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IDC Predictions

by Frank Gens and the 2008 IDC Predictions Team
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IDC predicts that 2008 will be marked by some of the industry’s biggest market makers — in software, servers, networking, telecommunications, and semiconductors — greatly increasing investments in disruptive markets, business models, and offerings. The shift will be so great that these disruptions will cease to be considered disruptions — they will become the new status quo for competing in the IT marketplace for the next decade. Key developments defining the coming year include:

  • Worldwide IT spending growth will decline, with significant U.S. downside risk.
  • With slower IT spending growth, suppliers will increase investments in hypergrowth markets — notably “BRIC+9″ and SMB — and the disruptive business models and offerings required to profitably reach and satisfy those markets.
  • Key market leaders — including IBM and Microsoft — will (finally) leap aggressively into “everything as a service” in 2008.
  • Application appliances — “iPods for the small enterprise” — will go mainstream as the industry’s largest hardware and software suppliers innovate with simple, solutions-oriented packaging.
  • A flood of “Web gadgets” — one or two palms wide, Web-connected, consumer-priced, and really good at one or two things — will extend the mobile Internet.
  • All mobile network operators will — albeit reluctantly and slowly — join the open Internet and leverage communities to rapidly expand their networks’ value.
  • U.S. telecom operators will promote consumer VoIP to win back market share from the large cable operators.
  • Social networking’s “cacophony of the crowds” will drive “Eureka 2.0″ software.
  • Key IT and communications players will redefine who they — and their offerings and customers — are.
  • Green IT — not the latest hype — will take deeper root and move market shares.
  • Interesting acquisitions are ahead as key players shore up positions in SMB, emerging markets, online software/services, information management/analytics, and location-based services.

In This Study

Welcome to IDC’s annual predictions season. In the next 60 days, we will publish literally dozens of Top 10 Predictions documents, each focused on a specific dimension of the information technology (IT) industry — including IT infrastructure, software, services, telecommunications, channels, consumer markets, SMBs, industries, regions, and countries. These documents represent our researched hypotheses about the key dynamics in each market, along with predictions about what actions vendors and users will take in light of those dynamics. As we do every year, we start by publishing this Top 10 Predictions document: our broadest outlook for the overall IT marketplace. To create this document, we’ve polled the nearly 1,000 IDC worldwide analysts for their take on what the coming year holds in store for the IT industry and synthesized and validated those views as well as filtered them down to a core set of predictions that:

  • Illuminate key new growth opportunities
  • Require major structural change within companies and across the industry
  • Are relevant to many different segments of the IT market

Over the years, we have found that the key to formulating successful predictions is less about listening to what vendors say they plan to do and more about observing what the market is driving vendors (often reluctantly) to do. As you will see, 2008 is certainly a year in which what the market wants vendors to do will trump what many vendors would otherwise prefer to do.

Situation Overview

As you read through IDC’s predictions for 2008, the themes will sound very familiar. And they should. Over the past several years, IDC has identified a handful of key disruptions — around emerging markets, online delivery, communities, and solutions packaging — that we predicted would profoundly transform the IT market. And they are still the major forces reshaping the market today. In IDC Predictions 2006: It’s Gut-Check Time as Disruptive Models Gain Traction (IDC # 34492 , December 2005), we saw models like software as a service (SaaS) and open source creeping into the mainstream, and in IDC Predictions 2007: Prospering in an Era of Hyperdisruption (IDC # 204631 , December 2006), we saw these models and others (such as services as software) — accelerated by the growing importance of emerging customer segments, such as BRIC and SMBs — prod more and more of the major vendors into experimenting with these disruptive markets and models. The four key disruptions continuing to redefine opportunity and strategy in the IT market in 2008 are:

