Business technology is a strategic investment for most CEOs that seek a lasting competitive edge in the marketplace. As a result, worldwide IT spending is forecast to grow from $2.46 trillion in 2015 to more than $2.8 trillion by 2019, according to the latest market study by International Data Corporation (IDC).
North America will provide the largest share of global IT spending throughout the 2015-2019 forecast period. This key market is predicted to pass the $1 trillion mark in 2017. Europe, the Middle East, and Africa (EMEA) will be the second largest region, followed closely by the Asia-Pacific region.
Latin America will be the fastest growing region with a compound annual growth rate (CAGR) of 4.3 percent while IT spending in North America will grow at a 3.8 percent CAGR. Asia-Pacific and EMEA will both grow more slowly than the overall market, which is forecast to have a CAGR of 3.3 percent.
"With the global economy entering a new and uncertain phase, IT spending will be heavily influenced by economic cycles and wild cards over the next five years," said Stephen Minton, vice president at IDC.
Exploring Future IT Investment Trends
Today, in many industries, business leaders will turn to IT solutions -- including cloud computing, big data analytics and infrastructure optimization -- to help them prosper within the stormy global networked economy. IDC believes that the savvy IT vendors will be targeting strategic pockets of growth and opportunity, amidst this volatile environment.
From an industry perspective, the largest IT expenditures will be found in the discrete manufacturing, banking, and telecommunications verticals with each delivering more than 8 percent of all spending throughout the forecast period. These three industries will be followed by process manufacturing, federal government, and professional services.
The fastest growing vertical industry over the 2015-2019 forecast period will be healthcare, with a five-year CAGR of 5.5 percent. Banking and insurance are tied with media and the resource industries for the industries with the second fastest-growing IT spending -- each with a five-year CAGR of 4.6 percent.
In terms of company size, over 40 percent of overall IT spending will come from very large businesses, while the small office category will provide roughly one quarter of all IT spending throughout the forecast period.
According to the IDC assessment, medium and large business will see the fastest growth in IT spending during the forecast period, with CAGRs of 4.4 percent and 4.8 percent, respectively.
More Focus on Software and Business Outcomes
"To truly capitalize on this opportunity, vendors would be well served to not only listen to their strategic client's feedback but also to respond and react accordingly. Knowing the client's industry is table stakes. In order to become more embedded in their customers' businesses and make a significant impact, the conversations between vendor and client must change to be process and outcome focused," said Jessica Goepfert, program director at IDC.
Software spending will be the fastest growing technology market segment with a 6.7 percent CAGR, led by healthcare and financial services investments, followed by business services at 6.2 percent with strong spending growth from media and resource industries. In contrast, IDC believes that hardware and IT services spending will grow at rates slower than the overall market.
Within the software segment, applications that facilitate enterprise and IT operations, such as enterprise resource management and operations & manufacturing applications, will receive the greatest share of software spending. The fastest growing software categories will be network software, collaborative applications, and data access, analytics & delivery applications.
Hardware will remain the largest market segment overall with roughly 40 percent of all IT expenditures going to devices, infrastructure, and telecom hardware throughout the forecast period. Telecom hardware, including smartphones, will represent more than half of all hardware spending through the forecast while PCs will remain an important category of IT spending despite a five-year CAGR of -1.6 percent.
Spending on enterprise infrastructure will be driven by solid growth in the server and storage segments with CAGRs of 2.6 percent and 3.2 percent, respectively. Regarding the vertical industry outlook, IDC says that healthcare and telecommunication firms will represent the strongest opportunities.