiative (BRI), government measures, digital innovation, and ecosystem expansion.
Our forecast for China’s $234 billion tech market in 2018 and 2019 follow three main themes:
- Leading tech providers will be critical enablers of their digital transformations. Substantial progress on BRI and the appreciation of the renminbi are refueling China’s economy. Market competition in this faster-growing, more connected business environment is pushing Chinese companies to accelerate their digital transformation. Leading tech providers — digital giants, traditional tech leaders, and innovative startups — are continuously strengthening their digital capabilities; enterprises inside and outside of China will increasingly create strategic partnerships with them to speed product innovation and drive growth.
- Investment will continue to shift from hardware to software and services. Hardware spending will still dominate, but growth will be flat. Modern hardware infrastructure like AI-optimized hardware and IoT edge devices is important to digital transformation, but these two areas will continue to shift from commodity hardware to software and services. Cloud adoption will further reduce the need for capital expenditure. Decision makers have come to realize that software is core to business success and customer obsession throughout the customer life cycle. The evolution of emerging technologies like container management, AI, IoT, and blockchain will further increase the complexity of platform digitization and application modernization, pushing firms to leverage enhanced capabilities via consulting and outsourcing services.
- Emerging tech will be the driving force behind digital transformation. Traditional industries in China are modernizing quickly by investing in emerging tech. Technologies like predictive analytics, cloud, IoT, and AI enable enterprises to not only maximize customer value across the entire life cycle, but also help achieve efficiency and agility for operational excellence. Of these technologies, AI is the one that will transform everything in China, from business operations to customer experiences. It has received huge support at the national level; the government gave it the status of key national strategy in March 2016 and began implementing an action plan last December to accelerate AI adoption in various verticals. Chinese firms leveraging emerging technologies are having an increasing impact on global tech innovation as tech leaders expand their footprint beyond the Chinese market, maintain strong business growth, and influence the global ecosystem.
While China’s nationwide reform and economic growth will create a friendlier business environment for firms there, market competition will only intensify. As digital transformation dominates business strategy in 2018, CEOs need to work with CIOs and other technology decision makers to strategically prioritize their tech purchases to lead this transformation.