Canadian Underwriter

Global IT spending forecast to reach US$2.7 trillion in 2020, led by financial services, manufacturing and healthcare

August 29, 2016   by Canadian Underwriter

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Worldwide revenues for information technology products and services will grow from nearly US$2.4 trillion in 2016 to more than US$2.7 trillion in 2020, according to the International Data Corporation (IDC).

Financial charts abstract business graphA newly published update to the Worldwide Semiannual IT Spending Guide: Vertical and Company Size indicated that the increase represents a compound annual growth rate (CAGR) of 3.3% for the 2015-2020 forecast period. The report covered 20 industries, including banking and insurance across eight regions, including Canada and the United States.

Among the trends in the forecast is the “positive momentum” displayed in big industries like financial services and manufacturing, where companies continue to invest in 3rd platform solutions (such as cloud, mobility, and Big Data) as part of their digital transformation efforts, Framingham, Mass.-based IDC said in a press release on Monday. The telecommunications industry is forecast to remain relatively sluggish, although spending levels are expected to gradually improve compared to the past several years.

“Combined, these four industries (banking, discrete manufacturing, process manufacturing and telecommunications, which are also the industries with the largest IT expenditures) will generate nearly a third of worldwide IT revenues throughout the forecast,” IDC reported.

IDC, a global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets, noted that consumer purchases accounted for nearly a quarter of all IT revenues in 2015, “thanks to the ongoing smartphone explosion.” But consumer spending for PCs, tablets and smartphones has been weakening, which will have a dampening effect on the IT market overall. Looking ahead, even the moderate growth forecast for the tablet market will be driven by commercial segments rather than consumer tablet sales, IDC said in the release.

“While the consumer and public sectors have dragged on overall IT spending so far in 2016, we see stronger momentum in other key industries including financial services and manufacturing,” said Stephen Minton, vice president, customer insights and analysis at IDC. “Enterprise investment in new project-based initiatives, including data analytics and collaborative applications, remains strong and mid-sized companies have been especially nimble when it comes to rapidly adopting 3rd platform technologies and solutions. Assuming the economy remains stable in 2017, smaller businesses will also begin to climb aboard the 3rd platform in greater numbers.”

Healthcare will remain the fastest growing industry, with a five-year CAGR of 5.7% despite concerns that spending growth may have peaked. Banking, media and professional services will also experience solid growth, with CAGRs of 4.9% and combined revenues of more than US$475 billion in 2020. Elsewhere, gradual improvement is expected in the public sector, although government purchases of technology will continue to lag behind much of the private sector. Similarly, IT expenditures in the natural resources industry are forecast to recover as the price of oil rebounds from recent lows.

“In the U.S., the greatest near-term growth is expected among healthcare providers, professional services firms, banks and securities and investment services organizations,” said Jessica Goepfert, program director, customer insights and analysis at IDC, in the release. “These service-based organizations are turning to 3rd platform technologies like mobility and big data to enable more productive and meaningful ways to engage with clients. In addition to these customer-centric priorities, businesses operating in regulated environments are also turning to technology to assist with compliance.”

In terms of company size, more than 45% of all IT spending worldwide will come from very large businesses (more than 1,000 employees) while the small office category (the 70-plus million small businesses with one to nine employees) will provide roughly one-quarter of all IT spending throughout the forecast period. Medium (100-499 employees) and large (500-999 employees) business will see the fastest growth in IT spending, each with a CAGR of 4.4%.

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