WEBINAR The 2016 To 2017 Global Tech Market Outlook Andrew Bartels, Vice President, Principal Analyst January 6, 2016. Call in at 10:55 a.m. Eastern time

Agenda: Five themes for this webinar Moderate growth in tech spending: No boom, but no bust Smooth sailing for the US tech market, and choppy waters elsewhere BT priorities will be growth engines for tech spending, especially in growing markets. Cloud and analytics will make software and services the fastest-growing tech categories. More reasons for optimism than for pessimism

Theme 1 for global tech market outlook Moderate growth in tech spending: No boom, but no bust

How our global forecasts have evolved WE HAVE LOWERED OUR 2016 TECH MARKET OUTLOOK DUE TO ECONOMIC WEAKNESS IN ASIA PACIFIC, LATIN AMERICA, AND EUROPE Forrester’s forecasts for global tech market growth in constant currencies Forrester’s forecasts for total tech market growth in US dollars *Forrester forecast †January 2016 forecasts include telecommunications services; prior forecasts did not

Global tech market by product in US$, 2011 to 2017 4.9% 1.5% 1.6% 2.8% -3.8 3.8% $3,088 $2,950 $2,870 $2,943 $2,783 $2,825 $2,826 US$ billions *Forrester forecast

Growth rates in global tech market by product SOFTWARE AND CONSULTING SERVICES LEAD THE MARKET Global in US$ (% change) 2012 2013 2014 2015* 2016* 2017* Computer equipment 0.9% 1.5% 1.0% -7.6% 2.4% 5.3% Communications equipment 1.6% 0.6% 2.0% -5.7% 0.7% Software 2.9% 3.9% -2.5% 5.7% 7.4% Tech consulting and systems integration services 0.2% 3.4% 5.1% -3.4% 5.5% Tech outsourcing and hardware maintenance 2.7% 3.2% 2.3% 3.5% 4.6% Telecommunications services 0.8% -0.3% 1.7% 3.6% Total tech purchases 2.8% -3.8% 3.8% 4.9% *Forrester forecast

2011 to 2017 global IT purchases forecast Yen and euro weakness will continue to distort US-dollar tech market growth until 2017 2011 to 2017 global IT purchases forecast (Percentage change in US dollars and in exchange-rate-adjusted US dollars) *Forrester forecast

Growth rates in global tech market by product in constant currency IN CONSTANT CURRENCY TERMS, STEADY 5% TO 6% GROWTH IN SOFTWARE Global in exchange-rate-adjusted US$ (% change) 2012 2013 2014 2015* 2016* 2017* Computer equipment 1.2% 4.0% 3.0% 2.9% 0.1% 3.2% Communications equipment 3.6% 4.7% 2.0% 3.9% 2.1% 1.5% Software 6.0% 5.8% 5.6% 6.5% Tech consulting and systems integration services 6.2% 4.9% 7.0% 5.9% Tech outsourcing and hardware maintenance 5.3% 4.1% 4.3% Telecommunications servicess 3.4% 1.1% 3.5% Total tech purchases 4.4% 4.6% 4.2% 4.5% *Forrester forecast

Theme 2 for global tech market outlook Smooth sailing for the US tech market, and choppy waters elsewhere

In local currencies, US will have strongest growth in 2016 2011 to 2017 regional tech purchases forecast (Percentage change in exchange-rate-adjusted US dollars) *Forrester forecast

2016 tech market by 25 largest tech markets by country

India and China will have the fastest economic growth; Russia and Brazil in recessions

Most currencies will continue to weaken against the US dollar in 2016 100 = Q1 2008 exchange rate against the dollar *Forrester forecast, as of December 28, 2015 Source: Forrester Research, based on quarterly average exchange rates from Oanda

