Dan McLean: Time again to take a swing at some annual industry predictions

Batter up! It’s that time of year again.

No, not baseball season, but the time when market researchers and other IT navel-gazers typically offer up a view of what’s to be for the year ahead.

Having never kept close score of prognostications made in the past, I can’t really say how I’ve fared. Being wrong more than two-thirds of the time, for example, I might reason that I’m batting about .333 – a pretty good average for a slow-footed outfielder, but maybe no so great as an industry watcher.

Regardless, mediocre past performance won’t get in the way of a bright new year of predictions. It would be nice to bat at least .500 this year. So, here goes.

There’s a great deal of economist and analyst buzz suggesting modest recovery in the IT industry in 2002. Many are suggesting an upturn by mid-year, with more pessimistic thinkers suggesting a last-quarter climb. But is more hope rather than supposition based on sound and rational evidence?

Canadian research conducted by IDC Canada suggests recovery and growth in some key sectors. IT services, for one, play an increasingly important role in business as companies look to gain scarce expertise and reduce operational costs. Service providers are more often proving they can do IT better and cheaper, so expect IT service to continue being the area of economic strength in IT.

An area of business enterprise spending that is also expected to remain strong is in network communication systems and not so much in new technologies, although investment in LAN telephony could really take off this year. Generally speaking, companies will continue to build for better performance and reliability, in support of increasingly distributed computing environments.

And speaking of LAN/IP telephony, one can’t but wonder whether this will be the year that Canadian businesses become true believers. The technology is one year older, is improving by leaps and bounds and as a solution is continuing to scale beyond fairly small implementations. Success stories have emerged, particularly in the education sector and most business sectors are expressing strong interest in investigating IP/LAN telephony.

This should also be a strong year for wireless LAN solutions. Similar to IP/LAN telephony, businesses are extremely curious about this technology, which addresses the increasing mobility and need for portability within the confines of business establishments.

IDC Canada research shows a majority of business will spend little, if any, capital dollars on IT projects this year, while operational budgets will for most remain at 2001 levels. Most companies will be looking to make do with current spending levels, meaning they’ll seek to do more by squeezing the value of every dollar. For IT/IS services firms, it will be an opportunity to expand the base of services already being provided to customers by demonstrating an ability to continue driving costs down.

Each year the belief is that security services will finally take hold among Canadian enterprises, but it has yet to happen. As in years past, there’s every reason to believe it will finally happen in 2002. This assumption is based on the ever-increasing importance of IT resources and the necessity of protecting these, the greater understanding of the need for IT security (call it the Bin Laden effect), and the increasing involvement of the business side of business in stepping up to the overall responsibility for security. IT service customers currently demand a an inherent level of security in most service offerings, and it’s reasonable to assume the Canadian business enterprise at large will recognize this necessity and expect likewise from themselves.

The smart IT companies will be thinking strategically in 2002, looking to achieve greater brand awareness and earn mindshare for the future, rather than focusing so exclusively on quarter-by-quarter sales targets. It’s a reasonable assumption based on the continuance of constrained budgets. These vendors will be spending more time with customers, educating them to the business value of new technologies and processes, in addition to outlining product roadmaps.

Among other things to expect in 2002: the usual continued consolidation in the industry (hey, will that Compaq/Hewlett-Packard merger/acquisition actually happen?) Also expect deeper forays into IT services by a wide range of players, but maybe especially so by communication service providers who continue to search for new revenue streams beyond traditional offerings. Novell for one is a company that seems to have learned the importance of extending beyond product and into value-add through IT services. Expect other companies to likewise investigate the opportunities in IT services. The major lesson of 2001 may be that it’s unwise for an IT vendor to put all its eggs in one basket by being focused on limited customer sets and offerings.

So with that I’m hoping this year’s IT market forecast season sees more spot-on hits and fewer errors.