Global technology spending will reach $4.9 trillion (£3.9tn) in 2025, up 5.6% from last year, according to the latest report from Forrester.

According to the tech research and advisory firm’s Global Tech Market Forecast, 2024 To 2029, the growing digital economy will capture 17% of global GDP by 2028, which, alongside a predicted 7% compound annual growth rate, will drive further technology investments around the world.   

Software and IT services combined will account for 66% of global technology spend this year, fueled by increased investment in cybersecurity and the modernisation of legacy systems.

Forrester’s study suggests that 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.

The forecast shows that software spending by enterprises and governments will reach 1.7% of global GDP by 2029, nearly doubling its worth since 2016.

The report also states that investments in genAI will drive industry-specific growth. As industries including financial services, retail, and media increasingly adopt AI-enabled tools, Forrester predicts that this growth in genAI investments will force businesses to reposition their workforce, compete for talent, and lower technical debt.

In the European tech sector, spending is thought to grow by 5% this year, exceeding $1.5 trillion (£1.2tn) for the first time, with European firms spending significantly more on software and IT than the global average, at 78%.

The report notes that more than 40% of European tech spend now comes from financial services, media and information, and professional and business services, meaning that as firms begin to see higher ROI on their genAI ventures this year could see significant changes for EU workforces.

Meanwhile, tech spending in North America is projected to be even larger, crossing the $2 trillion (£1.6tn) mark, a rise of more than 6% on last year, with the US set to lead the way at 41% of overall global tech spending.

Financial services and insurance, government, media, and professional and business services will drive this increase, at 63%, however the US will continue to dominate in AI, with the country accounting for 46% of all AI software spending.

Forrester said that almost 70% of the top twenty-four companies that saw the fastest growth in their market cap up to 2023 came from the US –  perhaps unsurprising, given a new Dealroom report found that US AI startups have raised ten times more in VC funding than any other country – but the data shows that more than half of these are in media and information.

Those figures are an indication of where US firms consider they’ll see the greatest return on investments in emerging technology, meaning, as with software in Europe, the US media sector could see turbulent changes in the coming year.     

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“Over the next five years, technology investments will reshape industries at an unprecedented pace,” said Michael O’Grady, principal forecast analyst at Forrester.

“GenAI, cloud technologies, and cybersecurity will take centre stage, transforming how businesses operate and deliver value. 

“Companies that prioritize these investments will not only strengthen their competitive edge but also achieve sustainable growth, but it’s important that they also balance their rapid tech investments with ongoing efforts to manage legacy systems and reduce technical debt.”