Reddogs - stock.adobe.comNewsForrester: AI and cyber security drive up IT spendingDespite artificial intelligence and cyber security increasing investment, technical debt remains a significant drain on IT budgetsByCliff Saran,Managing EditorPublished: 12 Feb 2025 16:00 Market analysis from Forrester has forecast that organisations in Europe are set to increase IT spending by 5% during 2025.According to the analysts Global tech forecast 2024-2029, spending will reach $4.9tn in 2025, with accelerated investment in artificial intelligence (AI), cyber security and cloud infrastructure. Generative AI (GenAI), cyber security and cloud services are poised to drive growth by 5.6% in 2025, up from 4.6% in 2024.Europe is set to spend less than the US and Asia Pacific as a proportion of gross domestic product (GDP). The research from Forrester shows that the US accounted for 41% of global tech spend and 46% of AI software spend in 2024. Almost 70% of the top 24 companies by market capitalisation that saw the fastest growth from 2015 to 2023 come from the US, and more than half of those are media and information companies.Forresters forecast shows that Asia Pacific tech spend will grow 5.6% in 2025. The analyst predicts that the Asia Pacific region will witness a surge in real GDP growth that far exceeds the global average, led by countries including India, the Philippines, Vietnam and Indonesia. Government initiatives in China and India, and increased investment in GenAI and semiconductors in Japan and South Korea, will help drive tech spend. India will see the fastest growth, with tech spend expected to increase by 9.6% in 2025.According to Forrester, software and IT services combined will account for 66% of global technology spend in 2025, fuelled by increased investment in cyber security services and the modernisation of legacy systems. Software alone will grow at a rate of 10.5%, and is expected to capture 60% of global tech spend growth by 2029, making it the fastest-growing tech sector.Over the next five years, technology investments will reshape industries at an unprecedented pace, said Michael OGrady, principal forecast analyst at Forrester.In a blog post, OGrady said that the analysts forecast suggests software spending by enterprises and governments will reach 1.7% of global GDP by 2029, nearly doubling its worth since 2016. GenAI will revolutionise sectors such as financial services, media and retail, enhancing customer experiences with more personalised and human-like virtual assistants and customer service solutions, he said.Read more IT strategy storiesForrester: IT budget growth pushed towards cross-functional teams: Analyst firm Forrester has forecast a slight increase in IT budgets for 2025, but technical debt is one of the areas likely to feel the squeeze.How to optimise SAM budget in todays heterogeneous environments: Hidden software costs and ecosystem complexity make managing a mixed software estate harder than ever. Heres how to optimise your spending.Among the big growth areas, according to Forresters analysts, will be in IT consulting and system integration services, which account for 19% of global IT spending. OGrady said that tech outsourcing and hardware maintenance make up 15% of global IT spending in its latest forecast. Driven by infrastructure as a service, outsourcing services growth outpaces that of consulting service, he said.According to OGrady, companies that focus their investments on cyber security and AI will not only strengthen their competitive edge, but also achieve sustainable growth.However, he warned that they need to balance their rapid tech investments with ongoing efforts to manage legacy systems and reduce technical debt. Legacy systems still capture two-thirds of global tech spending, said OGrady. With the half-life of tech skills at less than five years, skills renewal of the tech workforce is vital.In The Current Issue:Digging into the CMAs provisional take on AWS and Microsofts hold on UK cloud marketInterview: Digital tech fuels AutoTraders drive into the futureDownload Current IssueA road-warrior kit: Dell Pro keyboard, mouse, briefcase & backpack Inspect-a-GadgetSLM series: NTT DATA - Cost-effective solutions for real-time industrial AI CW Developer NetworkView All Blogs