IDC Is Bullish On IT Spending, Standards Adoption

IT spending will make a big jump, leading high-tech vendors will see standards-based products as the center of their future and foreign outsourcing of IT services will continue to grow are just some of the 2004 predictions made Thursday by market researcher IDC.

Topping the firm's 10 predictions for next year was a change upward in its early forecast for IT spending worldwide. IDC, which stands for International Data Corp., believes spending will grow by 6 percent to 8 percent from this year. The firm had predicted earlier this year a 4.9 percent increase.

"Key to our positive outlook is that good economic news has been emerging while 2004 IT and business investment budgets are being set," the analyst firm said in its forecast report. "Another factor is that -- in an election year in the U.S. -- the administration certainly will pull out the stops to keep the good news coming."

On a cautionary note, however, market optimism is still fragile, so any series of bad economic news in 2004 could cause companies to quickly zip up their wallets.

On IT standards, next year will be the first year that all of the leading software and hardware players will see standards-based products as the center of their future, as opposed to just a fast-growing product segment. The year will test major players on whether they can commit their organizations to this model and still differentiate themselves in the market without the protection of proprietary technology.On the SCO Group's legal challenge to open source Linux, IBM will indemnify customers from possible damage related to SCO's actions, as Hewlett-Packard Co. did this year, IDC said. Besides threatening to sue users of Linux, SCO has filed a $3 billion lawsuit against IBM.

SCO claims the copyright of some of the code in Linux, and has accused IBM of contract violation by freely distributing SCO's property. IBM denies the claims.

IDC expects SCO to escalate its legal actions against Linux distributors and users.

Despite an improving economy, enterprises are not expected to abandon the trend toward outsourcing IT services overseas to take advantage of cheap labor. In 2004, IDC expects the value of IT services provided to U.S. businesses to double to $16 billion, reaching 46 billion in 2007. The latter figure accounts for a fourth of the total U.S. IT services market.

Utility computing, the concept of selling processing power like electricity or natural gas, will continue to be met with confusion over the meaning and value of the model being hyped by many leading vendors."Although a lot of marketing muscle will continue to promote this concept in 2004, real investments that contain defining elements of the utility-computing model -- virtualized systems, applications shared among businesses, real-time usage-based pricing and (utimately) real-time adaptation of IT systems to changes in business events -- will be modes, and largely focused on infrastructure management, not on solving business problems," IDC said.

Adoption of radio-frequency identification (RFID) tags on products moving through supply chains will stall, despite mandates from the world's largest retailer, Wal-Mart, and the U.S. Department of Defense.

"By year-end, it will be obvious that it will take more than mandates from Wal-Mart or the DoD to drive the kind of money and time investment necessary to deploy the tagging infrastructure, the sensor technology, the operational procedures to use the sensors, and the applications to make sense of the data," IDC said. "In addition, RFID technology still has some serious practical issues, including poor tag reliability, many sources of signal interference, and slow standards development."

IDC predicts that fewer than half of Wal-Mart's top suppliers will have much more than early-stage pilots running by the end of 2004, and that the retailer, along with the DoD, will nudge the timeline for adoption and/or narrow the scope of their mandates.

On the adoption of Wi-Fi in the enterprise, the analyst firm expects businesses to begin using the standardized technology in wireless local area networks set up in small and temporary offices. Large office use will be limited to conference rooms and common areas. Vendors are expected to continue having trouble making a coherent business case for using the technology in office environments that already have a wired infrastructure.