2. WEBINAR The 2016 To 2017 US Tech Market Outlook
Andrew Bartels, Vice President, Principal Analyst
May 5, Call in at 12:55 p.m. Eastern time

4. Agenda: four themes for this webinar
Above-average growth for the US tech market, with consulting and SI services doing well thanks to widening SaaS adoption
BT priorities will be growth engines for tech spending, especially in the US.
Cloud and analytics will make software and services the fastest-growing tech categories in
More reasons for optimism than for pessimism for the US

5. Theme 1 for US tech market outlook
No. 1: Above-average growth for the US tech market, with consulting and SI services doing well

6. How our US forecasts have evolved
WE HAVE LOWERED OUR 2016 TECH MARKET OUTLOOK DUE TO ECONOMIC UNCERTAINTY AND THE FASTER-THAN-EXPECTED ADOPTION OF CLOUD
Forrester’s forecasts for US tech spending growth in 2016 and 2017
Forrester's forecasts for US BT tech spending in 2016 and 2017
N/A
N/A
N/A
N/A
*Forrester forecast

7. 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)
Federal government shutdown, October 2013
Fears of “fiscal cliff” not resolved until January 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 (
*Forrester assumptions

8. US tech spending will rise by 4.3% in 2016 after a 5.3% gain in 2015
5.1%
4.3%
5.3%
4.5%
$1,526
3.0%
$1,453
$1,392
$1,322
$1,265
$1,228
US$ 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

9. Tech categories ranked by highest yearly growth rate in the US
US growth shifted from outsourcing services in 2004 to 2010 to consulting, software, and staff from 2015 to 2017
Tech categories ranked by highest yearly growth rate in the US
(Percentage change from prior year in US dollars)
Tech category 
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016*
2017*
Computers and peripheral equipment 8% 1%
-4%
-10% 4%
-9% 3%
-3%
-1%
Communications equipment
11%
-17% 0% 6% 2%
Software
-2% 9% 7% 5%
Tech consulting services
10%
Tech outsourcing
15%
19%
Telecom services
-14%
-6%
CIO staff salaries and benefits
Total US tech
4.0%
8.1%
4.5%
-3.7%
6.1%
5.0%
5.6%
3.0%
5.3%
4.3%
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

10. Software and services dynamics in US market
The 5% growth in software in 2015 and 2016 results from flat license and maintenance fee spending offsetting 20%+ growth in SaaS subscription fees.
A significant part of SaaS subscription fees is now coming from SaaS replacing on-premises software, as opposed to SaaS as a complement to existing software.
SaaS as a replacement has much higher SI multiples than SaaS as a complement.
As a result, growth in tech consulting and SI services will outpace software growth in 2016.
But by 2017, the underlying strong growth in SaaS will show up in the software growth numbers.

11. Theme 2 for US tech market outlook
No. 2: BT priorities will be growth engines for tech spending, especially in the US.

12. How Forrester looks at tech spending
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.
New project spending (25% to 30%) creates new capabilities.
Tech MOOSE is 70% to 75% of tech budget to maintain and operate organization, systems, and equipment. BT
new project
BT MOOSE
IT MOOSE
IT new project

13. 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

14. Business technology will be 33% of US tech spending in 2017
5.1%
4.3%
5.3%
4.5%
$1,526
3.0%
$1,453
$1,392
$1,322
$1,265
$1,228
US$ billions
Source: Forrester Research, Inc.
*Forrester forecast
*Forrester forecast

15. US tech spending by focus (US$ billions)
But business technology will be a larger share of new tech spending in 2016
US tech spending by focus (US$ billions)
$1,453
$1,033
$420
*Forrester forecast

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

17. New project spending in US will outpace tech MOOSE in 2016 and 2017
Total MOOSE
spending
6.7%
3.4%
4.3%
4.8%
3.7%
4.4%
Total new project spending
9.8%
2.0%
5.3%
6.5%
6.0%
6.9%
Total tech spending
7.6%
3.0%
4.5%
5.1%
*Forrester forecast

18. US BT tech MOOSE will grow much more rapidly than IT MOOSE
*Forrester forecast

19. Theme 3 for US tech market outlook
No. 3: Cloud and analytics will make software and services the fastest-growing tech categories.

