Investment in technology for commerce and business operations is tapering off the growth rates of recent years, but there are still significant trends this year for spending on ecommerce and related customer-facing technology systems among B2B as well as retail companies, Forrester Research Inc. says.

Andrew Bartels, vice president and principal analyst, Forrester Research

Technology budgets among companies in the United States will grow about 4.2% this year over 2019, down from growth rates of 4.5% in     2019 and 6% in 2018, Forrester says in the report, “2020 to 2021 US Tech Budgets: The Industry Outlook,” by Andrew Bartels and other Forrester analysts. Moreover, technology spending by manufacturers—in a slowdown because of international trade matters involving the U.S.-China trade war and the coronavirus outbreak—will increase by only 3% or less.

“The coronavirus quarantines and supply chain disruptions are additional negative shocks to manufacturers, which could further depress their investments, depending on how long and far-reaching these disruptions are,” the report says.

B2B industries with plans to spend

But for now, Forrester forecasts significant investment plans for customer-facing technology projects by retailers and B2B companies involved in providing industrial, high-tech and transportation products, among others.

Forrester’s forecast of a 4.2% increase in technology investment in the U.S. this year covers overall business spending on technology, comprising what Forrester defines as customer-facing “business technology” including ecommerce sites, order fulfillment and customer service applications; and “back-office technology” including procurement, inventory management and financial management systems.

On average, Forrester notes, companies will spend about 30% of their 2020 U.S. technology budgets on customer-facing business technology, or BT, and 70% on back-office technology, or BOT.

Customer-facing technology plans

Forrester forecasts the following spending on customer-facing BT projects:

• Retailers, financial services firms, high-tech products suppliers and insurance companies will allocate the largest shares of their 2020 technology budgets to customer-facing BT projects, at 34%, 32%, 32% and 31%, respectively. Such projects will focus heavily on ecommerce, marketing, sales, customer service, customer analytics, mobile apps and supply chain management.
• Consumer products goods manufacturers, pharmaceutical companies, government agencies, media companies and utilities will allocate about 30% of their tech budgets to BT projects, though many of these companies are investing largely in sales and marketing systems and relatively lightly in ecommerce.
• Industrial products companies will “continue to make significant investments in ecommerce, order management and sales force automation systems, as they spend between 27% and 29% of their technology budgets on customer-facing BT. Healthcare organizations, educational institutions and professional services firms will also spend the same share of their technology budgets on BT projects, but with far less of a focus on ecommerce.
• Wholesale and telecommunications companies will spend about 26% of their tech budgets on BT projects, focusing mostly on sales, marketing and customer service applications.
• Companies involved in chemicals, oil and gas, and transportation will allocate about 25% of their tech budgets on BT projects, covering B2B ecommerce, customer service and tech support.

“BT includes the technologies that firms use to win, serve, and retain customers,” the report says, adding: “A higher BT ratio can help your firm win, serve and retain customers better than less customer-obsessed competitors. But if your industry is facing the prospect of slowing or even declining revenue growth, the best choice is likely to be focusing new project spending on back-office technologies that can help reduce operating costs by improving process efficiency and effectiveness.”

Overall spending on technology

For overall combined BT and BOT spending, Forrester forecasts:

• A 5.2% increase at transportation companies, covering such improvements as warehouse automation, shipment tracking, and the ability to manage supply chain disruptions;
• A 3% increase at providers of industrial products and high-tech, computer and communications equipment;
• A 2% increase at retail and insurance companies, as online retailers continue to make incremental improvements to their ecommerce technology platforms;
• Technology budgets will remain close to flat at consumer products goods and pharmaceutical manufacturers and wholesalers. Wholesalers, the report notes, are “getting disintermediated as manufacturers increase direct sales to consumers.”

In January, Forrester released a report forecasting 2.8% growth this year over 2019 in worldwide technology spending by businesses.

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