IT In 2007: Budget and Trends: Page 2

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Trends in Software: 2007

Within the healthy expenditure on software, IDC’s Minton identified the following trends:

• OS software: The robust spending on OS software partially reflects interest in Vista. “And of course we also have the adoption of other operating systems, in particular Linux,” he notes.

• Authoring software: A drivers in this sector is interest in Microsoft’s upcoming Office release.

• Storage software: “The storage solutions sector has performed extremely well over the last twelve months, and storage resource management is one of those areas which is growing at a double digit rate.”

• Web-based software: “This is one of those areas that is showing significant increases when we track back to surveys twelve months ago.”

While industry observers had expected much of the interest in Web-based software would come from small companies, IDC finds great interest among large enterprises. Perhaps surprisingly, more than 40 percent of companies with 1,000 or more employees expect to implement some form of Web-based application in the next twelve months, and almost as many plan on experimenting with it.

Web-based software “is a positive wild card” for IT spending in ’07, Minton says. “There are a lot of implications around Web-based software, not just around the software itself, but around all the massive amounts of infrastructures delivering these Web-based solutions.”

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Drivers and Inhibitors of Spending

A big driver of spending in 2007 will be security, IDC forecasts. “Security has been a pretty consistently ranked driver for the last few years,” Minton says.

With spending on hardware past its peak, many companies are now focusing on back office apps, like their databases and their ERP apps. It’s the mid-size firms who are most focused on this, IDC reports.

Another big driver will be real time business monitoring, and CRM apps. “Business intelligence is one of those sectors that we expect to be growing at that double digit rate.”

Also hot will be spending that supports a mobile workforce. “We see continued growth in the rollout of mobile e-mail and data solutions,” Minton says.

More drivers: VoIP solutions (particularly among larger firms) and VPN and wireless LAN development. IDC expects the wireless data sector to grow at double-digit rates for the next five years. The research firm forecasts that North American and Latin American wireless data growth rates will top a jaw-dropping 50 percent.

Among inhibitors, if the price of oil surges again, that could delay spending plans. Other inhibitors of spending include a poor ROI on previous projects, satisfaction with current computing, and that timeless catchall, “senior management caution.”

Additionally, many firms list “skill shortage,” as a growth inhibitor. Specifically, some Java and Web 2.0 skills are harder to find, Minton says.

Vista Adoption

Although the roll out of Microsoft’s new OS will clearly affect IT spending, “It’s not going to have the kind of dramatic impact that Windows 95 had,” Minton says. “It’s not going to be something that drives overall IT spending up by a couple of percentage points just because of the mass rush to go out and buy it.”

But it will shift some spending on PCs from the end of 2006 into 2007, particularly among consumer who defer holiday PC spending while waiting for Vista.

The Resilience of IT

Despite the questionable economic picture, IDC continues to feel upbeat about worldwide IT spending in 2007.

In fact, next year’s IT spending could actually be slightly higher than this year’s, Minton says, though he concedes that this conclusion may appear counterintuitive in the face of a cloudy macroeconomic forecast.

The reasons for the comparatively higher ’07 are: 1) ’06 spending is coming in lower than expected in Europe and Japan, and 2) PC sales are expected to move higher in the US and internationally, partially due to the upcoming Vista launch.

Although IT growth isn’t expected to be the frisky colt it was in the late ‘90s, it remains a solid workhorse. “We’re talking about an industry that’s growing a little bit faster than GDP, but is clearly more mature than it was in the past,” Minton says.

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