IDC Predicts Hyperdisruption in 2007, as IT Vendors Embrace New Models to Open Pockets of Growth In a Moderating Market

FRAMINGHAM, MA – DECEMBER 11, 2006 – With worldwide IT spending expected to grow a modest 6.6% in 2007, many industry leaders will be more willing than ever to take chances, and embrace change, to open up new pockets of growth. The result, according to IDC, will be a year of hyperdisruption, with many IT vendors stepping up their adoption of new business models and technologies, and cross traditional market boundaries.

"While overall IT market growth will appear almost boringly moderate, its impact will be the opposite," said Frank Gens, senior vice president of Research at IDC. "As IT market leaders step up their relentless hunt for growth, we'll see many disruptive shifts, with the importance of small business becoming very big, secondary economies becoming primary, software offerings becoming services, services offerings becoming software, channel-oriented players going more direct, direct players developing radically new channel strategies, and less distinction between business and consumer players and technologies."

Against a background of moderate IT spending growth, one of the main stories in 2007 will focus on "the great disrupter" – globalization. While 2006's hottest emerging markets – including the hyper-growth BRIC (Brazil, Russia, India, and China) markets – will continue to drive worldwide growth, a new group of countries will show their early potential as the next hot markets. In 2007, these "beyond BRIC" opportunities will be greatest in the Emerging Asia Countries, Latin America's Southern Cone, the Middle East and NEW (North/East/West) Africa.

The search for market opportunities will also bring the "Long Tail" of small and medium businesses (SMBs) further into the forefront for many IT vendors. Here, the ability to "scale down" offerings will become critically important, and software vendors will shift their Software-as-a-Service (SaaS) initiatives into high gear. Further disruption will come from online and offshore services players pushing into the SMB market with innovative new offerings and becoming prime acquisition targets in the process.

Other IDC predictions for 2007 include:

— Services/Software fusion will pick up speed. Offshore services vendors will continue to increase their footprint, swimming upstream and onshore into higher value IT and business consulting markets. To tap the mid-market opportunity, "Service as Software" offerings will emerge that graft traditional BPO services onto high-leverage, online delivery capabilities.

— Heightened competition in the information access and management space. With customers demanding "rapid access to relevant information" as a top business requirement for IT, the major vendors will slug it out for "information platform" leadership while Web 2.0 tools will disrupt the market with "good enough" information access.

— Virtualization and Software Appliances will reshape the infrastructure landscape. Already one of the most disruptive forces in the infrastructure marketplace, virtualization will shift into a new phase, delivering higher IT service levels and creating new opportunities for software vendors to create products that manage an increasingly virtualized IT environment. A key innovation here will be "software appliances" – limited function, self-contained products that are easily and inexpensively acquired and replaced.

— Consumer and telecom markets will continue to churn. Both the consumer and telecom markets will be their usual concoction of convergence, creativity, confusion and change in 2007. Internet video will continue to be a hotly contested online niche, while quad-play offerings from cable providers will further challenge the telcos to make a competitive response.

"These disruptions will force many market leaders out of their comfort zones, and open up new opportunities to those that choose to surf with the disruptive tide, rather than stand against it," added Gens.

IDC's annual Predictions are designed to identify and highlight key trends and pivotal choices facing the IT industry in the year ahead. The predictions draw upon existing IDC research and are vetted through a global review process involving more than 800 IDC analysts from every region of the world.

More information about IDC Predictions 2007, including a copy of Frank Gens' report, IDC Predictions 2007: Prospering in an Era of Hyperdisruption, and additional IDC research documents and events focusing on the year ahead, is available at www.idc.com .

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. Over 850 IDC analysts in 50 countries provide global, regional, and local expertise on technology and industry opportunities and trends. For more than 42 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com .

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