2023 was an undeniably difficult year for growing tech spend in Europe, with the grinding war in Ukraine, high inflation and energy prices, lingering supply-chain constraints, and an uncertain labor market. Forrester forecasts that European tech spend will have grown only 2.6% in 2023 — 100 basis points lower than our previous forecast.
2024, fortunately, promises a better outlook. The recovery of real incomes and improved business confidence mean that the EU will experience GDP growth of 1.2% in 2024 (up from 0.7% in 2023), according to the IMF, and in particular, the fall of inflation from 10% in November 2022 to 2.4% in November 2023 suggests increased investment and competitiveness in the coming year. Forrester therefore forecasts that European tech spend will bounce back to grow 5.1% in 2024, almost double its rate in 2023. In 2024, areas of focus will include:
- Software and services. In 2024, enterprise and government software spend will have double-digit growth, capturing more than half of European tech spend growth. Investment in software drives higher-value creation activities, as countries with higher-value economic activities in finance, professional services, and information and communication services spend more of their gross fixed capital formation on intellectual property products (including software). IT service growth will also be robust in 2024 compared to 2023’s gradual slowdown as enterprise digital maturity, cybersecurity, and digital innovation drive spend. Computer service exports to the European Union — especially from the US, the UK, and India — also drive IT service growth.
- EU rights, regulations, and fair market competition. At the continental level, the European Commission’s AI Act will place obligations on human oversight, safety, privacy, transparency, nondiscrimination, and social and environmental well-being. Similarly, the EU’s Data Act prevents enterprise vendor lock-in from cloud data-processing services on connected devices; the European Commission is also finalizing data center sustainability and energy efficiency regulations. At a country level, the UK communications services regulator Ofcom will likely regulate hyperscaler cloud market dominance to help enterprises switch cloud providers or use multiple. In Germany, the competition watchdog Bundeskartellamt is considering investigating Microsoft for possible anticompetitive practices within the country’s digital ecosystem, including whether it unfairly restricts cloud adoption choice.
- Innovative high-value activities. Switzerland and Sweden lead 2023’s Global Innovation Index. European manufacturers create innovation networks across material science, talent management, and employee experience. Advances in 3D printing drive rapid prototyping and localized fulfillment. Virtual- and augmented reality technologies will help improve customer and employee experiences. Innovation in Eastern Europe still lags Western Europe; the EU classifies Belgium, Denmark, Finland, the Netherlands, and Sweden as innovation leaders, with Bulgaria, Croatia, Latvia, Poland, Romania, and Slovakia classified as emerging innovators with performance well below the EU average.
To learn more about how to balance these competing factors and to see the numbers behind Europe’s forecasted €1.4 trillion tech spend in 2023, read Forrester’s new report, European Tech Market Forecast, 2023 To 2027. And keep an eye out in January for Forrester’s forecasts on US and global tech spend between 2023 and 2027.