Absence of Federal budget shocks means smoother growth path for US economy in 2016 US real GDP and GDP deflator (Percentage change from prior quarter at annualized rate) Fears of “fiscal cliff” not resolved until January 2013 Federal government shutdown, October 2013 Federal debt-ceiling crisis of July 2011 Source: US Bureau of Economic Analysis, “Gross Domestic Product: Third Quarter 2015 (Second Estimate); Corporate Profits: Third Quarter 2015,” November 24, 2015 (http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm) *Forrester assumptions

US tech purchases will rise by 4.8% in 2016 after a 4.5% gain in 2015 3.6% $1,425 5.6% $1,360 $1,302 $1,243 $1,200 $1,136 US$ billions Source: US Department of Commerce for 2011 to 2014 for computers and peripherals, communications equipment, and software; US Census Bureau for tech consulting services and tech outsourcing for 2011 to 2014; US Bureau of Labor Statistics for CIO staff spending; and Forrester Research for these items in 2015 to 2016 *Forrester forecast

Tech categories ranked by highest yearly growth rate in the US US growth shifted from outsourcing services in 2004 to 2013 to software and consulting from 2014 to 2016 Tech categories ranked by highest yearly growth rate in the US (Percentage change from prior year in US dollars) Tech category  2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* 2016* Computers and peripheral equipment -4% 8% 1% -10% 4% -9% 3% -3% -2% Communications equipment 2% 11% -17% 0% 6% -1% Software 7% 9% 5% Tech consulting services 10% Tech outsourcing 15% 19% Telecom services -14% -6% CIO staff salaries and benefits Total US tech 3.4% 4.0% 8.1% 4.5% -3.7% 6.1% 5.0% 5.6% Source: US Department of Commerce for 2011 to 2014 for computers and peripherals, communications equipment, and software; US Census Bureau for tech consulting services and tech outsourcing for 2011 to 2014; US Bureau of Labor Statistics for CIO staff spending; and Forrester Research for these items in 2015 to 2016 Highest Second highest Third highest Middle Third lowest Second lowest Lowest *Forrester forecast

Theme 3 for global tech market outlook BT priorities will be growth engines for tech spending, especially in growing markets.

How Forrester looks at tech spending New project spending (25% to 30%) creates new capabilities. Tech MOOSE is the 70% to 75% of tech budget to maintain and operate organization, systems, and equipment. Forrester terms: Business technology (BT) is technology for firms to win, serve, and retain customers. Information technology (IT) is technology to support business operations and to cut costs. BT new project BT MOOSE IT MOOSE IT new project

Business technology: top technologies in the BT agenda include customer life-cycle solutions and the engagement platform Source: “Top Technologies For Your BT Agenda” Forrester report

Business technology will be 26% of global tech purchases in 2016 4.9% 2.8% -3.8% 3.8% 1.5% 1.6% $3,088 $2,950 $2,870 $2,943 $2,783 $2,825 $2,826 US$ billions Source: Forrester Research, Inc. *Forrester forecast *Forrester forecast

Global tech spending by focus (US$ billions) But business technology will be a larger share of new tech purchases in 2016 Global tech spending by focus (US$ billions) $2,943 $2,249 $694 *Forrester forecast

And spending on business technology will grow faster than spending on IT Global tech purchases by business focus (Percentage change from prior year) *Forrester forecast

New project spending will outpace tech MOOSE in 2016 and 2017 Total MOOSE spending on goods and services purchases 7.5% 1.7% 1.8% 2.3% -4.0% 3.5% 4.4% Total new project spending 9.9% 0.9% 1.1% 4.2% -3.3% 4.6% 6.8% Total tech purchases 8.0% 1.5% 1.6% 2.8% -3.8% 3.8% 4.9% *Forrester forecast

BT tech MOOSE will grow much more rapidly than IT MOOSE

Theme 4 for global tech market outlook Cloud and analytics will make software and services the fastest-growing tech categories.

