Growth Cycle

TECHNOPHILES CAN WAVE a fond goodbye to the tail end of the IT boom. The good days aren’t coming back for a long time. A comprehensive new study from Forrester Research Inc. reports that companies and governments in the U.S. will limit their technology spending over the next few years, enabling only a modest 6% growth in IT between 2003 and 2008. That’s far from the double-digit gains of the past decade.

The Forrester report covers a good deal of historical ground in explaining this rather gloomy forecast. Since the 1950s, the authors note, IT growth hasn’t been steady but has occurred in predictable eight- to ten-year cycles, usually paralleling the debut of a major new technology, such as mainframe computing in 1956-1966, personal computing in 1976-1984, and network computing in 1992-2000. The periods in between are when businesses concentrate on maximizing the ROI of existing applications. You guessed it — we’re now in one of those troughs, and according to the report, “we still have four more years to go before the next wave of technology takes hold.”

That said, some tech categories will fare better than others. Pressured by the rapid growth of open-source software and blade servers, Sarbanes-Oxley compliance needs, and aging infrastructure, U.S. spending on hardware is projected to grow at a compound annual rate of 9% between 2003 and 2008. The software market remains weak, set to grow just 6% until 2006, but spending should pick up in 2007, with systems management, storage, and security applications getting the bulk of the dollars. IT outsourcing will expand at a compound annual rate of 7% until 2008, buoyed by robust growth in business process outsourcing.

HIRING FREEZE None of those positive trends, however, are likely to get you extra help in your shop. The Forrester analysts don’t mince words: “Spending on IT staff in the form of salaries, benefits, and overhead … is likely to be one of the weakest parts of the overall IT budget during the next five years.” IT hiring will stagnate until the next growth cycle begins in 2008, which is when these Next Big Things will surface:

Organic IT. Expect applications that are self-managing, self-healing, and networked.

The X Internet. Early versions include RFID tags, smart cards, and biometrics.

Web services and service-oriented architectures provide access to component-based enterprise apps that can be adapted to business needs.

Composite applications allow you to throw programs together quickly with existing components.

According to Forrester, these four technologies will eventually lead to a new paradigm, “ubiquitous computing,” which, as the name implies, consists of computer chips showing up in virtually every device. But don’t throw your money around just yet, the Forrester report recommends: “Invest conservatively in IT until 2007, then let it rip.”