Q: The tech sector is emerging from a very tough period. What's your forecast for the future?
A: Worldwide, we expect the overall tech market to grow 6.3% in 2004, to $962 billion, up from $916 billion in 2003. We think it will grow about 6% a year through 2008, which is as far as our forecasts go.
Q: Is the growth evenly distributed?
A: We expect the hardware sector to grow 6.5%, to $365 billion. We expect the packaged-software industry to grow 7%, to $197 billion. And we expect the services sector to grow 5%, to $400 billion.
Q: How does your forecast compare to the trend over the last few years?
A: Historically, we saw the market grow 12% to 15% a year in the '90s. It declined 1% in 2001, 4% in 2002, and it was flat last year.
Q: What's driving the turnaround?
A: A number of things, a combination of macroeconomic trends and tech trends. From the macroeconomic standpoint, as business recovers, it tends to increase its spending, much of which goes to technology.
And from the technology standpoint, management is trying to get its hands around the last 10 years of tech spending. We have ended up with an urban sprawl in data centers, with different platforms of Unix, Linux, and Wintel. There are different database products and different types of management software.
Now management can't just hire lots of people to control these systems, so it has to consolidate servers and storage systems into larger pools, and manage them with fewer people. Even midsize shops are buying technology that helps them reduce the number of servers from 100 down to 10.
Q: What are the other drivers of tech spending?
A: Mobility is huge. We're seeing all kinds of mobile devices connect to the network. It's not just cell phones. The big thing that we're seeing now is devices that combine personal information management with a cell phone. That's really huge. And we're starting to see software companies porting their products to devices like the BlackBerry (RIMM
), the Hewlett-Packard (HPQ
) iPaq, the Nokia (NOK
) Communicator, and the Treo 600.
And we're starting to see the proliferation of radio-frequency identification technology. These tiny wireless sensors can track inventory for companies. Best Buy (BBY
) and Wal-Mart (WMT
) are very interested in it. Instead of stocking all their stores with the same number of TVs and camcorders, they can determine if a particular product is doing well in Cleveland or Detroit, and react in real time.
Q: What sorts of technology are companies willing to invest in?
A: They're interested in the idea of the real-time enterprise, which is tied to utility computing. It allows you to automatically adjust your server storage networking capacity on an as-needed basis, depending on the demands of your customers.
Other important trends include Wi-Fi combined with PDAs. This is where the promise of the enterprise will be. Now you're making calls on the corporate data network using VoIP (voice over Internet protocol). And you're saving a bundle. VoIP saw a lot of hype in the '90s, but I think this will be a technology to watch over the next few years.
Q: What's the tone of this recovery?
A: I think companies are taking the rubble and bricks of the last few years and putting them back together. There really was so much innovation in the last cycle that with time, these things can work.
Q: Was the boom and bust a bad thing?
A: I think the boom and bust was incredibly natural. We really felt it because IT had become such a part of the fabric of the world. The '85-'86 crash was awful, lots of PC companies went out of business. But the country rolled right along, lots of people never felt it. I'm not saying that the dislocation of so many people is ever a good thing. But it was natural.