Forrester Adjusts Australian Tech Spend Forecast Downwards
In an updated report, Forrester revises its tech spend forecast for the Australian market downwards based on updated IMF GDP forecasts.
Entering 2020, Forrester forecasts that Australian tech spending growth would rise from 2.7% in 2019 to more than 4% by 2021. In early April, the forecast was adjusted to reflect that spending would shrink by 1% in 2020. In this latest forecast (June 2020), it is certain that tech budgets will be cut given that Australia will experience a recession in 2020. There are two main scenarios in the analysis:
Scenario A: Tech spending falls by around 3% in 2020.
- Forrester’s prediction for Australia’s tech market is that business and government will reduce total tech spending by A$2 billion in 2020 (decrease by 2.7% this year) before rebounding to positive growth of 4.5% in 2021 in response to rising GDP.
- Tech outsourcing services will bear the brunt of the downturn, and software spending growth is expected to leads the recovery in 2021.
Scenario B: Tech budgets remain below 2018 levels in 2020 and 2021.
- In this scenario, Forrester forecasts that Australian tech spending will fall by 6.4% in 2020 before returning to modest growth of 1.7% in 2021 — wiping out three years of local tech spending to the tune of A$4 billion.
- This prediction takes into account a lag in local recovery due to delays in economic activity from Australia’s major trading partners. We also consider the potential for a drop in economic confidence, resulting in lower consumer spending and business investment.
- Forrester expects software spending to collapse and services spending to slump; hardware and telecommunications will suffer less than in the last crisis; and hardware upgrades, rather than software projects, will come back online first.
Given the current circumstances, scenario A seems more likely.
Analyst Sam Higgins is available to discuss insights on the Australian technology market.
For more guidance on tech spend forecasting, please also refer to the following blog posts:
- Forecasting In Uncertainty: Warning Signs Inside The SaaS Vendors’ Recent Earnings Reports
- Forecasting In A Time Of Uncertainty: Some Guidance On The Outlook For Tech Markets In Different Countries In The Pandemic
- Forecasting In A Time Of Rapid Change: Tips For CIOs And Tech Vendor CEOs In Charting The COVID-19 Outlook