  • Strategic pursuit of emerging markets. To drive growth rates higher, industry leaders have been moving traditionally difficult to serve markets, including both emerging economies (e.g., BRIC) and SMBs, from the periphery of their radar screen to the center. The growth potential of these markets is the pot of gold that is driving vendors’ willingness to embrace the three disruptions below. But this is very challenging because it initially requires disproportionate investment in these markets.
  • Offerings designed to leverage the Internet. To profitably reach the emerging, hypergrowth markets, suppliers must move as many offerings as possible to the Internet to take advantage of simpler integration (through Internet standards), lower distribution costs, and easier/faster customer adoption. This is disruptive because online models challenge traditional pricing and financial models and challenge traditional channel relationships.
  • Community-driven value creation. The Internet not only allows suppliers to reach customers more efficiently but also allows suppliers to reach other suppliers (including many niche specialists) more efficiently. Given the broadening range of customer needs in the expanding IT marketplace, the winning strategy is shifting toward one that is the polar opposite of “go it alone” toward one that leverages large, productive communities of partners/suppliers to create compelling customer solutions. Suppliers that are not creating and/or participating in communities will very narrowly constrict their addressable market opportunity. This model is disruptive, though, as it means giving up some control to others — sharing development, sharing revenue, and sharing customer relationships — to expand the market.
  • “Solutionization”: high-volume development of targeted solutions. After decades of dis-integrating the IT marketplace into narrow product categories, the goal of reaching hypergrowth emerging markets (especially SMBs) is requiring re-integration. SMBs (and consumers) require simplicity and out-of-the-box utility — they are interested in solutions, not piece parts. Think of the iPod/iTunes solution model applied all across the IT industry. This means IT suppliers will need to bring what have been marketing partnerships up into the development process — working with ecosystem/community partners to prepackage solutions rather than waiting for customers or channel partners to put the pieces together. Virtualization and the increasingly modular, standard-based design of both hardware and software is making high-volume development of targeted solutions (a step toward mass customization) more economically and operationally feasible. And, importantly, solutionization is an important strategy for decommoditizing IT products. This is disruptive, though, as longtime partners will race — against each other — to become customers’ key solution integrator, and historically complementary relationships could become much more competitive.

But if these disruptions have been in-process for the past several years, what’s so new about 2008? Well, as we’ve seen before in periods of disruption, many market leaders — with a vested interest in the status quo — have reluctantly and cautiously just “dabbled” in these disruptive new markets, models, and offerings. But that is about to change. In 2008, the IT industry’s biggest market makers will jump in with both feet, demonstrating that they are substantially rebuilding their core businesses on these disruptive models and principles. There will be so much investment in these disruptive markets, business models, and offerings that they will — in fact — cease to be considered disruptions; they will legitimately start to become the new status quo for competing in this post-disruption IT marketplace of the next decade. IT players that still see these disruptions as disruptions rather than the new rules for competing will be in deep trouble as more market share is certain to shift in the next five years — as a result of these new approaches — than we saw in the past 10 years.

Future Outlook

Here, then, are 10 predictions that IDC believes will be very high on IT industry executives’ agendas, across many sectors, in 2008.

1. Worldwide IT Spending Growth Lower Due to Significant U.S. Market Downside Risk

We predict that in 2008, worldwide IT market growth will be lower, at a moderate 5.5–6% worldwide — down from 2007’s 6.9%. Driving the significant drop in worldwide growth is downside risk building from worsening U.S. economic forecasts, which could drive U.S. IT spending down from 2007’s 6.6% to 3–4%. According to IDC’s Global Research Operation (GRO) team, the earliest impact from economic downturns is felt, historically, in the hardware sector, with software impact lagging by one or two quarters and services impact more gradual. Factoring this against our third-quarter Black Book (i.e., predownturn scenario) expectation for flat 2008 growth (6.3%) in services spending, modest cooling in software spending (8.5%), and a full 1-point decline in hardware (5.7%), hardware suppliers — in particular — should be aggressively hedging their bets through accelerated activity in high-growth emerging markets (see prediction number 2 — emerging markets) as well as in added-value “solution” packaging (see prediction number 4 — application appliances).

