2023 proved to be difficult for the tech sector, as government and enterprise spending on technology sputtered, falling short of expectations. Instead of Forrester’s (News - Alert) projected 4.7% growth in constant currency, a meager 3.5% increase sent ripples through the industry.
Maybe the reason was the impact of global economic woes, fueled by rising interest rates and inflation. Perhaps the pandemic-driven tech boom of the past few years had reached its peak. Or perhaps analyst forecasts might have overestimated the continued resilience of the tech sector in the face of broader economic challenges.
No matter the reason, 2023 brought with it a sobering reality check. However, it also presents an opportunity for the tech sector to reinvent itself in 2024 as Forrester’s "Global Tech Market Forecast, 2023 To 2027" report predicts tech spending will grow 5.3% this year.
This acceleration is attributed to two main factors: shifting priorities and the Asia Pacific engine.
Businesses are expected to allocate more resources toward software and IT services, including generative AI, cloud computing and cybersecurity solutions. By 2027, software and IT services are projected to capture 69% of global tech spending, up from 60% in 2018.
The growing adoption of generative AI is a key driver of the software and IT services market. Forrester predicts investments in generative AI software will reach $227 billion by 2030, growing at a compound annual rate of 36%.
“Technology companies faced significant economic headwinds this past year, but 2024 promises a better outlook, with genAI expected to boost the tech market over the next three years,” said Michael O’Grady, Principal Forecast Analyst at Forrester.
As for Asia Pacific, strong economic growth in the Asia Pacific region, particularly in countries like India, China and Vietnam, is expected to drive a 5.6% increase in tech spending this year. Forrester predicts six of the countries with the fastest GDP growth in 2024 will be in the Asia Pacific region.
When compared to other regions in the world, North America will grow 5.4%, and Europe will grow 5.1%. Software and IT services will capture 60% of U.S. tech spend in 2027, up from 53% in 2018, and the European economy will recover in 2024 to grow almost double the rate compared to the previous year. Longer term, European tech spend will see 5.1% to 5.7% growth from 2024 to 2027, driven by higher enterprise digital maturity and more advanced cybersecurity adoption.
“Asia will see the fastest economic growth due to India’s growing IT export market as well as significant investments in tech innovation,” said O’Grady. “Similarly, in the U.S., heavy investments in emerging technologies through the development of three primary CHIPS and Science Act agencies will fuel tech spend growth. In Europe, greater investment in cybersecurity and the EU’s Coordinated Plan on AI will help the region bounce back.
Remember, businesses need to remain vigilant and adapt their strategies to capitalize on the opportunities presented by the accelerating tech market.
Edited by Alex Passett