Global software market, 2011 to 2017 Global software by major product (US$ billions) $640 $597 $579 $549 $557 $565 $534 *Forrester forecast

In software, growth will be greatest in analytics, process apps and mobile apps Growth from prior year 2013 2014 2015* 2016* 2017* Operating systems 1.4% 2.9% -7% -4% 3% Storage management -3% -5% 1% 2% Database management systems 6% 4% IT management tools Security 7% 5% 11% App servers and integration -1% 8% Application development tools -6% Desktop applications Information management applications 9% Enterprise process applications 10% 12% Enterprise vertical applications Mobile applications built by contractors and consultants 140% 67% 35% 30% 29% Other custom applications built by contractors and consultants -13% -15% Middleware Applications Custom applications *Forrester forecast

Global business applications by type of product (US$ billions) In business apps, BI, CRM, FMS, HRMS, and vertical apps are biggest categories Global business applications by type of product (US$ billions) $172 $158 $141 $136 $124 $115 $107 *Forrester forecast

Global business applications by type of revenue (US$ billions) In business apps, SaaS subscription revenues close in on combined license and maintenance by 2017 $172 Global business applications by type of revenue (US$ billions) $158 $141 $136 $124 $115 $107 *Forrester forecast

Global tech consulting and SI market, 2011 to 2017 — SI work is bigger, but consulting is growing faster Global tech consulting and systems integration services market (US$ billions) 5.5% 5.1% 3.5% 5.1% -3.4% 0.2% $571 $541 $533 $507 $515 $489 $490 8% 8% 4% 4% *Forrester forecast

Global tech outsourcing services market (US$ billions) Global tech outsourcing market, 2011 to 2017 — IaaS only segment with good growth Global tech outsourcing services market (US$ billions) 3.4% 2.5% 2.8% 1.7% -4.3% 2.4% $471 $456 $457 $465 $445 $445 $435 1% -1% 4% 3% 42% 40% *Forrester forecast

Computer equipment market, 2011 to 2017 — PCs and tablets are growing Global computer equipment market by major product (US$ billions) 1.5% 5.3% 1.0% 0.9% -7.6% 2.4% $384 $381 $385 $372 $375 $364 $356 *Forrester forecast

Communications equipment market, 2011 to 2017 — not much growth Global communications equipment market by major product (US$ billions) 0.6% 2.0% 1.6% -5.7% 0.7% 2.4% $354 $361 $346 $352 $351 $341 $343 *Forrester forecast

US telecommunications services market by major service (US$ billions) US telecom services market, 2010 to 2015 — 2014 bump up after and before slow growth US telecommunications services market by major service (US$ billions) 4.5% 10.7% -1.8% 5.0% $211 $202 5.4% $186 $182 $177 $168 *Forrester forecast

Theme 5 for global tech market outlook More reasons for optimism than for pessimism about 2016 tech market outlook

Three reasons the tech market could do better than our forecast Europe’s and Japan’s economic growth improves China’s economy returns to strong growth Microsoft 10 takes off, giving a boost to the PC and desktop application market. Also, no threats to US economy from US Congress in 2016, though 2017 will bring worries.

Two reasons the tech market could do worse than our forecast Europe slips back into recession, and China’s growth slips to under 5%. US economic policies turn contractionary if the Federal Reserve’s monetary tightening overshoots Also, Fed tightening while other central banks loosen would cause US dollar to rise even higher, causing dollar-denominated tech market to drop even if local currency growth is positive

Recommendations for CIOs Adapt your plans to the outlook for your country’s tech market. In most countries, prospects for steady, moderate growth in 2016 will allow CIOs to increase their tech spending. CIOs should prioritize investments that support the BT agenda. Cloud computing and mobility create opportunities to change the economics and agility of tech management. Technologies of analytics, big data, and smart process apps create opportunities for CIOs’ organizations to help transform the business. Weak demand for IT agenda creates opportunities to save. Because of a weak demand for PCs, servers, network gear, middleware software, mature apps, and outsourcing, now will be a good time to negotiate big savings in new or existing systems. Focus on driving down tech MOOSE costs to create room for new BT MOOSE.

Andrew Bartels +1 516-869-0128 abartels@forrester.com