2. IT Suppliers Will “Double Down” on Hypergrowth Emerging Markets: “BRIC+9″ and SMB

The 2008 forecast for cooling growth in worldwide IT spending will continue to drive the industry’s major players to double down on high-growth emerging markets, with increasing investments in two key areas:

  • In emerging economies, led by the BRIC countries — and the next nine important emerging markets — all growing at two to three times the market average. IT spending in the BRIC countries — Brazil, Russia, India, and China — will grow, in aggregate, by 16% in 2008, reaching $115 billion. The need to hedge slow-growth developed markets will drive IT suppliers to invest as well in other emerging economies, of which the next nine — based on 10%+ growth rates and the greatest net-new IT spending potential in the next four years — are Mexico, Poland and Turkey, followed by Vietnam, Thailand, Saudi Arabia, Argentina, Colombia, and United Arab Emirates. A look at IT spending in 2011, benchmarked against 2007 spending levels, shows that the BRIC+9 will generate nearly as much net-new IT spending as the EU but will grow at over two times the rate. In key markets, such as mobile phones, one or more BRIC countries is already moving up to the top 2 or 3 markets for key suppliers. Particularly for suppliers with a high percentage of business in low-growth developed countries — notably Japanese IT players such as Hitachi, Fujitsu, and NEC — achieving success in the hypergrowth markets will be critical to long-term success.
  • In the SMB segment, in developed and developing economies, growing at 8–10% worldwide. Japan is an excellent example of this opportunity: In 2008, the Japanese SMB market will grow 5–6%, while large company IT spending will be flat. As recently as two years ago, most major IT suppliers’ strategy for SMB was to make minor packaging and pricing modifications to their large enterprise offerings and try to push it (largely unsuccessfully) through the channel. That began to change greatly in 2007 with strategic, large-scale SMB initiatives announced by IBM, HP, Oracle, SAP, and many others — most with radical new offerings tailored for SMBs either announced or in the works (see later predictions). In 2008, expect SMB initiatives to be of growing focus for IT infrastructure vendors, application and infrastructure software vendors, IT services and business services providers, and telecom service providers. We also predict increasing investment in the SMB market by major consumer players like Google, eBay, Apple, cable system operators, and others, taking on the traditional IT players. SMB specialists in the IT market will be prime acquisition and partnering candidates (see prediction number 10 — key acquisition candidates for 2008).

3. Key Market Leaders Bring Selves (and Their Ecosystems) Aggressively into “Everything as a Service”

The IT industry’s market makers — in applications, business intelligence, servers, storage, imaging and printing, and so on — will dramatically increase the migration of core offerings to online delivery models over the Internet as a key method for profitably serving high-growth markets — particularly SMBs. Importantly, these market makers will bring their very large ecosystems of partners (that dwarf those of pure-play SaaS vendors) along with them. SAP finally made its big SaaS for SMB announcement this fall. But most of the other big players have been dabbling up until now. Among 2008’s key online delivery market makers, we predict, will be:

  • IBM. Last year, we predicted that Big Blue would finally make a big splash in the software-as-a-service market, introducing an online software and services hub we termed “IBM Live” and bringing its large ISV partner ecosystem online with it. We’re sticking with this prediction: Watch IBM and the online space very closely. It may be late, but it’ll have major impact — bringing some new twists to the model.
  • Microsoft. Last year, we noted that while Microsoft dipped into the SaaS pool with the announcement of Dynamics CRM Live in 2006, it quickly appeared to get cool (if not cold) feet, concerned about a potential channel partner backlash. In 2008, we predict Microsoft will reengage and go full bore into online software and services delivery, bringing the rest of its Dynamics applications online, and leveraging the Microsoft Office Live Workspace as a common portal for SMBs to access the company’s on-demand business applications.
  • Google. Two years ago, we asked the question, “Is Google the next ‘disruptive’ enterprise application platform/ecosystem?” While Google has dabbled in applications beyond search — primarily in the personal productivity realm — it needs to move beyond, into business applications and services, as the glue that will pull in a major new stream of SMB-focused advertising revenue. Last year, we predicted Google might acquire salesforce.com (the two announced a partnership); we still see the fit — if salesforce.com doesn’t get scooped by another SaaS upstart.
  • Cisco. When Cisco bought WebEx, it not only bought the number 1 market share player in Web conferencing, but it also bought the number 2 market share player in the SaaS market (right behind salesforce.com). We predict that Cisco will take this platform beyond just Web conferencing and other “collaboration” applications to become an online platform for a wide range of business applications and services. Look for Cisco to make some key acquisitions to move toward this vision of itself as a business value company, not just a network company. But this is a prediction that could well drag into 2009; Cisco sees this future for itself but is very cautious about making moves that might upset its key partners (e.g., IBM, SAP, and Microsoft).

