Tech Resurrection Will Be Accompanied by Significant Structural Change, According to IDC Predictions 2004

FRAMINGHAM, MA – DECEMBER 9, 2003 – A “tech resurrection” will occur in 2004, as worldwide IT spending returns to solid positive growth. But the IT industry emerging from the market downturn of the past three years will not resemble the industry of the past 30 years, according to IDC. Instead of relying on vertically integrated proprietary systems and system software, the IT industry’s business model is rapidly shifting toward standards-based commodity computing to meet the budget limitations and operational efficiency demands of its customers. IDC believes the full impact of this shift will be felt for the first time in 2004 as the industry’s leading hardware and software vendors begin to clash on this new battlefield.

“The shift toward commodity computing is a massive structural change that has been underway for several years,” said Frank Gens, senior vice president of research at IDC. “But 2004 will be the first year where virtually all the leading hardware and software players have standards-based products at the center of their offerings. To succeed in this commodity market, vendors will have to learn how to differentiate their products without the protection of proprietary fences. This will present serious challenges for many of the major players and sets the stage for some major market shifts by 2007.”

Other IDC predictions for 2004 include the following:

• Utility computing will look more like futility computing as the nascent market slowly moves toward practical applications that offer solutions to real-world business problems.

• Offshore IT services will continue to grow as service providers aggressively build their offshore capacity into their own delivery models and cost structure. “Offshore outsourcing represents a structural shift that is just as significant to the services industry as commodity computing is to hardware and software makers,” added Gens. “It’s a trend that’s here to stay.”

• IT suppliers will struggle to put on a business face as they reorient their product offerings to more clearly address high-priority business problems.

• IT spending will be increasingly driven by CEO-level business priorities, such as improved product development and management, new regulatory reporting requirements, the continued pursuit of a single customer view, and the expansion of business services, to name a few.

• An RFID bubble will form – and burst – as the costs and difficulties of rolling out practical product tracking and supply chain systems become clear.

• Public Wi-Fi hotspots will continue to proliferate, nearly doubling worldwide to almost 85,000, while WLAN adoption in the enterprise will remain limited due, in part, to security concerns.

• China and Europe will act as powerful engines driving worldwide IT spending with a “new” China consuming nearly $30 billion in products and services 2004 while the enlargement of the European Union drives 11% of new IT spending in the overall Europe, Middle East, and Africa (EMEA) region.

• Consumers will continue to be another important force in the market, as they merrily embrace new technologies like cameraphones, DVD recorders, and broadband, challenging traditional media and consumer electronics suppliers in the process.

IDC’s annual predictions are designed to identify and highlight intriguing opportunities 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 IDC analysts from every region of the world.

To download a free copy of IDC Predictions 2004: New IT Growth Wave, New Game Plan (IDC #30499), go to www.idc.com and click on the “What Really Matters in IT for 2004? icon.

About IDC

IDC is the premier global market intelligence and advisory firm in the information technology and telecommunications industries. We analyze and predict technology trends so that our clients can make strategic, fact-based decisions on IT purchases and business strategy. Over 700 IDC analysts in 50 countries provide local expertise and insights on technology markets. Business executives and IT managers have relied for 40 years on our advice to make decisions that contribute to the success of their organizations.

IDC is a subsidiary of IDG, the world’s leading technology media, research, and events company. Additional information can be found at www.idc.com.

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