Shake-up predicted to accompany IT recovery

Tech spending is now on a firm upward path, but continuing consolidation means that more than half of IT vendors will disappear during the next two years, predicts Gartner

Analyst firm Gartner has declared the slump in IT spending over, and is predicting a return to moderate growth during the next two years.

But the shake-up will continue for IT vendors, with consolidation eliminating more than half the companies from the competitive scene by 2005, Gartner said at its Tech Investor Summit in New York, which concludes on Wednesday. A side-effect of consolidation will be that the rock-bottom prices that buyers have enjoyed of late are likely to disappear, analysts said.

Industry observers have recently been expressing cautious optimism about the prospects for the recovery of the IT sector, although they say much depends upon wider economic recovery in the US and elsewhere. Gartner last week raised its estimates for 2003 PC shipments, saying it now expects worldwide PC shipments to reach 164.3 million units for the year, which is a 10.9 percent increase from the previous year's numbers. Earlier this year, Gartner said shipments would increase to 161.3 million units, an 8.3 increase from 2002. IDC, which last revised its 2003 unit shipment forecast to 148.2 million units in September, is also expected to raise its forecast later this year.

Outside the PC industry, prospects for sales increases are improving, and spending has bottomed out, Gartner said. "We are now seeing a true recovery in the making," said Al Lill, Gartner group vice president, in a statement. "There is a key combination of technology advances, architectural changes, market forces and best practices in place to lead a good recovery for IT in the near future and culminating in very strong growth in the longer term." The next two years will see a minimum of strong single-digit growth over this year's levels.

The current trend of consolidation will continue, leaving the IT industry in the hands of a few powerful players in the next two years, Gartner said. These players will regain their pricing power, after a period in which companies have been forced to slash prices to drive sales. In the PC industry, low prices have fuelled a boom in mobile products such as laptops and wireless equipment.

For tech workers, the recovery will mean a tremendous skills shift possibly affecting millions of people, Gartner predicted. The most valuable skills will include broadband, wireless, Linux, content management, data mining, security and business intelligence.