US Tech Demand Will Be Strongest In Domestic And Services Industries, Weakest In Manufacturing And Multinationals
Forrester has just published its 2019 industry outlook for US tech budgets, with forecasts for how firms in different industries will increase and allocate their spending this year (see the Forrester report, “2019 US Tech Budgets: Industry Outlook“). Our overall forecast of growth is 6.1% for US business and government spending on tech goods; services and staff is only slightly slower than 2018. But this growth will be spread unevenly across industries due to imbalances in the US economy. The US will continue to enjoy strong consumer spending. But government spending will be shaky, thanks to the fallout from the Federal government shutdown and state and local taxes coming in below expectations. Flat business investment in plant and equipment, declining housing investment, and slowing exports will hurt the prospects of firms catering to these markets. Overall, this mean US economic growth rests squarely on the willingness of consumers to continue to open their wallets.
The resulting strengths and weaknesses in the US economy will cause differing rates of tech budget growth between verticals. Here’s a rundown of the industry tech spending changes we are expecting this year:
- Retail and services will accelerate tech spending, while manufacturers will pump the brakes. Weakness in trade, housing, and business equipment investment will cause manufacturing businesses to slow their tech spending to 4% or less. But strong consumer spending will lead businesses in retail, transportation, professional services, media and entertainment, and insurance to grow tech budgets by 7% or more this year.
- Media, high tech, and financial services will have the highest ratio of tech spending to revenue. These industries will spend 8% to 9% of their revenues on tech goods, services, and staff in 2019. Most services industries will spend between 3% and 6% of revenues on technology. Manufacturers, retailers, and wholesalers (where cost of costs sold represents half or more of revenues) will mostly spend less than 2% of revenues on tech, with little change in ratios from last year.
(Nate Meneer contributed to this blog post.)