Financial and Professional Services Set to Drive Fastest IT Budget Increases

Improvements and stability in business confidence across a broad range of vertical industries will drive stronger IT spending growth this year, led by financial and professional services firms, retailers, and healthcare providers, according to IDC.

Professional services firms, including cloud service providers, will increase their IT spending by 6% in 2017, while IT budgets in the financial services sector will increase by more than 5%. By 2021, IT spending will reach $2.7 trillion, with the largest contributions coming from consumers, banks, manufacturers, and telecommunications providers.

Consumer spending is dominated by smartphones and 2017 will be a stronger year for growth, largely driven by emerging markets. Total consumer smartphone spending will increase by 7% this year, while consumer notebook sales will post 2% growth. Consumer tablet sales will continue to decline in the short term, however, and overall consumer spending will slow throughout the forecast period.

Commercial tablet sales are much healthier, with positive growth expected across all enterprise and public sector segments. Strong double-digit growth rates are expected in healthcare, services, telecommunications, manufacturing, and utilities as many businesses adopt new form factors and professional devices.

Commercial spending on traditional PCs is expected to be weaker, but will still be positive outside of the consumer and government sectors. The education industry will post the strongest growth in traditional PCs, driven by a 13% increase in sales of notebooks to education customers. Sales of desktop PCs will decline across most industries.

Cloud service providers are expected to resume datacenter investment growth in the second half of 2017, after a brief slowdown, and this will drive server and storage spending by professional services firms to almost 9% growth this year. Meanwhile, enterprise buyers are also poised for a server upgrade cycle this year, driving positive growth in spending across vertical industries.

Enterprise software spending remains strong, led by professional services (+9%), followed by banking, securities and investment services, retail, and healthcare (all +8%). Total annual software spending will surpass $600 billion by 2021, with the largest contributions from manufacturing, banking, and professional services.

On the IT services side, the strongest growth will come from project-oriented services including application development and IT consulting, with weaker growth in outsourcing and support services. The strongest IT services spending growth this year will be in banking, telecommunications, and professional services, which will each post increases of around 4%.

Growth will be stronger in business services (business process outsourcing (BPO) and business consulting), led by healthcare (+8%), banking (+7.5%) and retail (+7%). Total IT and business services spending will be more than $1 trillion next year, with the largest contributions from banking, discrete manufacturing, and federal/central government.

A rebound in consumer spending will help to drive emerging markets this year, while growth in the next five years will be increasingly driven by commercial investments including government initiatives. Governments in a number of emerging economies are investing heavily in smart city and digital transformation projects, and this will drive a sustained period of government IT budget increases in key technologies.

In mature economies, transformation projects will continue to drive much of the growth in IT budgets, with businesses in the U.S. particularly advanced in their adoption of new 3rd Platform technologies. Nevertheless, there will be some changing dynamics within these markets, as some industries enter a period of slowing growth compared to recent years.