Moving offerings online will not be just for application software vendors in 2008. Among the other IT segments moving online will be:

  • Web 2.0 Datacenter as a service. IBM (and Google) announced “cloud computing” offerings this fall: online access to Internet-scale computing and programming resources, particularly useful for supporting Web 2.0 applications. Look for other players, including HP and Sun, to expand their offerings for flexible, online access to computing resources. Telecom operators will be an important channel for this — especially to the SMB space. And with their well-publicized massive investments in “mega” datacenters, look for Google and Microsoft to make their mark in this space as well.
  • Storage as a service. With early adoption by consumers and small businesses, mainly for backup purposes, online storage, or storage as a service, will begin to get serious consideration for certain enterprise workloads such as medical images, banking records, and legal documents that need to be preserved (and, in some cases, made available for sharing) by being hosted at a remote location as either a primary or a secondary copy.
  • Business intelligence (BI) as a service. An impediment to BI as a service has been the need for companies to send their data to the service provider so that BI tools or applications could be applied against it. But with the rise in software-as-a-service applications, BI as a service is a nice complement to the offering. Look for on-demand analytics to be a growing offering within SaaS providers’ move from a single function to multiple related functions (e.g., salesforce.com’s AppExchange). But the natural path to BI as a service will be for information providers that have been a presence for years in many verticals, such as Acxiom, which recently introduced ConnectionPointX for real-time customer data-matching and delivery of customer demographics/segmentation data that can drive personalized offers by eretailers. The natural evolution of these information providers — also including LexisNexis, Experian, ACNielsen, Thomson Financial, and others — is to provide online (rather than batch-oriented) services.

The shift of more industry players to “everything as a service” will also have major channel/partner ecosystem implications in 2008:

  • Partner tools for online “solutionizing.” To be successful in the online delivery world, market makers will have to not only recruit the most productive partner communities but also arm deployment partners with tools that help them “solutionize” (i.e., quickly and affordably create tailored solutions) for hypergrowth markets from the exploding variety of online software and service components. A good example of this is Oracle Accelerate, essentially a packaged configuration tool to simplify customer deployment and delivery cycles. We’ll see lots of announcements in 2008 of tools to support this type of “systems integration for the masses.”
  • Explosion in online solutions-oriented services companies. With the growth in SaaS and other online offerings, a new generation of services companies — experts at taking the growing “toolkit” of online software and services, and weaving them together to create affordable and highly customized solutions — will proliferate in 2008. Current examples include Astadia and Bluewolf. Look for the larger services players to greatly expand their practices in integrating and solutionizing online software and services.

4. Application Appliances — “iPods for the Small Enterprise” — Will Go Mainstream

To speed and expand IT adoption — especially in the SMB segment — suppliers will move much more aggressively in 2008 toward providing more complete, integrated offerings rather than piece parts. This solutionization is a key strategy for commodity IT product suppliers to add value and decommoditize their business.

We predict that in 2008, one or two leading server vendors will partner with business application vendors (including some of the leading pure-play SaaS vendors!) to create prepackaged, Web-connected business application appliances that simplify customer adoption and use the Internet to provide remote support and simplify access and download of new applications and services. The appeal of these appliances comes from information security and performance benefits of on-premise deployment, coupled with access to remote management services and minimal requirements for on-premise IT staff. (These business application appliances are, by the way, an example of a broader variety of integrated, solution-oriented software stacks — enabled by virtualization technologies — that IDC has termed “software appliances.”)

These “AppPods” (as we first referred to them last year) will be a strong demonstration of the solutionization trend and will also highlight that the future is not just about “everything as a service,” but will consist of a portfolio of different ways for suppliers and customers to leverage the Internet. As noted above, we expect the leading pure-play SaaS companies to participate in these business appliances partnerships to add on-premise deployment options for their customers.

