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Forrester: US Will Drive IT Spending in 2014

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Posted January 2, 2014 By Jeffrey Burt     Feedback

The recovery of the U.S. economy is still slow, but is ahead of those from Europe and Japan, according to a Forrester analyst.

The United States will lead the way in a global technology market that will see 5.5 percent growth in 2014, though it will still take a year for the market to see strong growth, according to a Forrester Research analyst.

While the market growth this year will be better than in 2013, it will still be slow compared with what vendors saw in the 1990s and 2000s, and it is still facing challenges in regions that are recovering at different rates, Forrester analyst Andrew Bartels wrote in a post on the Forrester blog site. A key will be what happens in the United States, which Bartels said holds a 40 percent share of the global IT market.

The growth rate in the United States will be about 6.3 percent, according to Forrester. Only smaller tech markets such as Eastern Europe, the Middle East and Africa will grow faster that the United States.

"Despite self-inflicted wounds from austerity zealots in the US Congress, the US economy has continued to expand at a steady (albeit modest) rate," Bartels wrote. "In contrast, Western and Central Europe is just starting to recover from its debt crisis and related economic slump, Japan is experiencing a modest expansion after years of deflation, and Brazil, China, India, and Russia are going through a period of sluggish and uneven growth."

Another trend will be the fast growth—7.1 percent—in the software market, according to Bartels. Software will be the fastest growing sector, followed by IT consulting and systems integration services (at 6.6 percent). Again, the United States—which purchases almost 50 percent of all the software in the world—will lead the drive, he wrote. Tablets will continue to see strong growth.

"Laptops and other PCs will see a modest recovery," Bartels wrote. "Communications equipment will do somewhat better, driven by business and government spending on smart phones and wireless equipment, which will offset weakness in traditional routers, switches, and other wireline equipment. … IT outsourcing and hardware maintenance will be weak in 2014 due to smaller deals and widespread discounting."

Driving the growth in software will be the cloud, mobile computing and such applications as business intelligence, analytics and collaboration, he wrote. Such software is growing at double-digit rates, and in the software-as-a-service (SaaS) space the growth is at more than 20 percent per year. The United States is also strong in this area, where it holds about 60 percent of the market for SaaS and analytics software, according to Forrester.

"Traditional licensed, on-premises software has suffered, especially in the slow-growth economies of 2012 and 2013, but will revive in 2014, especially in Europe, Asia, and emerging markets," Bartels said. "The combination of strong growth in new software categories and restored growth in older categories will help make software the leading tech category."

IT consulting firms and systems integrators will applaud the bounceback of on-premises software in 2014, he wrote. SaaS means less spending on system integration services, Bartels noted, adding that SaaS will continue to grow, which will impact IT services revenue growth in 2015 and beyond.

"Beyond 2014, we are expecting a strengthening global economy in 2015 will propel global tech market growth higher across the board, but with software growing at double-digit growth rates for the first time in many years," he wrote, pointing to 6.9 percent growth next year.

 

Originally published on eWeek.

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