The IT Analysts Make Their 2007 Predictions

Published: January 9, 2006

by Timothy Prickett Morgan

Human beings are forward-looking animals, which is probably why we have our eyes in the front of our heads. (Well, actually, we have our eyes in the front of our heads so we can see in 3-D, and the effect is that we are turned into forward-looking creatures.) As we enter the new year, it is probably a good idea to take a look at what some experts have to say about the IT ecosystem in general and what its prospects are for the year.

As we reported in the final edition of The Linux Beacon for 2006, the analysts at Forrester Research are predicting that IT spending will grow in 2007, but that spending growth will slow compared to that of 2006. Specifically, Forrester is expecting a slowdown in IT spending in both geographies in 2007, with the European market cooling a little to $586 billion in sales, up 3.7 percent, compared to $742 billion in the United States, up only 2.9 percent. That compares to a 5.8 percent increase in 2006 in the United States and a 5.1 percent increase in Europe.

If you want a second opinion, the prognosis will be much the same over at Gartner, at least among large enterprises in the United States. Gartner released a statement late last week that said the company's analysts have found after checks that big companies are expecting to only increasing their IT spending in 2007 by 2.8 percent. Only six months ago, these same executives were forecasting that their 2007 spending would rise by 6 percent. What gives?

"A number of factors have combined to force enterprises to lower their IT spending forecasts from the first half of 2006," explained Jed Rubin, director of Gartner Consulting. "Looking back at the distribution of spending in 2006, enterprises spent more to support core business operations. This includes spending to support increasingly complex infrastructure and applications requirements, rising energy costs, regulatory requirements and other non-discretionary spending to keep the business running. This increased 'run the business' spending has consumed budget resources that were originally earmarked for more strategic and transformational investment. IT leaders are now planning to optimize their spending in these areas in the year to come."

These same companies expect to lower their basic infrastructure budgets--the ones that simply run the business, not transform it or add new applications--by 5 percent in 2007. The data was based on 807 companies that commit more than $1 billion in IT budgets; specifically, the budgets at those companies added up to $130 billion in spending, which is a big chunk of the IT spending in the United States. (The top 1,000 companies in the States probably account for a quarter of total IT spending, if you can believe it.)

Not to be outdone in the stylish buzzword department, the analysts at IDC put out their prognostication statement for 2007, and were predicting something called "hyperdisruption," which is what happens with my kids at my house on Sunday morning if I am trying to get a moment's peace reading the newspaper.

IDC is, however, predicting that overall worldwide IT spending will grow by 6.6 percent in 2007, which is a lot more than either Forrester or Gartner are saying it will. I like the way that number sounds better, but it is really anybody's guess as to what will really happen. As for the hyperdisruption idea, IDC says that IT vendors are adopting new business models and selling new technologies, and that means we are in for a lot of changes.

"While overall IT market growth will appear almost boringly moderate, its impact will be the opposite," says Frank Gens, senior vice president of research at IDC. "As IT market leaders step up their relentless hunt for growth, we'll see many disruptive shifts, with the importance of small business becoming very big, secondary economies becoming primary, software offerings becoming services, services offerings becoming software, channel-oriented players going more direct, direct players developing radically new channel strategies, and less distinction between business and consumer players and technologies."

IDC is also predicting that more vendors will try to move down into the small and medium business space, and that services and software will start to fuse in the Software as a Service business model, or SaaS. (Next year, we are probably just going to start saying SaaS and stop spelling it out; ditto for SOA, or service oriented architecture.) IDC is also predicting something that VMware has been aching for: the establishment of virtualization hypervisors as a standard way to deploy servers, and a virtual machine as a means of deploying application software that is pre-packaged, pre-installed, and pre-tuned.

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