2005: huge turbulence in IT market

2005 will be a year of enormous turbulence for the high-tech sector, IDC says.

"Beneath the surface of an almost boringly moderate growth rate of six per cent, 2005 will be a year of enormous turbulence in the IT market with lots of consolidation and realignment in many sectors," commented Frank Gens, senior vice president of research at IDC.

Indeed, the prognostication seems to be coming true already, with companies like Oracle, Symantec EMC and Lenovo involved in mergers worth billions of dollars in the dying days of 2004.

In its outlook for 2005, IDC notes that the six per cent growth willl keep IT suppliers under pressure to control costs. The research firm bases its assumptions on improving IT growth in the US and modest improvement in Western Europe. In emerging IT economies in Central and Eastern Europe, China and India, growth will be stronger, but in Japan and Latin America demand for IT-related products and services will be tepid.

"Of these assumptions, European recovery has the greatest downside risk," IDC noted.

On the hardware side, the market for servers and storage devices will be affected by increased price pressure, and the semiconductor industry will experience a correction in the first half of the year, IDC said. In terms of infrastructure software, vendors like IBM, HP, Sun and EMC will continue to buy up companies, large and small, to fill out their software portfolios, the research firm added.

Meanwhile, independent infrastructure software players like Microsoft, CA and Novell will also engage in mergers, acquisitions, and alliances to boost their business software portfolios. "The interesting question is: Are these two communities - that have depended on each other for success - headed for a showdown?" asked Gens. "And will Dell, which has stayed largely out of the software game, be forced to follow IBM, HP and the others?"

He thinks Microsoft may look to make an "audacious" acquisition in 2005, following its failure to take over SAP in 2004, a buy that could have given it more clout in the application software market. According to IDC, during the coming year, the top application vendors - such as SAP, Oracle and PeopleSoft, and middleware vendors like IBM and BEA - will aim to define their own products as the "killer application platforms."

As for consumer technology in '05, IDC forecasts that handheld game consoles, hard-disk drive MP3 players, and digital cameras will lead the market and that broadband adoption will also make further gains as price points fall further.

Similarly, Voice over IP (VoIP) will hit the mainstream consumer market during the year as telecoms continue to battle for dominance. Importantly, consumers in many markets will see the introduction of the ultimate telecoms package, with broadband internet, fixed-line services, cable TV and wireless services all rolled into one package.

© ENN

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