Tech Spending Expected to Rise as Pandemic Restrictions Ease, Economy Improves

CIOs at U.S. companies across several industries are expected to spend more on software in 2021, with an emphasis on software related to process automation, artificial intelligence and security. Market researcher

Forrester Research Inc.

last week raised its forecast for enterprise technology spending for this year, citing stimulus funding and stronger-than-expected economic data.

As pandemic restrictions ease, information technology budgets at U.S. businesses and governments are now projected to rise to nearly $2 trillion this year, up 7.4% from 2020, according to the Forrester report.

In December, Forrester projected IT spending would fall 0.4% this year, compared with increases of 6.7% in 2019 and 1.8% in 2020. Then in April, Forrester forecast budgets would grow 6% year-over-year in 2021.

The upward revisions reflect the impact of an economic stimulus package President Biden signed into law in March, said

Andrew Bartels,

a research analyst at Forrester.

Of all spending, communications equipment is the fastest-growing spending category, forecast to rise 13.2% this year. Spending in the category fell last year as people moved to remote work, but it is expected to pick up again as offices reopen, Mr. Bartels said. Forrester in April forecast communications equipment spending would increase 12.4% this year.

“Activities are coming back again,” Mr. Bartels said. “And as they do so, [businesses] become buyers of technologies to support the reopening.”

Cambia Health Solutions Inc. plans a double-digit increase in spending on artificial intelligence and consumer-facing applications this year even as its overall IT budget remains flat. The Portland, Ore.-based healthcare company is transitioning to a post-pandemic hybrid work environment, according to

Laurent Rotival,

its CIO.

“We are increasing our focus and spend on the accelerated evolution of our network and infrastructure to serve employees, partners, customers, and health plan members anywhere,” Mr. Rotival said.

Edward Wagoner,

digital CIO of

Jones Lang LaSalle Inc.,

said more data tools and capabilities are a top priority for some of the commercial real estate services company’s customers.

Adopting a hybrid approach to work is an important factor in retaining top talent, Mr. Wagoner added, and companies need to be equipped to collect and analyze those preferences.

Software spending, the second-fastest growing segment of IT spending, is forecast to rise 10.4% this year, compared with an April forecast of 9.7% growth. Mr. Bartels said many companies are greenlighting new software spending after taking a cautious approach in 2020.

Within software, spending on platforms for process automation and AI are projected to grow 33% and 13%, respectively, this year. Security software spending is projected to grow 11%.

Spending on software will reach $482 billion in 2022, according to Forrester, marking the first time it will surpass CIO staff spending, which is forecast at $470 billion next year.

Write to Jared Council at [email protected]