It’s prediction time again. Looking back on last year’s prediction column, the hits narrowly beat out the misses but they did beat the misses so we’re going to expand on last year’s efforts with five more predictions for 2010 (besides, as writers, we like the way the numbers line up in the headline!).
A Look Back
I was right about the recession sparking a major acquisition or two. Oracle-Sun and HP-3Com fit the bill nicely. I also predicted there would be major acquisition action in the mobile space. Sprint’s $483 million acquisition of Virgin Mobile and, better yet, Ericsson’s $1.13 billion acquisition of Nortel’s CDMA and LTE business in North America authenticated that prediction. Now rumors are circulating–again–that T-Mobile and Sprint may merge. We’ll see. Too late for this article, whatever the case.
Despite all of the M&A excitement in the mobile space, as well as a slew of cool new smart phones, I was correct in guessing that the handset sector would under perform in 2009. Gartner reported that handset shipments slipped by 6% in the second quarter.
The replacement cycle for handsets has extended from 12 months to 18 months. Even as the economy recovers, I wouldn’t be surprised if replacement cycles continued to extend. As more smartphones enter the market, more of those phones have more personalized data tied to them. As you have to move much more than just your address book, it’ll be a much bigger nuisance to switch phones and migrate data in the future. (And don’t say that migration software will solve this problem. Most of it is expensive and so-so performance wise.)
When 2009’s data is all in, Gartner is predicting overall flat growth for the year, with the slight up tick achieved mostly through so-called “grey market” sales. It’s being called a grey, rather than black, market because it includes the legitimate reselling of unlocked phones, but also the sales of counterfeit phones.
At first glance, my virtualization prediction appears to be a miss. IDC’s Worldwide Quarterly Server Virtualization Tracker found that “worldwide virtualization software revenue declined 18.7% year over year in 2Q09.” However, Gartner noted that mid-sized companies (those with 100 to 999 employees) nearly doubled their rate of adoption in 2009. The trouble, from the point of view of vendors, is that many of those organizations are using the free virtualization tools built into new operating systems. In other words, adoption continues at a feverish pace, but vendors will have to work harder to squeeze money out of virtualization. (Since it’s my column, I’ll say I was more right than wrong on this one.)
My big misses came with “social networking slows down in the enterprise” (it’s doing anything but), and “technology sparks the recovery.” Let’s just say I’m not sold on this recovery, nor on technology’s role in it, which leads us to this year’s predictions. In the spirit of the “do-more-with-less” mandates that inevitably come during tough times, I’m expanding from five to 10 my predictions for this year. So, without further ado …
1. It’ll get worse before it gets better. There’s been a lot of talk about the economic recovery, but there are still systemic problems. A new housing bubble appears to be underway, while the U.S. manufacturing sector has practically disappeared.
Each day seems to bring some new report about how the recovery is weaker than most realize. An NPR report about online job postings found that a reasonable number of job listing doesn’t translate into the same number of opportunities. Many of these jobs require specific skills, such as medical training, that the jobless don’t have. Others are in distant, middle-of-nowhere places that would require relocation but don’t offer moving compensation or even the wages to make relocation feasible.
Meanwhile, even if employment does start expanding modestly, it probably won’t be enough to offset a population growth of about 100,000 per month.
The UCLA Anderson Forecast group forecasts another rocky year for 2010. The group believes that the unemployment rate will peak at about 10.5% in Q1 and remain at or above 10% for almost all of next year.
2. IT spending ticks upwards―a bit. IDC believes that worldwide IT spending will rebound in 2010. The analyst firm sees 3.2% growth for the year, returning the industry to 2008 spending levels of about $1.5 trillion.
Gartner also sees an IT spending increase. (I should note here that IDC and Gartner measure this market differently. Although the percentage increase is practically the same, the raw dollars are larger for Gartner, forecasting a worldwide growth of 3.3%, translating into spending of $3.3 trillion.)
“2010 is about balancing the focus on cost, risk, and growth. For more than 50% of CIOs the IT budget will be zero percent or less in growth terms,” said Peter Sondergaard, senior VP at Gartner and global head of Research. “It will only slowly improve in 2011.”
Foote Partners is equally cautious, believing that IT job growth will stay flat for most of the year, perhaps picking up in Q4. In other words, …
3. Good news about IT spending may not translate to good news about IT jobs. One of the silver linings of recessions is they often speed innovation. IT has been undergoing an automation trend for several years, but automation often comes at the expense of labor. Two factors may accelerate the pace of automation in the coming years: First, automation saves organizations money, and anything that benefits the bottom line looks good in hard times.
Second, compliance is becoming a bigger and bigger issue for IT departments. HIPPA is beyond its grace period, with fines kicking in for noncompliance, while fines are set to increase with PCI DSS. The largest cost of compliance for most organizations is the audit itself, both internal and external. Without adopting things like document and data controls, and automating many of the process around document and data creation, storage and collaboration, compliance will be costly.
Automation will be one of the things that companies can no longer afford to ignore.
From an employment perspective, though, automation translates into fewer jobs. All of those hours spent auditing spreadsheets add up. Sure, there will be some jobs created around compliance. There are new C-level compliance officers at many large organizations, but those gains won’t offset the larger IT losses.