IDC Projects 2004 'Conservative' IT Spending Growth of 4.9%; Could Be Higher

Specifically, IDC projects 3.9 percent growth in North America and Western Europe; with only 3.0 percent growth in Japan. In China and India, however, each country is projected to have an IT spending increase of 18.8 percent next year. Russia, according to the research firm, will see a 13.9 percent increase in 2004.

"My key assumptions for '04 [on which we're basing these number]s is that there will be good, stable economic growth, no oil shocks, double-digit profit growth in the United States, and that stocks will continue to trend up," Gantz told the Raymond James attendees. "Company profitability is the best predictor of IT spend changes."

During his presentation, Gantz talked about what he called "The Channel's Pain." He said that while the channel's share is increasing in certain categories, like hardware, those segments are "going down" in dollars sold. He said that direct sales of PCs are flattening, and direct sales of servers are increasing. He also talked about an increase in "many local assemblers in remote geographies," but couldn't specify the trend's implications for the solution-provider market.

In its sector outlooks, IDC believes that PCs will still be subject to price wars and that the business will benefit from desktop replacements. There will be some "major swap-out ahead" as well as consolidation in the server market, Gantz reported. Services, he said, are under price pressure with project-based activity giving way to outsourcing.

There will be pockets of growth in software. One of the hot-spots will be "high-growth software [that] manages other software," he said. "[And] there will be some rebound in enterprise apps in 2004."

Addressing some of the hot topics confronting the market as it enters the new year, Gantz weighed in on specific issues such as:

Linux: IDV believes adoption will be up 45 percent overall in 2004.

Standards-based Products: The research firm thinks they will become the "center of a server future and not just a hot product category," Gantz said. "Sun was the last system vendor hold-out and will struggle to get employee [and] management buy-in."

Utility Computing: Actual investments will be "modest" in 2004, and "confusion will continue." Gantz believes market leaders will do what they can to sharpen the message, anticipating they will take utility computing, which he joking referred to as "futility computing," from a "marketing cloud to implementation road maps for business problems."

Offshore IT Services: will accelerate, Gantz said, from $8 billion in 2002, to $16 billion in 2004. While "all IT companies will deliver offshore services," many of them are still behind in staffing levels. The net impact will be negative on IT professionals but positive on IT services customers, he said.

VoIP Sets: will double in two years, he told the Raymond James attendees. "There will be more cross-border VoIP by 2007 that circuit-switched," he said.

Ultimately, there are two separate industries emerging,commodity and customer-facing, Gantz concluded. "The supply chain needs to play in both."