The intriguing question is: Will these AppPods have as much impact on the growth and market shares of the server business as the iPod did in the MP3 player market?

One critical element of the (online) business appliance approach will be to enlist (and/or possibly acquire) the top regional and local ISVs and integrators — in BRIC, companies that are top 5 players in business apps such as TOTVS and Datasul in Brazil; 1C and Kaspersky Lab in Russia; ICICI Infotech, Tally, and Ramco in India; and Kingdee, UFIDA, Genersoft, and New & Grand in China. Importantly, all of these have particular strengths in the SMB market space.

5. A Flood of “Web Gadgets” Will Extend the (Mobile) Internet

Apple’s iPod touch and Amazon’s Kindle are just the beginning: In 2008, the reach of the Internet will be extended greatly with the proliferation of many different “Web gadgets” — devices filling the gap between notebook PCs and smartphones. We will see dozens of these devices announced — one or two palms wide, consumer-priced, simple to use, good battery life, and really good at one (or a small number of) thing(s). Vendors likely to introduce new Web gadgets include Asus, Qisda (formerly BenQ), Compal, and Electrobit — and, oh yes, Microsoft, Apple, and the major mobile handset players.

Intel will also make a big push into the Web gadget space (through OEMs), with new ultra-low-power Intel Architecture platforms, in an effort to ride the mobile Internet growth wave and further expand its portfolio beyond the traditional PC and server markets.

6. All Mobile Phone Network Operators Will Join the Open Internet and Leverage Communities to Expand Value

Mobile telecom network operators, such as AT&T, Sprint, T-Mobile, Verizon, Vodafone, and others, have enjoyed huge growth in “mobile data” — customers using these networks for Internet access as well as email and text and multimedia messaging. But most continue to tightly control access to their networks, like “walled gardens” — dictating as much as possible which handsets, with which features, running which applications suppliers may provide and customers may use.

Apple put a dent in this mobile operator control with the introduction of the iPhone and customer self-activation via the iTunes store. But — additionally — the flood of new Web gadgets, along with Google’s Android and Open Handset Alliance initiative, will put even more pressure on, and offer more opportunity to, mobile telecom operators willing to yield control to greatly expand the market.

We predict that in 2008, virtually all the major mobile operator networks will — albeit slowly and begrudgingly — follow Verizon Wireless and its November 27 announcement that it is opening up its network to any devices and any applications. Why did Verizon do this — and why will Verizon’s competitors also do it? As Verizon Wireless’ CEO put it: “Customers’ needs are increasing and diverging. Soon Verizon Wireless will not be able to meet every customer’s needs with our specific portfolio of devices and applications.”

Does this sound familiar? Mobile operators are discovering the “Internet rules” that SAP, Oracle, Microsoft, IBM, salesforce.com, and others in the IT marketplace have already learned — that walled gardens imprison the gardener. In an exploding online marketplace, the only way to survive — and grow — is to open up and invite in others that will help you create much more value for customers, much faster. Going it alone, or overcontrolling your market, is the fastest way to limit your growth opportunities. (See also the early days of the “AOL vs. the Internet” battle.)

Of course, mobile operators will have to do a lot more than simply open up: They will have to rethink many of their core assumptions about who their customers are, what their pricing should be, and what their real value-add should and can be, in a more open — but more networked than ever — world. This magnitude of this challenge may cause some operators to stall in this transition (or even reverse course), but, in our view, they will do so at their peril.

7. Social Networking’s “Cacophony of the Crowds” Will Drive “Eureka 2.0″ Software and Sites

In 2008, the buildout of the social networking and collaboration infrastructure will accelerate in both consumer and enterprise spaces — as Facebook, Orkut, Twitter, and others have been joined by IBM, Microsoft, Cisco, EMC, Open Text, BEA, and other enterprise players in promoting Web 2.0 information creation and sharing environments.

