Time for good news
By Hugh McKellar, KMWorld editor in chief
You could feel it walking the exhibit hall floor at our conference in Santa Clara—optimism, and not the guarded variety, about the IT business in 2004. People were talking about budgets they would be spending to reach their very specific business goals. They have money to spend. The atmosphere wasn't "irrational exuberance," which is good, rather a mature confidence in the future.
To support my (completely unscientific) assessment is a new study by Frank Gens, IDC senior VP of research, in which he predicts 2004 will see a 6% to 8% jump in IT spending, up significantly over the past few years. (Further details about IDC predictions will appear in the fourth-quarter edition of its "Worldwide Black Book," which will be available in Q1.)
Where will the growth in IT spending appear? Gens cites six business arenas in which CEOs believe further IT investment will occur: regulatory compliance, product innovation/development, post-merger integration, single customer view across channels and offerings, improved return on invested capital and, finally, building/expanding services business. That's no real news about regulatory compliance—we're already seen a surge in spending because of HIPAA and Sarbanes-Oxley. But Gens emphasizes that Basel II (banks) 21 DFR Part 11 (life sciences) and the TREAD Act (automotive) will also mean significant opportunities for IT investment because of the sheer volume, format type and location of the information needed to fulfill the regulatory requirements.
While CEOs have focused on reducing operating expenses for the past few years, it's refreshing to see that in the near future, increased attention will be paid to product development and product management systems. Gens sees that trend to be especially apparent in consumer packaged goods and life sciences. He also anticipates more acquisition capital to be available in 2004, as well, so further M&A activity will likely be a mechanism for companies to boost their products and services.
Fully integrating customer information, whether it be in government, financial services, healthcare or any other sector, will continue to be technological imperative, and the current regulatory climate will make it even more so, Gen believes. He also predicts that manufacturers of durable goods, autos, aerospace components and industrial equipment are likely to invest in service operations as a way to increase their revenue streams and will need improved information systems to accomplish that. And, he says, manufacturers and retailers will invest to realize their view of the ideal supply chain, which is, Gen describes, "better connecting supply systems to demand information."
IDC predicts a legitimate jump in business application investment, as well as increased revenue for integration and consulting services. Further, a 10% to 12% jump in business process outsourcing is anticipated.
Speaking of outsourcing, expect the trend offshore to continue. But that's another, more complicated, story