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These great forces of change, which IDC calls “hyper-disruptions,” spring from the following:
• Global emerging markets. The rapid growth of developing nations will significantly influence IT vendors.
• Online delivery. Chiefly SaaS, but the effects will spread.
• Proliferation and influence of communities. Web 2.0 will rule.
• Solutions packaging. The desire for rapid adoption, including modular design and standards, will shift how tech vendors offer products.
Businesses that fail to ride the wave of change created by these forces do so at their own peril, in IDC’s view. “More market share is certain to shift in the next five years – as a result of these new approaches – than we saw in the last ten,” the firm wrote in its report.
To make its forecasts, IDC held a virtual brainstorming session among its nearly 1,000 IDC analysts. It synthesized these forward-looking thoughts into the following global trends for the year ahead:
1) Lower Worldwide IT Spending
In contrast to 2007’s healthy 6.9 percent growth in global IT spending, 2008 will see 5.5 to 6 percent growth – or lower.
“Driving the significant drop in worldwide growth is certainly, in part, downside risk that’s building from the worsening U.S economic forecast,” says IDC senior VP Frank Gens. Indeed, U.S. IT spending could fall from 6 to 3-4 percent, IDC predicts. Hardware will fall first, with software taking a hit over the next two quarters, and Services seeing a more gradual downward impact.
2) IT Vendors will ‘Double Down” on their investments in the emerging markets
IDC sees a group of hyper-growth economies enjoying a breathless growth rate of 16 percent in 2008, collectively. Big IT vendors, fearing slower growth, will investing still more aggressively in these financial racehorses in hopes of keeping their bottom lines healthy as a slowdown looms.
IDC points to a group of emerging economies it calls “BRIC+9.” This is the classic BRIC group (Brazil, Russia, India, China) along with Mexico, Poland, Turkey, Argentina, Columbia, Saudi Arabia, Thailand, UAE, and Vietnam.
Additionally, vendors will announce initiatives in the SMB sector in both the developing and developed market, resulting in 8-10 percent greater spending worldwide. “Virtually all the large IT vendors have made big SMB plays this year, and 2008 is when they need to execute,” Gens says.
3) The IT market will jump feet-first into “everything as a service”
2008 will be the year of SaaS. “The industry’s big market markers, notably IBM and Microsoft but many others as well, will move major parts of their offerings online, after years of just dabbling in software as a service and online delivery,” Gens says. Cisco and Google will also be pushing this trend.
Gens concedes that IDC predicted last year that 2007 would see larger moves in SaaS from IBM and Google, “but it hasn’t happened yet. But we say ‘better late than never,’ and we’re sticking with our predictions for both companies in 2008.”
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Other players will help accelerate the shift toward “everything as a service”: HP and Sun will expand their access to flexible, online computing resources, IDC predicts; business intelligence as a service will also see increases, as will storage as a service. Customers are getting used to the idea of corporate data outside the firewall, though are perhaps still not comfortable with the idea, Gens says.
4) “Application Appliances” will go mainstream
It’s not very easy for SMB’s to get value from servers without a lot of work. To counter this, server vendors will take a page from the Apple iPod playbook, Gens says. That is, they’ll simplify and add value to an existing product the way the iPod did to the MP3 player market.
Players like Dell, HP, IBM, and Sun will ship servers as “business application appliances.” Translated: they will pre-load these boxes with applications and ship them Web-enabled for easy download of additional software and services. Pure-play SaaS vendors will partner with traditional software vendors to facilitate this trend, IDC predicts.
IDC calls this effort to pre-load boxes for the SMB market a form of “solutionization.” In other words, the server makers see selling a fully loaded box as a way to de-commoditize their business: It’s not just a box, it’s a solution.
5) A Flood of Web gadgets extends the mobile Internet
2008 will be the year of the small mobile device whose function falls in the gap between notebook PCs and smartphones. Think “alternative to the iPhone.” Web connected, consumer priced, simple to use, long battery life.
“The iPod Touch and the Kindle are just the beginning,” Gens says, predicting that dozens of these units will be launched in 2008.
A key driver: prices of PCs have now fallen so low that these gadgets are in the same ballpark, price-wise. Consumer will be able to get a mobile “pocket PC” for about the same as a low-end desktop. “285 million PCs will be shipped in 2008,” Gens says. Simultaneously, “We’re going to see 200 million portable media players, and about 150 million or more smartphones.”
6) All mobile network operators will join the Open Internet
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In the bad old days of AOL vs. the Web (in the mid ‘90s), America Online kept its users corralled in a narrow online space – yes, you were online, but you don’t want to look at non-AOL pages, do you? In a similar dynamic, in 2008 many players in the telecom industry will (reluctantly) follow Verizon’s lead by opening up their network to an array of devices and applications.
