The global technology market will see robust 6% growth in 2022 and 2023, significantly faster than pre-pandemic levels, according to new research from Forrester.
The analyst firm said tech stocks boomed in 2021 because of record-low interest rates and central bank liquidity injections to limit the pandemic’s economic impact.
In its latest report on global technology market growth, Forrester reported that cloud service providers such as AWS, Google Cloud and Microsoft Azure grew by more than 40% over the last 12 months.
“The top three vendors – AWS, Azure and GCP – have a collective annualised run rate of ~$120bn, growing 43% year-over-year from Q3 2020 to Q3 2021,” said the authors of the Global tech market outlook for 2022-2023 report. “Azure has taken a larger share of incremental spending, with its growth outperforming peers.”
Meanwhile, Forrester forecast that IT services will grow by 6.8%, adding that it expects IT services to grow significantly faster than pre-pandemic levels, driven both by digital and cloud investment and the momentum of 2021.
For instance, data privacy, software security and data management services create consulting opportunities. Forrester noted that in 2021, Accenture, Wipro and Infosys saw the fastest IT services revenue growth rates of 21%, 18% and 14%, respectively.
Forrester also warned that limited tech talent availability has driven up outsourcing and consulting costs. But, in five years’ time, as much as two-thirds of in-house developments could adopt low-code or no-code tools to help relieve the pressure of labour costs on tech talent.
Looking at spending in Europe, Forrester forecast that software and IT services would drive more than 80% of European tech spend over the next three years. It predicted that countries adopting “frontier technologies” and facilitating their use by SMEs will thrive.
Forrester analysts believe countries that have low corporate tax rates, invest in favourable industries for R&D investment and growth, and value the role of IT specialists and tech startups in driving change will see strong technology spend.
Globally, Forrester forecast that software will grow by 10.5%. The report noted that cloud software – both multi-tenant software-as-as-service and single-instance hosted subscription – would continue to expand its share of the software market. The analyst’s forecast suggests that public cloud spending would more than double by 2025.
The fastest increase in IT spending is expected to happen in North America and Asia Pacific, according to Forrester. It said these regions would also be the quickest to recover from the pandemic downturn. Data from Forrester shows that North America will grow by 7%, while Asia Pacific will grow by more than 6% as China drives a larger share of its economy from in-house software development and tech exports.
However, the Forrester analysts expect that IT providers will expand their products and services outside their traditional markets to rebalance European tech investment.
The report’s authors noted that Europe is the largest importer of US-developed software. Less than one-third of European software spend is developed in Europe, but the European Union aims to spend up to €10bn over the next seven years to build its home-grown cloud computing sector and challenge Amazon, Google and Alibaba.