In 2008, these environments will drive an avalanche of digital information to almost 400 billion gigabytes (or exabytes) up from 255 exabytes in 2007 — on its way to almost 1,000 exabytes (or 1 zettabyte) in 2010. Rather than helping companies and individuals discover the “wisdom of crowds,” the explosion of unstructured information from these systems will more often create a “cacophony of crowds.”

Consequently, we predict a growth in 2008 of what we call “Eureka 2.0″ software and services: leveraging text analytics, sentiment extraction, and related technologies (including semantic search) that are able to distill real insights — such as brand/reputation monitoring, customer satisfaction, and new product ideas — from this extremely valuable but overwhelming volume of information. There are dozens of companies to watch in this space, including Lexalytics, Clear Forest, Connexor, Cymfony, Biz360, Attensity, Attenex, and Recommind.

We predict that one or more of these Eureka 2.0 companies will demo their capabilities by hosting a U.S. presidential election portal that analyzes Internet news, blogs, wikis, and other sites to track public sentiment about the candidates — and predict the winner.

One other area that will grow in importance in 2008, amplified by the information avalanche (especially video), will be content distribution networks. We predict this segment will grow by at least 30% in 2008, drawing in a parade of new players — including telcos, such as AT&T — to challenge leaders Akamai and Limelight Networks.

8. Key IT and Communications Players Will Morph Who They — and Their Offerings and Customers — Are

One very profound consequence from the hyperdisruption of moving more offerings online, leveraging communities to radically expand the number of offerings and speed up the pace of their creation, and mashing up and integrating these offerings into customer-friendly solutions is to make it easier — and critically important — for suppliers to move beyond their old, narrow identities and offerings. In 2008, two key areas where we will see an acceleration in the morphing and collision of industry segments and suppliers are:

  • More IT and communications suppliers moving into business/consumer services, and vice versa. There is an old saying, “Most people don’t want drills: they want holes.” For more and more business and consumer services, IT is the drill. That is, more customers are interested in the outcome supported by the technology than in the technology itself. That is why we’ll see more IT suppliers — particularly in “everything-as-a-service” environments — add a wide range of business and consumer services on top of their technology offerings. This has already begun: Apple Computer famously became Apple Inc. in January. Salesforce.com changed its identity in 2007 from an on-demand software company to a provider of “on-demand business services.” Look for more blurring: All of the business application players — including Oracle, Microsoft, SAP, and IBM — will add business services to their SaaS platforms. This is a variation of the solutionizing megatrend moving up into higher-value solutions.
  • A collision of enterprise and consumer players, with SMB as ground zero. We predict that in 2008, consumer-focused players — such as Google, eBay, Yahoo!, Apple, and cable MSOs — will accelerate their investments and offerings up into the SMB space. At the same time, enterprise IT suppliers — to profitably reach SMBs — are trying to learn consumer-inspired scale-out models (e.g., Microsoft in advertising-based funding models). From the enterprise side, expect to see IBM rethink its long-held position that it’s not going to play directly in the consumer space; as more enterprise software, in particular, is impacted by the consumer market (e.g., social networking), IBM will need to directly participate since being just a fast follower of Google, Microsoft, and others will weaken IBM’s ability to achieve the leadership it wants.

