Forecasts say that over the two years, the overall tech spending in the US will slow down, but investments in cloud infrastructure will increase, leading to squeezed budgets
Recent turmoil at the bond and stock market has highlighted the risk of a US economic slowdown or even a recession. According to a survey by the National Association for Business Economics of US economists, 74% of economists think that recession will happen by 2021.
The Forrester, ‘US Tech Market Outlook For 2019 To 2020: Slowing Economic Growth And Rising Cloud Will Squeeze CIO Options’ report reveals that a slowing of the US economy will cause US tech budget growth to decrease from 6% in 2017 and 2018; to 5% in 2019 and even less at 4% in 2020. During this time, the spending on software, especially cloud software, will rise strongly.
The Forrester further report details, the total US tech budgets will grow by 5% in 2019 and 4% in 2020 and reach $1.85 trillion. Although the US tech spending growth rate is slower than in 2017 and 2018, the predicted growth rates are still relatively strong. However, downside risks are more than upside potential. Weaker overseas economies, trade wars, and changing US government policies can hurt new investments and consequently, US exports.
In the US, software drives tech spending. Software is the largest and the fastest-growing category of US tech budgets, with an increase of 10% in 2019 and 8% in 2020. More enterprises and consumers shifting to the cloud software and especially multitenant SaaS is driving this growth. To capture their share of continuing economic, higher investment has led to stronger demand for marketing, front-office sales, and customer service software. The demand for back-office software for HR, finance, risk management, purchasing, and core transaction systems is also rising. However, the cost of cloud deployments will become a worrisome challenge for CIOs, as the higher subscription fees will squeeze budgets in times of falling revenues.
Systems integration services, tech consulting and tech outsourcing services will benefit from the shift to cloud. Forrester forecasts say that the increases in software spending will add to investments in systems integration services and tech consulting that help firms secure, implement and get returns from their software investments. Tech staff spending is also expected to grow steadily. The average staff salaries in tech will grow by 2% to 3%, with an increase in the number of tech professionals alongside.
This combination of increasing spending on cloud and decreasing revenues will inevitably put pressure on the other categories of tech that includes communications equipment, computer equipment, and telecommunications services.