IDC predicts 'tech resurrection' in '04

An improving U.S. economy and pent-up demand after years of austerity will combine to fuel IT spending growth in 2004, research firm IDC predicts.

According to the report, "IDC Predictions 2004: New IT Growth Wave, New Game Plan," released Thursday, IT spending will grow by between 6 percent and 8 percent in 2004, creating a "tech resurrection" in a year that will also see a continuation of trends such as off-shore outsourcing of IT services, wireless technology adoption and brisk consumer spending on new media technologies.

Positive U.S. economic news in recent weeks was key to IDC's rosy predictions for 2004, coming just as companies are setting their IT budgets for next year. That good news will generate optimism for the coming year, driving an increase in enterprise IT spending and keeping consumer spending on track, IDC said.

A better spending environment won't necessarily translate into a hot IT job market, however.

IDC predicts that the movement of IT jobs offshore, which blossomed with the bursting of the Internet technology stock bubble, will continue in 2004 and beyond. The value of IT services provided to U.S. businesses from offshore labor will double to $16 billion next year and triple again to $46 billion by 2007, IDC said.

Next year will also see the continuation of a trend towards "commodity" IT strategies that rely on standards-based technology and off-the-shelf products.

Sun Microsystems Inc.'s recently announced Sun Fire B100x Server, which features an Advanced Micro Devices Inc.'s Athlon XP1800 chip is just the latest example of that trend, which will make it more difficult for companies with proprietary hardware and software products to compete.

While companies such as Sun, IBM Corp. and Hewlett-Packard Co. (HP) have all been moving away from proprietary technology and platforms, the rapid move to a "commodity" computing model will put more pressure on them to refocus their strategy on the new business environment and manage the transition from older platforms, IDC said.

The trend toward commodity computing products may also benefit makers of Linux operating systems, which will likely see more interest in Linux as a low-cost option for deployment on servers in 2004, according to the report.

Wireless technology will continue to proliferate next year, with the number of WiFi hotspots worldwide increasing to almost 85,000 in 2004 compared with 50,000 in 2003, IDC said.

However, corporate adoption of wireless networking will lag behind public adoption, with security concerns and the presence of existing wired infrastructure slowing the transition to wireless local area networks.

On the consumer side, the continued increases in broadband Internet access and a range of new consumer products from companies such as HP, Dell Inc. and Gateway Inc. will drive the transformation of the PCs into consumer electronics devices, IDC said.

In the "mind the hype" category, IDC singled out utility computing and RFID (radio frequency identification) technology.

Utility computing, the sharing of virtualized IT infrastructure and applications among businesses on a use-based pricing model, might soon transform the way companies consume IT products and services. However, the technology is still plagued by confusion over the meaning and value of such services and a paucity of practical business applications for it.

RFID technology also promises to transform the manufacturing and retail industries, providing companies with far greater control over supply chains. However, the technology is not yet mature, with error- and interference-prone RFID tags and a lack of industry standards.

Corporate investments in both utility computing and RFID technology will be modest in 2004, IDC said.