By: Jack of Hearts, Analyst, Bloor Research
Published: 27th November 2002
Copyright Bloor Research © 2002
Despite predictions to the contrary, and certainly dreams to the contrary, 2003 does not appear to hold the solution to the ongoing tech spending slump. A new tech spending confidence study from Gartner has found that tech budgets through 2003 will not grow as many have predicted, but rather they will fall by 0.03%.
It might not sound like much - in fact it isn't - but it shows that the tech blues are going to continue for at least another twelve months. Tech spending in 2003 will be flat, the same as through 2002. You can only assume that the IT departments know what they are doing so it's doubtful that they will be sorely affected by the lack of readily available funds, but the vendors are going to be hammered.
Gartner believes this lack of funds is creating what it terms as a demand gap, between demand for technology and technology budgets. It doesn't sound entirely accurate to me. Rather, organisations are finally realising that they have spent far too much on technology and the business, as opposed to the techies, are now taking charge and demanding real value be squeezed out of these elaborate, and frankly shoddy, systems. Sounds like a good situation, in my opinion.
Still, it is going to hurt the vendors who are operating in this rapidly maturing industry. The hype is gone, the interest is diminishing and now the vendors are going to have to find new ways to survive. Another Gartner study reckons that the vendors will do this by continuing the onslaught of consolidation - that is the only way they are likely to get money flowing around the industry.
The problem, as Gartner rightly notes, is that there are simply too many IT vendors out there right now. The big solution vendors are increasingly leading the way and winning the contracts, whilst the smaller, specialist point product vendors are losing business and failing to compete effectively.
That means there are some prime opportunities for acquisitions. Indeed, the past year has seen this trend reach unprecedented heights with HP's acquisition of Compaq and IBM's acquisition of PWC Consulting. And there's more to come.
One of the markets currently primed for consolidation, according to Gartner, is telecommunications which, as demonstrated by KPNQwest, is now in a rather startling state of flux. There are no predictions about who, when or where the acquisitions are likely to take place but no doubt Europe will be at the centre of developments leading, as it does, the majority of telco developments.
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