Artificial IntelligenceCryptocurrencyMetaverseCybersecurityTech Forward

Software Spending Will Ignite Tech Turnaround This Year

January 5, 2016, 9:53 PM UTC

All things considered, Dell picked a relatively auspicious time to engineer its $67 billion buyout of storage and data center equipment giant EMC (EMC). That’s because spending on computer hardware should bounce back in 2016, after a steep decline last year, based on estimates published this week by Forrester Research (FORR).

Here’s the scenario: Spending for PCs, tablets, computer servers and other hardware declined an estimated 7.6% in 2015 to $356 billion, according to Forrester’s Global Tech Market Outlook for 2016 to 2017. That trend will reverse during 2016 with a modest anticipated increase of 2.4% to $364 billion, the firm predicts. Forrester expects a much bigger 5.3% bump for 2017, when corporate spending for computer hardware should return to 2014 levels of around $384 billion.

Part of that bounce, mind you, is due to fluctuations in exchange rates. The strong uptick for Microsoft’s latest operating system Windows 10—which just reached 200 million activations—is also helping, by spurring sales for personal computers and tablets.

The biggest story for data center upgrades? Equipment that combines storage capacity with computer server and networking capabilities “With HP’s split into its PC and printer business, and its enterprise business, Dell will be the only vendor with a full computer equipment offering that includes PCs as well as servers and storage,” writes Forrester analyst Andrew Bartels.

SIGN UP: Get Data Sheet, Fortune’s daily newsletter about the business of technology.

Since software rules the tech world these days, you won’t be surprised that Forrester’s projection for software-related spending is much more bullish than its outlook for hardware. The firm anticipates a 5.7% increase to almost $600 billion forecast for 2016, according to the report.


The brightest spots? The amount of money dedicated to software as a service (SaaS) investments will explode by 24% to $108 billion during the next 12 months, Forrester predicts, with applications for data analysis and managing customer relationships leading the way. The push to go mobile is still a motivating factor for many chief information officers, although not as much as in the past.

Bartels notes:

Three forces are driving above-average growth in 2016 in the software and tech services markets: cloud apps, analytics, and mobile. Of these three forces, cloud is still rising, though the highest adoption is mostly occurring in the U.S., with slower adoption elsewhere. Mobile is less of a factor, with most major firms already having mobile apps in place. Analytics will see even strong growth in the future, especially predictive and diagnostic analytics related to the Internet of things.

From a bigger picture standpoint, software is growing way faster than the industry as a whole. Forrester’s aggregate tech spending projection for 2016 calls for growth of 3.8% to $2.9 trillion—basically a return to 2014 levels.