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IDC: Economy Will Force IT to Transform

Hammered by the global recession, players in the IT industry will have to undergo radical changes to simply survive, according to research firm IDC.

But that's not bad news for everyone.

Enterprises and small to midsized businesses (SMBs) may be poised reap the benefits of a transforming IT industry -- in the form of new developments in cloud computing, Web 2.0 and virtualization, Frank Gens, IDC's chief analyst, said during a teleconference presenting the firm's predictions for next year.

For vendors, hunkering down in these tough economic times instead of transforming themselves to leverage these kinds of technologies could mean they'll pay a heavy price, Gens said.

"Major economies will be close to flat, and the downside scenario would take them below zero percent growth -- and it looks as if IT growth could go down to around two percent," he said. "IT industry growth was seven percent in 2007 and fell to five percent in 2008, and it will take three years for the industry to return to the 2008 growth rates."

But while the outlook for IT spending is grim overall, customers are still expected to spend big on radically market-altering trends such as cloud computing, virtualization, Web 2.0 and green IT.

"The disruptive vectors of the market will be among the highest growth sectors in 2009 as their advantages are magnified in a down economy, and suppliers who slow down their transformation will limit long-term viability and miss near-term growth."

One area in particular -- cloud computing -- will be a growth sector for the next 20 years, he said.

"In 2009, the pace of adoption of the cloud will accelerate," Gens said, with Software as a Service (SaaS) and cloud storage players among the first major beneficiaries.

He also said IDC sees lots of cross-sector cloud partnerships to come, especially among major infrastructure providers such as EMC (NYSE: EMC), HP, Dell (NASDAQ: DELL), Sun Microsystems (NASDAQ: JAVA), Oracle, Microsoft (NASDAQ: MSFT) and Salesforce.com -- as well as telecommunications service providers.

"Telecom services will be a very attractive partner as the others look to penetrate SMBs," Gens said. AT&T (NYSE: T), British Telecom and Verizon (NYSE: VZ) will all be major players, he added.

Players that deliver cloud-like services such as denser servers likewise will be strong, and IBM, HP, Microsoft, CA (NYSE: CA) and Symantec (NASDAQ: SYMC) will be among leading system providers that will offer bridges between cloud services and on-premises systems.

Getting ahead of the game

That concept had been anticipated by VMware (NASDAQ: VMW), which unveiled its vCloud initiative in September at VMworld 2008, its annual user conference. The goal behind vCloud is to enable customers to integrate multiple datacenters or federate internal and external clouds.

[cob:Special_Report]Oracle (NASDAQ: ORCL) and Hewlett-Packard (NYSE: HPQ) will finally make clear statements of strategic intent about the cloud, and HP will leverage EDS, which it bought for $13.9 billion in May, for its cloud delivery strategy, Gens predicted.

IBM, which has launched several initiatives in the cloud space, will ramp up its offerings, while Google (NASDAQ: GOOG) will buy Salesforce.com (NYSE: CRM) or another SaaS player such as SugarCRM. Meanwhile, Cisco (NASDAQ: CSCO) will consider similar options to get into the SMB space.

The bad economy will lead businesses to ramp up support for telecommuting, and they will begin paying for employees' computers and mobile devices to get them to work from home in order to shave costs, Gens said. This will make desktop virtualization a critical technology.

Anticipating this, several vendors have already begun ramping up their desktop virtualization offerings.

The convergence between business and personal computing being brought about by Web 2.0 technologies will become stronger, and vendors who cater to this will grow. More enterprises will seek to leverage such technologies, integrating with companies such as Salesforce.com and Facebook, Gens said.

Meanwhile, more enterprise IT vendors, both in hardware and software, will target the consumer market. For instance, business-centric devices like the BlackBerry will offer greater ties to consumer environments, Gens said.

On the other hand, consumer Internet brands such as Google, Amazon.com, (NASDAQ: AMZN), Yahoo (NASDAQ: YHOO) and Facebook will further their efforts in the business communications market, especially the SMB market, Gens said. And consumer devices like the Apple iPhone will offer better integration with business environments, he added.

Green is good

Enterprises and vendors can expect to see sustainable technology thriving in 2009, with green IT initiatives such as virtualization, space-efficient storage and cloud services being promoted under the umbrella of cost savings, Gens said. Enterprises will be able to snap up offerings that promise a near-term payback, but bigger-ticket green IT projects will temporarily be put on hold.

"Based on the green aims of the Obama administration, the focus in 2009 will be on energy efficiency and conservation," Gens added.