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Growth Returns to Tech Field

IT systems and services will drive surge

By Peggy Albright

Businesses around the world are still struggling to emerge from the economic downturn. But their investment in new IT systems and services is expected to help the technology industry in 2011 grow at a faster pace than the overall economy.

While the market’s expected growth provides employment assurances, those working in the sector should also expect adjustments to business strategies as companies incorporate new technologies and adapt to new competitive forces. Market observers see some significant changes ahead.

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Boosting budgets

First, the numbers. In its predictions for 2011, the research firm IDC forecasts a 5.7 percent increase in worldwide IT spending. The firm expects that hardware budgets will increase by 7.8 percent, driven by investments in converged mobile devices, networking equipment, and PCs. The growth rate for hardware will be a few points lower than it was in 2010, but it will be offset by a rebound in spending on software and services, which will grow faster than in 2010 as companies move beyond their recent focus on infrastructure to build new systems and applications for the enterprise.

The firm says software spending will increase by 5.3 percent and spending on project-based services related to software will increase by 3.4 percent. Outsourcing, meanwhile, will grow by 4 percent, IDC says.

Growth in emerging markets will drive more than half of all new IT spending in 2011. The BRIC countries of Brazil, Russia, India, and China will account for 44 percent of emerging markets’ spending, according to IDC, which warns that companies hoping to compete will need to serve these markets.

“If you don’t have a strong emerging market presence, you’re boxed out of new growth. That’s where the money is,” says Frank Gens, senior vice president and chief analyst at IDC.

Gens foresees the IT industry coalescing around cloud computing, social networking, and mobile computing, and integrating the technologies in a variety of ways. Businesses will no longer be able to manage these efforts individually, he believes.

As Gens and IDC see it, this shift will create a new “mainstream IT platform” that will make industries like retail, financial services, energy, and healthcare more intelligent. While the industry is anticipating an evolution to “smart businesses,” Gens believes the new paradigm will create a new “intelligent economy” based on these disruptive technologies as well as broadband access and real-time, pervasive analytics solutions, which companies will need to manage the data these services will generate.

This shift will create a new round of winners and losers as significant as the disruption that occurred during the 1980s transition from mainframes to PCs. Gens foresees the overthrow of leading companies as a result of the changes taking place in 2011.

Cloud computing

IT spending on public IT cloud services will grow by more than 30 percent in 2011, more than five times the growth rate of the overall IT industry, as more companies move from initial cloud applications like email and collaboration tools to a broader range of business applications.

In fact, IDC predicts that more than 80 percent of new software products will be deployed via the cloud in 2011. Private clouds, which are not as far along on the adoption curve, will continue to evolve and gain acceptance in 2011.

There will be increased competition and consolidation among vendors. IDC predicts that pure-play public cloud companies will partner with private cloud vendors and that there will be battles for dominance in the platform-as-a-service and hybrid public-private cloud management markets.

Expect smaller firms to make moves to strengthen their offerings and expect current platform providers to make acquisitions. Logically, these changes will influence those who work in these firms and those whose companies adopt new cloud solutions.

Michael Friedenberg, president and CEO of IDG Enterprise, echoes this theme of major change when it comes to cloud computing. He predicts that cloud computing will move from an “overhyped theory” to an adopted practice in mainstream business in 2011. Private, public, or hybrid clouds, “when applied to the right business need,” will be game-changing in some industries, he predicts.

Peter Sondergaard, senior vice president at Gartner and global head of research at the firm, is looking farther ahead. Within the next 10 years, he says, cloud computing will change vertical industries so dramatically that it will make the impact of the Internet on the music industry “look like a minor bleep.”

Social networking

During 2010, businesses began realizing that social networking will have a place in the enterprise as a tool for engaging customers and improving productivity. IDC predicts that social business software will grow at a 38 percent annual rate through 2014.

Watch for consolidation here too. According to Gens, one-third of the more than 100 social networking vendors could be acquired in 2011 by major companies like Oracle, SAP, Microsoft, Hewlett-Packard, Cisco, and IBM.

Gartner’s Sondergaard predicts that social networking will be used in coming years to support people “whose jobs require discovery, interpretation, negotiation, and complex decision-making.” He said social approaches will be implemented across and between all organizations to the extent that they will “blur the boundaries between personal and professional activities.”

Mobile computing

Mobile computing is now a fact of life in the consumer market and on the sidelines of the enterprise. But as companies use mobile devices to “empower the workforce, speed decision-making, and grow top-line revenue,” mobile computing will finally move more aggressively into the business environment, IDG’s Friedenberg predicts.

Helped by the enterprise, IDC expects non-PC mobile devices like smartphones and tablets to outnumber PC shipments with the next 18 months. The firm predicts that traditional software and PC vendors in the computing industry will scramble to secure leading positions in the market. Watch for companies like Microsoft and Lenovo to acquire device makers, Gens predicts.

The apps market will also continue a “staggering” level of activity. Between applications created for Apple and Android devices, more than a million apps will be available on the market, Gens expects. The app store phenomenon, now focused on from smartphones and tablets, is expected to move to the PC market and next-generation enterprise solutions. Major strides in this direction will occur in 2011.

Other trends

While cloud computing, social software, and mobile devices garner the most attention, additional trends are also on the horizon. IDG’s Friedenberg predicts CIO turnover for any business that can’t scale to capitalize on new market demands. CIOs will have to focus more on “reducing cycle times and helping [their] organizations increase revenue instead of cutting costs,” he says.

Friedenberg thinks CIOs will have to focus more on transforming business processes and setting strategy than managing IT operations, and that vendor consolidation will cause major support issues for businesses.

Looking farther ahead, Gartner’s Sondergaard, believes that context-aware computing will also lead to significant changes in IT and the economy. This approach, which enables the creation of software and services that blend data, text, graphics, audio, and video with context such as location, desires, and feelings, will lead to new services that people can’t imagine today. It will “have a profound impact on organizations, on the way we do business.”

Another trend Sondergaard expects to become very important is the use of pattern-based strategies, which employ social network analysis, context-aware computing and predictive analytic tools in ways that allow IT to find patterns from an organization’s many information sources to model future business possibilities. CW

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