CIO spending will stand proud this year, no really, honest

SaaS and analytics the place to be in 2016

Tech spending is set to rebound this year and next following across-the-board declines in the last 12 months. And it is all the fault of software – specifically, sustained demand for analytics and cloud stuff.

Of course this becoming reality is predicated on the good folk at Forrester Research stroking their collective crystal ball in the right way, on forex rates remaining stable, and on local economies not going awry.

But suppliers are happy to take good news where they can get it, amid projections that businesses and governments will fork out 4.5 per cent more cash on goods and services in 2016 to $2.9trn, albeit in constant currency.

"As we look at the global economy and tech markets, there are more reasons to think that tech market growth will turn out to be better than our forecast than reasons to think it will be worse," said analyst Andrew Bartels.

All product segments reported declines in 2015, preliminary estimates from Forrester revealed, but software will lead the return to the black in 2016, growing 5.7 per cent to $597bn.

Bartels said adoption of software-as-a-service and cloud platform services will "continue to accelerate," as standalone analytics and those embedded in applications "will be a second driver of software growth."

But the Forrester man added that "if software is where all the action is, hardware is the backwater of old technology."

That said, computer gear will "show some signs of life, as tablets and Windows 10 PCs attract increases in spending." On the flip side, growth in the segment will be clipped by "sluggish demand" for servers and storage.

Computer equipment is forecasted to rise 2.4 per cent year-on-year to $364bn; comms kit is expected to grow 0.7 per cent to $343bn; tech consulting and SI by 5.1 per cent to $541bn; outsourcing and hardware maintenance by 3.5 per cent to $473bn; and telecoms services by 3.5 per cent to $647bn.

As for the geographical split, Forrester said it expects the US to grow to $1.132trn, up 5.1 per cent, or 2.5 to 3 per cent including forex conversions. The next largest tech spender is China – at about one fifth the size of the US – which is tipped to swell 7.1 per cent to $224bn.

The land of the rising sun is expected to be the third largest buyer of technology this year, growing 0.1 per cent to $203.4bn, but coming up fast behind is the UK, forecast to expand 8 per cent in constant currency to $178.6bn, or 5.6 per cent growth when currency is accounted for.

The appreciating US dollar put a dampener on spending last year, as US-based vendors and those that buy components in American dollars raised their prices to compensate for the lower amounts when repatriated.

This knocked customers' budgets out of sync and meant that fewer products were acquired.

Another theme set to continue this year is relatively slower spending growth in parts of the emerging markets. Russia is forecast to decline 16.1 per cent to $14.5bn; Turkey by 7.5 per cent to $15.3bn; Brazil by 11.5 per cent to $48.1bn; and South Africa by 2.4 per cent to $10.1bn.

So things will remain tough in certain product sectors of the industry and in regional pockets around the globe, but as Forrester said, things can only get better – as a certain popular beat combo D:Ream once claimed. ®

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