IT Predictions for 2005, Part One

Although growth in global IT spending in 2005 is projected to increase by a modest 6 percent, there will a great deal of action beneath the statistical surface in terms of corporate shake-ups. These were among the predictions in a compendium of future IT trends, which was released last month by global research firm IDC, compiled over the course of three weeks and included input provided by nearly 40 of the organization’s senior experts. “It’s really kind of a virtual brainstorm across IDC on a global level,” said IDC’s senior vice president of research Frank Gens.


IDC is projecting net growth of $60 billion in IT spending next year, bringing total worldwide expenditures to approximately $1 trillion (accounting for between 2 percent and 3 percent of the world’s economic activity). The report predicts that the strongest regions in terms of IT growth will be in the emerging economies in Central and Eastern Europe, and Southern and Eastern Asia. Increases in IT spending should be moderate but stable in Western Europe and North America, while Japan and Latin America are expected to struggle with IT growth.


The biggest driver of growth in 2005 probably will be application software, comprising roughly 10 percent of new IT spending, Gens said. However, he added that new and expanding IT products and services—such as radio frequency identification (RFID), wireless merchandise and infrastructure security software—would also be factors. “Security software will continue to be a very large driver of growth and investment next year,” he said. “About $5 billion in additional spending is going to happen in what we call systems infrastructure software. That’s all of the system management stuff. Security is probably the biggest growth piece in that. That’s probably the single biggest thing driving that systems infrastructure software, because that’s a forced market. I would say that the whole identity management space is going to be key.”


Predictions regarding the transformation of the IT marketplace also were included in the report. “There were no real stunners in my view,” Gens said of the forecasts. “Last year, we saw most of the major players starting to make moves in two directions at the same time. One was that they were trying to squeeze lots of cost out of their business models. The flipside of that coin is that (companies were) trying to align better with their own customers’ needs. We tended to see a lot of verticalization of offerings in IT services as well as in the application software market. Looking at this year, our feeling was it’s the same game plan, but I think the difference we’re seeing in 2005 is the cast of characters is widening out to a much broader range of players, and the leaders are really accelerating their moves.”


Gens cited a recent upsurge in corporate acquisitions as a primary example of how IT companies were trying to save costs and provide value-add solutions to their customers (for more on this, see the “Corporate Acquisitions, Mergers Abound in IT” story in this newsletter). “This is a restructuring of the industry,” Gens said. “It’s probably the biggest one in the post-PC era. It kicked off in the last 12 to 18 months, and in our view, in the next 12 to 18 months it’s just full speed ahead.”


Next week’s CertMag EXTRA will feature more predictions for 2005, which will include a detailed outlook on a new era for the industry and what it will mean for IT professionals.


For more information, see http://www.idc.com/getdoc.jsp?containerId=pr2004_12_01_190339.

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