How COVID and the US presidential election will impact budgets in 2021


Forrester has revised its outlook, predicting an overall 0.4% decrease in tech budgets next year after a 2.5% decline in 2020.

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In light of the US presidential election outcome, a resurgent COVID-19 pandemic, and renewed signs of economic instability, Forrester has issued an update to its predictions for the US tech market in 2021.

Originally published in August, Forrester said in a press release on Friday that revisiting its prediction was important because “we at Forrester now have greater clarity on the outlook for US business and government spending on tech goods, software, services, and staff than we did in August 2020.” 

Forrester cites several key takeaways from its updated report, all of which combine to suggest the issues that made chaos out of 2020 will continue to be a problem in the year to come. This will mean big changes for tech leaders preparing budgets for 2021.

Expect tech budgets to shrink

2020 was actually less destructive on the tech market than it could have been, Forrester said, with lots of cash finding its way into the hands of tech companies benefiting from newly remote workforces, long-distance meetings, and increased need for cloud computing solutions.

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That activity means 2021’s economic outlook looks cloudier by comparison, and Forrester is predicting an overall 0.4% decrease in tech budgets. This could be made worse by a lack of an economic stimulus bill, Forrester said, predicting that without one “state and local governments will be forced to cut spending, failures of small and medium-size businesses (SMBs) will rise into the hundreds of thousands, and millions of Americans will face reduced income support and greater risk of foreclosures and evictions.”

Some spending trends will continue to be similar to 2020, with communications equipment and staff spending increasing as workforces remain remote. In contrast to 2020, hardware sales will likely drop as the remote work purchasing surge winds down, while consulting/systems integration services and telecom spending decreasing as well.

A few industry tech budgets will grow

Of the 22 industries covered in Forrester’s 2021 prediction, it says only six will experience positive growth in 2021 tech budgets:

  • Healthcare, with telehealth and AI diagnosis tools being major spending categories.
  • Pharmaceuticals and medical equipment tech budgets grew in 2020, and will likely continue to do so as COVID-19 treatment research continues.
  • High-tech products, particularly those built for collaboration, supply chain resilience, AI, analytics, sales, and marketing in mind will experience positive growth in 2021.
  • Utilities will spend more on tech used to bolster customer service and communications, as well as improving field-service systems as well.
  • Insurance companies will spend more, particularly on replacing legacy underwriting systems with new cloud-based alternatives, RPA, and mobile consumer apps.
  • Consumer products companies will likely spend money on sales, marketing, and supply chain technologies in the coming year.

If a particular industry isn’t listed here, assume the tech budgets in that area to remain steady or decrease, which is discussed in detail in the report.

How tech leaders can prepare for an uncertain 2021

Forrester mentions one word repeatedly when giving recommendations to tech leaders for how to approach budgeting for 2021: Flexibility.

One major factor, the state of an economic stimulus bill, will be resolved early in 2021, Forrester predicts, but “many of the factors that disrupted business in 2020—the pandemic, lockdowns and consumer cutbacks, the timing of an effective vaccine, as well as the legacy issues of trade wars, tariffs, and Brexit—will still persist into 2021.” 

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Forrester recommends three strategies for staying on top of the ever-shifting ground that is 2021:

  • Prepare for the most likely scenarios: Map out events that may happen, how they would affect business, and how budgets would change in those circumstances. By prepping now you can meet the inevitable with little upset.

  • Figure out which specific areas of your budget would change if things turn out to be better than predicted: If 2021 ends up being great, have a plan in place for windfalls as well. 

  • Plan for worse-than-possible scenarios: Assume the worst will happen, hope that it doesn’t, and then prepare for it anyhow. 

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