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The tech your business will be buying in 2016

Tech spending in 2016: Why software is where the action is and hardware is a backwater.

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Total spending on tech products and services this year.

Image: Forrester

This is how the world will spend its IT budget this year, according to analysts Forrester.

Forrester calculates that global tech spending is worth $2.9 trillion a year. Telecoms accounts for the largest slice of that, followed by software, tech consulting and systems integration services, and then outsourcing. Computer equipment and communications equipment are the smallest sectors.

Software is where the excitement is in 2016 when it comes to IT spending - and hardware is going to be a dull backwater, according to analysts.

In its Global Tech Market Outlook, Forrester said the next couple of years are likely to see moderate growth in tech spending: "no boom, but no bust", with 4.5 percent growth this year and 4.7 percent next year - slightly less than it predicted in August last year due to weaker growth in Europe, Brazil, China, and the Middle East.

The analysts said that spending on cloud and analytics will make software and services the fastest-growing categories. Software as a service continues to be a big winner, with cloud application spending growing more than 20 percent this year. And while spending on mobile app development will increase by 30 percent, Forrester said growth is starting to slow as mobile is starting to become a standard feature of applications.

"In today's business world, software matters far more than hardware," the analysts report said. Software spending will grow 5.7 percent in 2016 and 7.4 percent in 2017, and this will also boost spending on tech consulting and systems integration services, which will rise 5.1 percent in 2016 and by 5.5 percent in 2017, as CIOs call in the consultants to get new software working with legacy systems.

However, as the analyst house noted: "If software is where all the action [is], hardware is the backwater of old technology". Tablets and Windows 10 PCs will attract increases in spending, but lower demand for servers and storage devices will keep 2016 growth at 2.4 percent. Spending on other hardware - such as routers, switches, wi-fi equipment, PBXs, and smartphones purchased by firms for employee use - will also be weak, it predicted.

The analyst group said there are "more reasons for optimism than for pessimism" and growth may be higher than its forecast. "We think the more likely alternative to our tech market forecast would be better-than-expected growth should Europe's and China's economies post stronger growth and if the launch of Windows 10 turns out to be more successful in restoring growth to the PC market than its recent predecessors have been," said Forrester vice president Andrew Bartels.

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