Information Technology Purchases to Grow 6 Percent in 2014

Purchases of information technology will increase in 2014, with even bigger outlays ahead in 2015, according to a report released today by Forrester Research.

"A Better But Still Subpar Global Tech Market In 2014 and 2015" predicts growth of 6.2 percent in global IT (information technology) purchases . That's up two points from 2013, where IT outlays increased 4.3. percent. In 2015, Forrester predicts even stronger growth; purchases are expected to increase 8.2 percent.

Still, the growth rates are not the double-digit growth that Forrester vice president and principal analyst Andrew Bartel saw in the late 1990s and 2000 era. "The reason we said it was subpar is that there are exciting new technologies, like in analytics, where based upon past patterns, you'd expect to see double-digit growth. We're not seeing explosive growth," explains Bartel, the lead author of the report.

The biggest growth in purchasing will be in software, not hardware, out of a group that includes hardware items like computers and smartphones, all software, as well as services like outsourcing and IT consulting and systems integration. Within the software category, cloud computing and analytics solutions are experiencing particularly strong growth.

The report also called out "smart process apps," as termed by Forrester, as a category undergoing double-digit growth. The smart process apps are designed for collaboration in environments with frequent process changes, and that agility has resonated with IT buyers. "The focus is not to eliminate people and automate work but to provide people with software tools to work more effectively," Bartel says. Vendors such as IBM, OpenText, Applan, Kofax, and Salesforce.com all have smart process solutions rated highly by Forrester earlier this year.

The United States remains a leader in IT purchases, accounting for 40 percent of all IT spending globally. "The U.S. tech sector has gone back to being a leader, not just the largest but the fastest-growing," Bartel says. Brazil, Russia, India, and China, while known for their high growth, "are going through a period of sluggish and uneven growth," Bartel relates, noting that "the characteristics that allowed them to grow strongly have worn thin." Western and Central Europe remain behind the U.S. in their economic recovery. The rosiest growth predictions come from markets too small to have a big impact, like Eastern Europe, Africa, and the Middle East.

The U.S. also appears to be a trendsetter. "The U.S. has the broadest willingness on the part of executives to try new technologies across a wide spectrum of the economy," Bartel says.

According to the research, software-as-a-service is growing more quickly in the U.S. than in other markets. Two of the highest-growth categories, software-as-a-service and analytics, will see 60 percent of their business come from the U.S.

On-premises software and IT services can expect to see small increases. Outside the U.S., it will do even better, seeing growth in Europe, Asia, and emerging markets. "They're not going to be facing that day of reckoning yet," Bartel says of on-premises vendors and service providers. On-premises software is unlikely to go away, in part because of its security and ability to meet compliance requirements, but growth will be slow to nonexistent, he says.

The weakest categories will be in IT outsourcing and hardware maintenance, which Bartel attributes to "smaller deals and widespread discounting."

In hardware, tablets will outshine purchases of laptops and PCs. Business and governments will also spend money to equip their workforces with smartphones. As routers, switches, and wireline equipment sales decrease, they will be offset with hardware meeting new needs, like wireless equipment to serve office workers toting their laptops to conference rooms and collaborating outside their cubicles.

Overall, Forrester predicts that the growth of IT should continue to increase in relation to global economies, especially among software vendors, which have a projected double-digit increase for 2015 on the horizon.

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