20. US software by major product (US$ billions)
US software market, 2016
US software by major product (US$ billions)
*Forrester forecast

21. In software, growth is shifting from middleware to process apps and mobile apps
Growth from prior year
2013
2014
2015
2016*
2017*
Operating systems 3%
-8%
-1% 0% 2%
Storage management 5% 1%
Database management systems 6%
IT management tools 7% 4%
Security
-4%
App servers and integration
Application development tools
Desktop applications
10%
-17%
-3%
-2%
Information management applications 8% 9%
11%
Enterprise process applications
Enterprise vertical applications
Mobile applications built by contractors and consultants
101%
62%
50%
17%
Other custom applications built by contractors and consultants
-41%
18%
*Forrester forecast

22. US business applications by type of product in 2016* (US$ billions)
In business apps, BI, CRM, FMS, HRMS, and vertical apps are biggest categories
US business applications by type of product in 2016* (US$ billions)
*Forrester forecast

23. US business applications by type of product (US$ billions)
In business apps, SaaS subscription revenues close in on combined license and maintenance by 2017
$163
US business applications by type of product (US$ billions)
$150
$141
$135
$128
$119
*Forrester forecast

24. US tech consulting and SI market, 2012 to 2017 — SI work is bigger, with SaaS-related growth starting to dominate growth
US tech consulting and systems integration services market (US$ billions)
8.1%
7.6%
6.7%
$246
5.2%
$228
2.8%
$212
$199
$189
$184 8% 8% 9% 8%
*Forrester forecast

25. BT consulting and SI will be more than half of US tech services purchases in 2016
8.1%
7.6%
6.7%
$246
5.2%
2.8%
$228
$212
$199
$189
$184
US$ billions
Source: Forrester Research, Inc.
*Forrester forecast
*Forrester forecast

26. US computer equipment purchases, 2016 and 2017
Peripherals 2% 5% 3%
-4%
-3%
Storage
-10%
-1% 4%
Tablets
51%
14%
11% 1%
PCs 0%
-5%
-2%
Servers
13%
-9%
Total computer equipment purchases
*Forrester forecast

27. US outsourcing services purchases, 2016 and 2017
Hardware support and maintenance 4% 3%
-6%
-5%
-4% 2%
Other IT outsourcing 1% 0% 6%
Cloud platform services (IaaS)
117%
79%
64%
52%
42%
40%
Infrastructure outsourcing
12%
-1%
Hosting
10% 8%
Application outsourcing and management
13% 7% 5%
*Forrester forecast

28. US telecommunications services purchases, 2016 and 2017
Wireline 3%
-1% 7%
-2% 2%
Wireless
18% 8% 6% 5%
Other
11%
25%
17%
Total telecom services
8.4%
0.9%
8.0%
3.8%
2.8%
3.5%
*Forrester forecast

29. US CIO organization staff spending, 2016 and 2017
US business and government spending on CIO staff
2012
2013
2014
2015
2016*
2017*
Number of US CIO department staff (thousands)
2,339
2,395
2,452
2,539
2,627
2,722
Average US CIO department staff salary (US$ thousands)
$83.4
$84.7
$87.1
$89.6
$91.0
$92.6
US CIO staff salary costs (US$ billions)
$195
$203
$214
$227
$239
$252
US CIO staff benefits and other employee costs (US$ billions)
$57
$59
$63
$68
$72
$76
Total CIO staff spending (US$ billions)
$262
$277
$295
$311
$328
Percentage change
2012
2013
2014
2015
2016*
2017*
Number of US CIO department staff 4% 2% 3%
Average US CIO department staff salary
US CIO staff salary costs 7% 5% 6%
US CIO staff benefits and other employee costs
Total CIO staff spending
7.2%
3.9%
5.5%
6.7%
5.3%
5.6%
*Forrester forecast

30. Theme 4 for US tech market outlook
No. 4: More reasons for optimism than pessimism about US 2016 tech market outlook

31. Positives and negatives for US economy
Job growth and falling unemployment
Low oil and energy costs boost consumer spending.
Federal government spending is not contracting.
Housing sector is still growing despite threat of higher interest rates.
Negatives
Strong US dollar is hurting US exports and earnings of multinationals.
Energy sector is cutting back.
Slow growth in Europe, Asia, and Latin America is hurting US exports.
Potential for banking crisis in Asia or Europe due to bad energy- related loans, which spreads to US
Threat of Federal Reserve tightening too much

32. Recommendations for CIOs
In US, 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.
Analytics and big data 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.

33. Andrew Bartels