9. Two-Minute Drill: More Second Thoughts in Telecom, Location-Based Services, Green IT

  • U.S. telecom operators will promote consumer VoIP. To counter the very successful cable incursion into the residential telephony market, telecom operators will launch aggressive promotions of consumer VoIP services. Telephone companies are losing 1 million residential lines per quarter, while cable MSOs are gaining 1 million residential telephone subscribers per quarter. Nothing has worked to staunch this. Telcos have viable VoIP products — AT&T CallVantage, and Verizon VoiceWing. Positioning discounted, feature-rich, and user-friendly telephony offers, carriers may win back some customers.
  • For location-based services it will be a breakout year. As Web gadgets join phones in an explosion of mobile Internet devices, this will make 2008 a year for high-profile GPS-based (and other location-based) services to break out in applications including social networking (friend finder apps, geo-tagging of events, location-aware twittering), navigation, local search, targeted advertising, field force management, fleet management, real estate sales, and more. As GPS penetration increases from 11% of mobile phones to 15–18% in 2008 (growing at 25% per year for the next several years), it will be a good year to be a key player in the location-based applications (LBS) ecosystem because these companies will be in big demand. With the impending acquisition of NAVTEQ (by Nokia), and NAVTEQ competitor Tele Atlas (by TomTom), mobile application platform players like TeleNav and Networks In Motion will be the next area of focus for industry consolidation.
  • Green IT will take deeper root and move market shares. OK, this is a layup. Two months ago, we conducted our Green IT Survey and found that over 50% consider suppliers’ greenness when buying IT, almost 80% think the importance of greenness as an IT buying consideration is growing, and over one-third have policies that favor green vendors. While many vendors are choosing to stress their bona fides by reducing their own environmental footprint, in 2008 it will be the introduction of green products (energy-efficient, space-efficient, materials-efficient, regulatory-compliant) that will create meaningful differentiation and move market share. Once again, the European Union (EU) will provide the “sticks” that add pressure on IT suppliers (and their customers) to “go green”: We predict at least one major EU country will pass laws to make carbon trading compulsory — although it will not begin in 2008. Consequently, we predict an explosion of green IT marketing initiatives and — more importantly — offerings, from all corners of the IT industry. The hardware vendors are all running down this road, but we see opportunity as well for a new set of IT companies that, based on policy-based management, can truly affect the way power and cooling in datacenters are managed (e.g., Cassatt).

10. Key IT Market Acquisition Candidates for 2008

Based on the predictions above, we’ve identified a number of companies that could be particularly desirable candidates for acquisition in key areas of market growth in 2008. This exercise is always a challenge because these companies are certainly not the only ones worthy of consideration for acquisition, nor are we suggesting that they either want to be acquired or can’t survive as independent companies. Think of these companies simply as exemplars of the capabilities that some of the key players need in the post-disruption marketplace, and this set of predicted acquisitions as an opportunity for thoughtful discussion — and, no doubt, debate:

  • Intuit. Intuit is an extremely interesting company in that it is already where many leaders in the IT industry (and upstart dot-com players like Google) want to be: successfully delivering online business software and services to SMBs. Microsoft, of course, made a failed run at Intuit over 10 years ago; we would not be surprised to see another major market player make a run at Intuit in 2008.
  • The top business software vendors in the BRIC countries. Given how important the emerging economies are in 2008, and in the next decade, we expect companies like TOTVS and Datasul in Brazil; 1C and Kaspersky Lab in Russia; ICICI Infotech, Tally, and Ramco in India; and Kingdee, UFIDA, Genersoft, and New & Grand in China to be very high on the acquisition lists of the major global software vendors. They are already at the top of their partnership lists.
  • Online solutions players. Given the growing importance of SaaS and other online solutions, here are a couple of examples of the types of companies that will be in demand:
    • Salesforce.com. Last year, we made a “half-court shot” prediction that salesforce.com would be acquired by a player that needed strengthening in its SaaS capabilities as well as a strong online partner ecosystem (salesforce’s AppExchange). We predicted that a dot.com upstart, such as Google, would be a more likely buyer than one of the traditional application/app platform players like IBM, Oracle, SAP, or Microsoft. We’re sticking with this one, even though — in the interest of full disclosure — IDC’s SaaS analysts feel 2009 is a more likely time frame. (They feel that NetSuite could well be scooped up in 2008.)
    • Next-generation systems integrators. These companies specialize in the deployment of SaaS-based solutions. As mentioned in prediction number 3, they are experts at taking the growing “toolkit” of online software and services, and weaving them together to create affordable and highly customized solutions. It’s a very safe bet that Astadia, Bluewolf, and other such players will get lots of offers in 2008 and may even accept one.
  • Last year, we highlighted the “information access/analysis/management” space as the next big “platform play” in the IT market — with companies such as Oracle, Microsoft, IBM, SAP, HP, EMC, and others attempting to consolidate and integrate important capabilities in this very fragmented space. In 2008, we see the following categories of companies as especially “in demand” by these companies as they build out their capabilities:
    • Informatica — one of the larger independent data integration companies — we see as a potentially good next piece of HP’s expanding footprint in the information management space.
    • Independent “Eureka 2.0″ companies like Lexalytics, Biz360, Connexor, Attensity, Attenex, and Recommind will be targets for the major “information platform” players.
    • Predictive analytics software companies — such as Unica, SPSS, Zoot, and others — that provide tools for analyzing data that enables companies to make predictions about their customers’ and prospects’ behavior will also be attractive targets for information platform leaders building out capability in 2008.
  • As mentioned in prediction number 9, location-based applications ecosystem players will be sought after in 2008, notably mobile application platform players TeleNav and Networks In Motion.

