Small Biz, Emerging Markets Hot For IT in 2008

While the looming credit crunch in the U.S. threatens to slow growth in IT spending in 2008, the industry will make its biggest strides in the small busines market and in emerging markets like India, Russia and Brazil next year, according to research firm IDC.

Speaking at the Raymond James IT Supply Chain Conference in New York, IDC chief research officer John Gantz, said that it's still not clear how the market will be affected if the rate of mortgage foreclosures in the U.S. climbs next year.

"We have yet to begin to see forfeitures of suprimes. Early 2008 will be the big fallout. We survey a lot of business executives and CIOs every month about what they expect for the next 12 months," he said. "The news kind of got to them in 2007."

IDC expects IT spending to jump 22.7 percent in India and 15.1 percent in China in 2008. For the U.S., IDC is projecting 2008 growth at 5.5 percent but IDC may lower its forecast as much as a point, to 4.5 percent, after it sees how Q4 plays out for IT companies. "The IT industry is now pretty closely linked to the economy in almost all countries," he said.

Yet, in spite of macroeconomic woes, Gantz said he's not hearing from VARs and disributors that business has taken a turn for the worse. And, VARs will benefit from advances in technology that require their expertise to deploy.

"I'm not hearing it. I'm not feeling it. I talked to CDW. Their inventories are fine. They're moving things... We hear the bad news but we're not actually feeling it in the marketplace," Gantz said.

Brian Alexander, senior vice president, equity research for technology hardware and distribution with Raymond James, agreed with Gantz's assessment. "Virtually every presenter [at the conference] noted that quarter-to-date demand is consistent with expectations across products and geographies, with no weakness emerging. However, most presenters acknowledged current macroeconomic risk factors, noting that 2008 is likely to see slower growth,'" he said.

"Diversification in adjacent market strategies is becoming more prevalent within the industry. As growth in mature markets becomes muted, distributors are carving out niches ranging from data capture to VoIP, consumer electronics, and business process outsourcing," Alexander said.

IDC expects to see storage and services grow in 2008, along with appliances as vendors and the supply chain vie for slices of the small business market, and that will be good for the channel. "With the slow growth in the developed world we think most of our big customers and vendors are looking for segments they can attack that grow faster than the market, one being small business, one being geographies," Gantz said. "Everybody's going after small business. All of a sudden even SAP has to go through the channel to reach small business."

Mobility will be another industry driver next year with more than 1 billion people using the Internet by 2010, Gantz said. Mobile technologies and the hardware, software and services that go with them will help solution providers go deeper into their existing accounts. Solution providers will also be needed to help businesses figure out how to best leverage new technologies, like GPS, in their businesses, he said.

"The IT organizations of the world are overwhelmed and trying their best to figure out what to deal with. What that means for the supply chain is they need more support... They need someone who knows more about GPS and location than they'll ever know, and who will help them deploy it," Gantz said. "IT will include much more than IT and will merge with the business. Supply chain companies need to be ready."