IDC: IT needs 'Big Dig' to spur recovery

CNET News.com

Ed Frauenheim

SAN JOSE, Calif.--Wireless devices, computer systems integration and emerging international markets are among the keys to a recovery for the tech industry, according to market research firm IDC. At its "Directions 2003" conference here this week, IDC's Chief Research Officer John Gantz said companies will need help simplifying complex IT systems. He drew an analogy between integrating companies' multiple applications and the city of Boston's costly effort to build an underground road through "legacy" infrastructure systems--a project known as "The Big Dig." Just one in 10 Web sites are highly connected to back-end systems, he said.

"We have our own big dig," Gantz said. "I think we've just put the first shovel in the ground on this."

Gantz was one of a host of IDC analysts offering advice at the conference Wednesday, which was geared toward senior executives at IT companies. Tech execs have reason to look for answers. According to IDC, IT spending dropped 4.1 percent in 2002, on top of a 0.5 percent decline in 2001.

Forecasts for IT spending this year suggest modest growth at best. An IDC study released in February found 85 percent of companies plan to increase or maintain their IT spending this year, but such spending will remain under constant review. In a survey released March 3, Forrester Research predicted that technology spending will increase 1.9 percent this year.

But a Goldman Sachs survey of 100 chief information officers at leading U.S. companies indicated that average business spending on computer hardware and software will decline by 1 percent this year. What's more, the war in Iraq has raised questions about a recovery in IT spending.

A recent survey by Merrill Lynch found that less than one-fifth of American and European CIOs said they would slow technology spending with the start of the U.S.-led war against Iraq, but fewer still said they would increase spending even if the war were to end quickly.

Despite the geopolitical turmoil, tech companies would be wise to look abroad for pockets of opportunity, suggested IDC analyst Philippe de Marcillac. In fact, the Middle East region represents a "wild card," he said, with IT demand ready to boom when the geopolitical crisis is resolved. Marcillac also suggested that five countries will become attractive markets in the longer term: China, India, Russia, Brazil and Mexico. While IT spending in those five nations totaled less than $50 billion last year, it should climb to nearly $90 billion in 2006, he said.

Marcillac argued that China is a "technology powerhouse in the making." It has world-class facilities, and a "phenomenal" amount of investment is flowing into the country, he said. China is less like Taiwan in the 1990s, and more like Japan in the 1970s and '80s, Marcillac said.

Conference attendees heard other guidance about future trends. This included discussions of utility computing, tech products for the home and advances in display technologies.

Gantz said the growth in wireless devices also represents a significant opportunity. He said by 2006, 3 billion cell phones will be in use, and 50 percent of Internet users will be mobile. Such developments create growth in areas including billing applications, location-aware applications and content redeployment technology, he said.

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