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Software spending will rise by almost 10% to $640bn worldwide in 2017, according to Forrester.
Cloud and analytics will make software and services the fastest-growing categories, the analyst noted in its latest forecast.
Forrester said the growth in software sales will come from business and government accelerating their adoption of cloud and SaaS (software as a service) products in 2016 and 2017.
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It also predicted that analytics – whether standalone business intelligence (BI) products, cognitive technology such as IBM’s Watson, or BI embedded in applications – will be a second driver of software growth.
Spending on BI software, cloud and SaaS will drive growth in consulting and systems services spending, it said.
“If software is where all the action is, hardware is the backwater of old technology,” Forrester principal analyst Andrew Bartels noted in the Global Tech Market Outlook For 2016 To 2017 report.
“Computer equipment will show some signs of life, as tablets and Windows 10 PCs attract increases in spending. But sluggish demand for servers and storage devices will keep 2016 growth at 2.4% in US dollars (3.2% in local currency terms) and a bit better in 2017.”
While Forrester expected $314bn to be spent on applications, it estimated that organisations will spend $87.1bn on custom software and $17.5bn on mobile apps built by external contractors. This suggests that one-third of an enterprise’s code will be custom.
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The analyst expected IT services spending to grow by 5.3% to $541bn in 2017, although it noted that the growing adoption of SaaS would limit systems integration services, because of the limited ability to customise SaaS and the more simplified integration typically used.
Spending on telecommunications is forecast to rise by 6% to $647bn by 2017, driven by the adoption of cloud computing. However, Forrester said communications equipment – routers, switches, broadcast equipment, Wi-Fi equipment, PBXs and smartphones bought by firms for employee use – will experience weak growth. Growth in local or constant currency terms will be 1.5% (0.7% in US dollars) in 2016 and 2.2% (2.4% in US dollars) in 2017.