Google’s effort to liberate the mobile handset with the Open Handset Alliance – and the avalanche of online services – will create market pressure that’s hard to fight, in IDC’s view. “Walled gardens imprison the gardener,” Gens says. The only way for the mobile operators to grow is to open up and invite a community of others.
The Kindle, for example, simplifies access for the mobile book reader because Amazon inked a deal to provide wide-ranging content. “That’s the kind of model that mobile operators will need to do,” he says.
7) Social networking will drive “Eureka 2.0” software and sites
Unless you live in a Tibetian monastery, you’ve noticed the exponential rise of social networking sites, from MySpace to YouTube to Digg to Wikipedia. This phenomenon “is going to drive an avalanche of digital information to almost 400 billion gigabytes,” Gens says. (Up from 255 billion gigabytes in 2007.)
However, “Rather than helping people and companies discover the wisdom of crowds, we think the explosion of unstructured information from these systems is going to more often create a cacophony of crowds,” he says.
To help make sense of this info-deluge, a vibrant new crop of software will spring up in 2008. IDC dubs these new applications “Eureka 2.0” software. These apps will leverage text analytics, sentiment extraction and – one of today’s hot buzzwords – semantic search. This software will help companies by monitoring brand perception, customer satisfaction levels, and new product ideas.
As a related development, content distribution networks will blossom by at least 30 percent in 2008, attracting a crowd of new players – most probably telecom concerns like AT&T, in IDC’s forecast. Leaders like Akamai and Limelight Networks will see additional competition.
The many disruptions in the IT marketplace will make it imperative that vendors reinvent or refresh their product offerings and identities, IDC says.
For example, Apple recently changed its company name from Apple Computer to Apple, Inc. Salesforce.com has moved from being an on-demand software company to being a provider of on-demand business services, Gens observes.
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“All of the business application players, including Oracle, Microsoft, SAP and IBM, will add business services, we predict, to their software-as-a-service platforms.”
Similarly, the boundary between business and consumer IT will continue to blur, especially in terms of targeting the SMB sector. “In 2008, we predict such consumer-focused players such as Google, eBay, Yahoo, Apple, and the cable MSOs [multiple system operators] will accelerate their offerings into the SMB space,” Gens says. “At the same time, business IT players will adopt more consumer-inspired business models to be competitive in the SMB space.”
One intriguing contrarian prediction: IBM, the ultimate leviathan in the corporate IT sector, may rethink its long-held strategy of not competing in the consumer market. “It’s going to be harder to be a leader…if you’re strictly in the enterprise space,” Gens says.
9) A mixed bag of forecasts: telecom, Green IT, location-based services
Surveying the broad tech market, IDC foresees a grab bag of changes, including:
• Telecom operators will start promoting consumer VoIP to counter the very successful incursion by cable companies into the residential telephony market.
• “It’s going to be a break-out year for location-based services,” Gens says. 2008 will see a flood of applications, including “location-aware social networking, twittering and the like, local search, targeted advertising.” GPS-based apps will be hot.
• The buzz around Green IT will turn out to be more than hype, and in fact increase market share. The reason: it’s not just environmentally friendly, it saves money. In an IDC survey, 80 percent of businesses said that Green IT is becoming more important for them.
10) Key companies may get acquired
Predicting which tech companies will get purchased by other companies is a particularly daunting task, Gens notes. The companies on IDC’s “likely to get acquired” list may not want to be acquired, and indeed could certainly survive as independent firms. That said, IDC sees the following companies as possible purchase targets, mainly because they’re the kind of businesses the market is looking for:
Intuit – it’s attractive due to its SMB and SaaS capabilities. (At one time Microsoft made a play for Intuit, but was rebuffed.)
Salesforce, Bluewolf, Astadia – with the “everything online” trend in full bloom, these companies are highly desired. Particularly Salesforce.com: “We predicted that they’d be bought in 2007, and we’re sticking with that in 2008,” Gens says. He revealed that, last year, IDC analysts argued internally about including Salesforce on the “to be acquired” list – many were against its inclusion. Yet this year, those same analysts agreed that an acquisition of Salesforce was probable.
Attenex, Attensity, Biz360, Connexor, Lexalytics, Recommind – These companies are choice targets in the “Eureka 2.0” trend referenced in the social network prediction above.
TeleNav and Networks in Motion – mobile app platforms will be devoured as the world moves increasingly toward mobile-centric, location-based services.