Essential Guidance

So one thing about 2008 is clear — there will be so much investment in these disruptive markets, business models, and offerings, that they will — in fact — cease to be considered disruptions; they will become “the new status quo” for competing in this post-disruption IT marketplace of the next decade. IT players that still see these disruptions as disruptions rather than the new rules for competing will be in deep trouble as more market share is certain to shift in the next five years — as a result of these new approaches — than we saw in the past 10 years.

Learn More

To see the rest of our predictions, as well as the dozens of Top 10 Predictions documents we will publish in December and January, each focused on a different segment of the IT industry — visit idc.com.

Related Research

  • Worldwide Black Book Query Tool, Version 3, 2007 (IDC # 209378 , November 2007)
  • History Has Sobering Lessons (IDC # lcUS20898807 , October 2007)
  • IDC Predictions 2007: Prospering in an Era of Hyperdisruption (IDC # 204631 , December 2006)
  • IDC eXchange blog

2008 Predictions Team

Cushing Anderson, Michelle Bailey, Shiv Bakhshi, Dan Bieler, Pim Bilderbeek, Ray Boggs, Angele Boyd, Wilvin Chee, Crawford DelPrete, Lee Doyle, Stephen Drake, Matt Eastwood, Scott Ellison, Robert Farish, Michael Fauscette, Susan Feldman, Lidice Fernandez, John Gantz, Frank Gens, Al Gillen, Stephen Graham, Rachel Happe, Chris Hazelton, Martin Hingley, George Hoffman, Earl Joseph, Danielle Levitas, Mark Levitt, Stephen Minton, Henry Morris, Graeme Muller, Bob O’Donnell, Eric Prothero, David Reinsel, Junichi Saeki, Merle Sandler, Avneesh Saxena, Rebecca Segal, David Tapper, Erin TenWolde, Vernon Turner, Dan Vesset, Ricardo Villate, Hideo Wada, Janet Waxman, Karsten Weide, Bob Welch, Mark Winther, Yukiharu Yorifuji

Synopsis

This IDC study IDC predicts that 2008 will be marked by some of the industry’s biggest market makers — in software, servers, networking, telecommunications, and semiconductors — greatly increasing investments in disruptive markets, business models, and offerings. “The shift will be so great,” according to IDC SVP of Research Frank Gens, “that these disruptions will cease to be considered ‘disruptions’ — they will become the new status quo for competing in the IT marketplace for the next decade.”

Table of Contents
Predictions
In This Study
Situation Overview
Future Outlook

1. Worldwide IT Spending Growth Lower Due to Significant U.S. Market Downside Risk
2. IT Suppliers Will “Double Down” on Hypergrowth Emerging Markets: “BRIC+9″ and SMB
3. Key Market Leaders Bring Selves (and Their Ecosystems) Aggressively into “Everything as a Service”
4. Application Appliances — “iPods for the Small Enterprise” — Will Go Mainstream
5. A Flood of “Web Gadgets” Will Extend the (Mobile) Internet
6. All Mobile Phone Network Operators Will Join the Open Internet and Leverage Communities to Expand Value
7. Social Networking’s “Cacophony of the Crowds” Will Drive “Eureka 2.0″ Software and Sites
8. Key IT and Communications Players Will Morph Who They — and Their Offerings & Customers — Are
9. Two-Minute Drill: More Second Thoughts in Telecom, Location-Based Services, Green IT
10. Key IT Market Acquisition Candidates for 2008

Essential Guidance
Learn More
Related Research
2007 Predictions Team
Synopsis

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