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January 14, 2002

IDC's Crystal Ball

IDC's predictions for 2002 provide insight into which strategic business applications companies should focus on to take advantage of the coming economic rebound

By Jeanette Perez

After a tumultuous year like 2001, things can only get better according to Massachusetts analyst firm IDC. IDC's predictions for 2002, a year in which the number of Internet users will surpass the 600 million mark, are mostly optimistic, yet cautious. IDC is putting its bet on an economic rebound, a new emphasis on the security of strategic business applications, the Web services hype, wireless, and the staying power of Linux.

According to IDC, the IT rebound will begin in mid-2002 and maybe even earlier. In a telebriefing presentation, IDC's chief research officer, John Gantz, said, "The good news is that the economic assumptions behind our IT forecasts are holding up. In fact they may even be conservative. If that's the case, the IT recovery could come sooner and be stronger than we currently predicted." Those current predictions state that U.S. gross domestic product growth could begin to rise in quarter 3 of 2002, however the uptake in IT spending "will be gradual and vary by sector."

But many companies are wondering what software and applications will have business value and let them take advantage of a rebounding economy. One sector that IDC believes will have a strong year and stay at the forefront of many IT business decisions is security. IDC predicts "corporations will reset their IT security plans in 2002" due to what Gantz calls the "Bin Laden Effect." According to Gantz and IDC, IT security will focus on business continuity and will be more tightly integrated into IT infrastructure, securing business applications from the ground up.

"Security is moving to the broader issue of business continuity. You're seeing security being put into the application at a foundation level," said Chris Christiansen, vice-president of Internet infrastructure and security software.

Like security, Web services will also be at the forefront of many IT minds as IDC believes the Web services hype will "reach peak hysteria levels" due to set standards and the roll out of Microsoft .Net. However substantial business value and applications will not come until after 2002. IDC believes, that in 2002, Web services will only be a form of middleware, as its long-term implications will not yet be realized.

"[Web services] is a long-term vision, maybe a few years away. Unfortunately, businesses are not spending money on long-term investments," said Rob Hailstone, director of IDC's enterprise system infrastructure and software research. "Vendors need to be more specific about the short-term deliverables." Hailstone believes that enterprises will experiment with Web services architecture and technology this year, but within the firewall, and that it won't be until after 2002 that these experiments make it outside the firewall.

Like Web services, IDC believes that wireless will also make waves in the IT industry in 2002, however for different reasons. It will be customer demand for wireless access that drives the sector and not just vendor hype. IDC believes that the demand for wireless access will be "recognized after the fact and drive a year-end spike in demand for consulting, services, and equipment." Those companies that act early and see the strategic business value in wireless applications will benefit by appeasing mobile employee and customer demands. Richard Villars, vice president of Internet and e-commerce strategies, believes that in 2002 companies need to realize that wireless must be part of IT infrastructure, just as in the '80s PCs became a part of IT infrastructure and in the '90s, the Internet did.

Finally, IDC believes Linux is here to stay and will have a "breakout" year in 2002. This prediction is founded on the fact that Linux is now gaining support from vendors such as IBM, Hewlett-Packard, Caldera International Inc., and Sun Microsystems and also on Linux' unification of the Unix market. IDC believes these factors give Linux real "long-term staying power."

The power of IDC's foresight remains to be seen, but even if it's only half right, 2002 already looks much more positive than 2001.