Consolidation will take centre stage in 2004: IDC

The year 2004 will be one of consolidation, strategy and execution for the IT industry, according to one insider.

Vito Mabrucco, group vice-president at IDC Canada Ltd. in Toronto, said that by the end of the year the industry would revolve around a different landscape of players.

“It’s a year where companies will want to set the stage for their next five to ten years of growth,” Mabrucco said.

In order to set that stage, many of the heavyweight IT companies are choosing to consolidate.

In light of recent news such as Sun Microsystems Inc. and Microsoft Corp. becoming new-found friends, Apple Corp. regaining its foothold, and EMC Corp. continuing to buy software companies, Mabrucco said that companies will either come out as winners or they will come out as part of something else.

“Companies are just realizing that to get growth they need to dominate and in order to dominate they need to either continue to grow their share or they need to buy share,” he explained.

Mabrucco said it’s all about market share and the market is not growing. For those in the IT industry that might be used to achieving 10 to 15 per cent growth, now that the market is only growing five per cent, they will have to either gain market share or find other ways to grow — such as consolidation.

Microsoft and Cisco are two good examples of companies that need to be seen as growth companies. In order to keep that status intact they are trying to enter new markets, such as the consumer market; they are cutting alliance deals to remove obstacles in the market, as Sun and Microsoft did; and they are expanding overseas, Mabrucco said.

This prediction is just one of many that Mabrucco is suggesting will affect the IT market in 2004, in a new report called The Way Ahead: IDC’s Top Canadian Predictions for the IT Market.

While the report is widespread, it identifies key driving forces in various segments of IT and forecasts future trends.

For example, Mabrucco said that 2004 will be a turnaround rather than breakout year for Canadian business and IT companies. There will be moderate growth in IT spending, but greater pressure exerted on pricing, which will push many to improve productivity and processes.

Also, IT services in general and outsourcing in particular have become increasingly competitive, where the landscape of large business opportunity may be near to being maximized in terms of contracts available, according to the report. There will also be a stronger push by IT service providers into new customer segments with new types of process-based services, they seek to expand the customer base of opportunity.

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Jim Love, Chief Content Officer, IT World Canada

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