IDC predicts top trends in 2004

IDC Thursday announced its annual IT predictions for the coming year, and according to the research firm’s worldwide analysis, spending will increase and infrastructure will evolve to better support business-driven initiatives.

In a conference call, Senior Vice President Frank Gens said IT spending will grow 6% to 8%, up from previous predictions of 4.9%. Gens said enterprise adoption of business-oriented applications and the need to upgrade hardware after a three-year drought will drive the upturn in IT buying.

“We could be in for a refresh of three-year-old or older IT infrastructure in 2004,” Gens said. “IT organizations have been sitting on their hands for years, but this optimism certainly is fragile considering the last few years.”

Another trend is that IT buyers will be focusing on business-oriented technology projects. Companies such as IBM, which recently announced it would restructure its software organization to address vertical markets, will begin delivering products to address business problems specific to industries such as financial services, retail, transportation, manufacturing and more.

As vendors look to address business needs, IT buyers planning to upgrade their infrastructure will be looking at a more commoditized product market, according to IDC. The firm predicts server hardware and system software will become more commoditized in 2004 with vendors looking to remove proprietary features and adopt more standards.

For example, Sun’s announcement with AMD last month marked the end of the last vendor holdout for proprietary infrastructure.

Linux adoption will also be on the rise, but IDC said Microsoft wouldn’t need to worry about adopting a Windows version of the open source operating system until 2007 because Linux won’t be making a significant dent in Windows sales for a few more years. IDC said in 2004, 11% of the market of servers sold in the U.S. will have Linux as the operating system, 34% will have Windows, and 37% will be Unix.

And wireless infrastructure may also see a significant upturn in 2004, IDC said, as Wi-Fi hotspots are predicted to double worldwide next year. Public Wi-Fi hotspots will proliferate in locations such as hotels, cafés and pay phones. Companies such as McDonald’s and Starbucks have announced their plans to install Wi-Fi pay phones at their locations, IDC said.

Also on the rise is offshore outsourcing. While the U.S, economy will eventually return, the number of jobs for IT professionals will not reach the same number in the coming year. IDC predicts the trend to double in 2004.

“By 2005, one-quarter of the IT market will be delivered through offshore sourcing,” Gens said. “It’s a fundamental structural change in an organization, not a short-term response to an economic downturn.”

Yet while this trend will have a negative impact on IT workers, IT buyers will benefit from more vendors and service providers opting to locate staff offshore, IDC says.

Another trend IDC noted is a gradual move toward utility computing. While vendors such as Sun, HP, IBM and others have been beating the utility computing drum throughout 2003, enterprise adoption will be gradual at most in the coming months. Despite the slow adoption in the short-term, IDC says it believes utility computing is a good long-term bet.

“It will see a practical step-by-step adoption, and vendors will need to get past vague marketing and deliver real value,” Gens said. “Vendors will continue to try to deliver IT systems that can adapt in real-time to business changes and events.”

Radio frequency identification (RFID) will also see slower growth than previously expected, IDC says.

The firm says while there will be a lot of vendor investment in RFID technologies, that effort will be mismatched with customer spending. IDC says the technology could potentially in the long term revolutionize retail technology, but concerns over tag reliability, signal interference and a lack of standards will hinder big growth in 2004.

For example, IDC says Wal-Mart, a leader in RFID adoption, plans to have only 4% of RFID readers in its distribution and retails centers by January 2005. Others in the retail market will follow that lead.

IDC closed the call by restating the top trends for 2004. “Growth will return, and IT will be re-oriented around business models,” Gens said.