Slow Growth For IT Spending In 2003

IT spending will show meager growth, outsourcing will be a bright spot but potentially troublesome, and Linux won't move out of the back of the shop. That's the take on 2003 from the Aberdeen Group, which this week identified its top tech trends for the coming year. And if the market-research firm is on target, outsourcers will have the most to look forward to.

"More and more IT organizations are telling us that their executives have concluded that technology operations are not their core competency," says Peter Kastner, Aberdeen's chief research officer and one of the firm's 2003 crystal-ball gazers. The need for capacity to handle larger-than-usual loads, he says, is playing right into the hands of "computing-on-demand" outsourcers such as EDS, Hewlett-Packard, and IBM.

IBM, for instance, has in recent weeks revealed major outsourcing deals with Deutsche Bank ($2.5 billion) and J.P. Morgan Chase & Co. ($5 billion). Kastner sees more deals like those on the horizon.

But what's good for outsourcers may be less so for IT workers, who may be forced to leave the companies they know for outsourcing firms where conditions are different. And Kastner is particularly troubled by the trend toward outsourcing overseas. "That's a horse of a completely different color," he says, "and a potential economic threat to the livelihood of a lot of Americans."

As for global IT spending, Aberdeen predicts modest gains: up 4% in 2003, from less than 1% in 2002. "That's inflation, plus or minus," Kastner notes, adding that it will be "back-end loaded" toward the close of the year.

But Kastner stresses that the situation could turn on a dime--or a phone call from the executive suite. CEOs control considerable amounts of discretionary spending, and in the right scenarios they could free that money almost instantly. He cites as examples some clarification of the situations in Iraq and the Korean peninsula, and notes that congressional priorities and the president's State of the Union message later this month could also play a role.

"Ultimately, psychology and not technology will determine the growth rate for IT spending this year," Kastner says.

Other trends look firmer to Aberdeen, such as the growth of Linux. Growth in the Linux server sector will be 40% during 2003--not as dramatic as the 50%-plus boost in 2002, but still substantial.

But don't expect 2003 to be the year of Linux on the enterprise desktop. While large system vendors such as Dell Computer, HP, IBM, and Sun Microsystems will continue to push desktop Linux (realizing, Aberdeen says, that they can sell more servers if there are corresponding desktops running Linux), the best supporters can hope for is that the open-source operating system will overtake Apple Computer at roughly 3% of the market during 2003.