Technology companies faced a difficult 2023 due to a range of issues, but this year looks far brighter, new findings from Forrester Research reveal.
Forrester is predicting that, after last year, where the overall technology spend growth reached only 3.9 per cent, improving economic conditions as a result of lower energy prices, abating supply constraints, and declining inflation will see the increase this year hit the 5.3 per cent mark and reach US$4.7 trillion.
In a blog about the findings, Michael O’Grady, forecast analyst, and data researcher Michael Kearney wrote, there is a “lot to be excited about when it comes to the technology market in 2024 – whether due to the rapid rise of the Asia Pacific market, huge demand for software, the wide-ranging possibilities of generative AI, and/or a growing need for green and digital innovation.
“In 2024, Forrester suggests that companies invest in technology that backs their long-term growth. Among their focuses should be software, generative AI (GenAI), and green and digital innovation, which will let companies be more adaptive and resilient by streamlining operations, providing the platform for future growth, and reducing enterprise risk.”
This year, Forrester is forecasting that:
- Overall, the software market will grow 10.5 per cent, with commercial off-the-shelf software revenues increasing by 11.9 per cent. Meanwhile, demand for cloud services will remain strong, as witnessed by the cloud performance last year: Microsoft’s annual cloud revenues grew 27 per cent to surpass US$110 billion, Google Cloud grew revenues 26 per cent in the first nine months of 2023, and AWS had a more modest 13 per cent revenue increase.
- IT services are expected to grow by four per cent, but, that said, Forrester said the outlook is uncertain: For example, Accenture, which expects only two-to five per cent growth for FY 2024, had double-digit growth in its cloud and security business in FY 2023, but its consulting revenues only grew three per cent in constant currency – significantly more slowly than its 14 per cent growth in managed services.
- Computer equipment will grow 3.6 per cent. Microsoft plans for capex spending on data centres and servers to support Azure’s forecasted 25 per cent revenue growth in the next year; its capex reached US$10.7 billion in Q4 2023. Microsoft, Google, and AWS will also optimize capex spend by extending the useful life of cloud servers and network equipment.
“To accelerate tech spend growth in 2024, tech firms will focus on developing new technology markets, the green economy, digital innovation, the re-configuring of chip supply chains, and 5G’s return on investment,” authors of the report note.
“As the tech market converges around key themes like cloud, AI, digital transformation, automation, e-commerce, and digital marketing, tech vendors will acquire or extend their reach to new markets and verticals, especially in software and IT services that see the fastest growth.”
As for the Canadian market, Forrester predicts that “tech growth in Canada will lag behind the U.S., as the federal government plans a 3.2 per cent reduction in science and technology budgets for 2024.”