2006 predictions roll in...

It's the end of the year so the industry gurus have started to come out with their predictions for 2006.

Research Yankee Group found that in 2005, spending on IT ranged from $16,500 for two to 19 employee companies to $821,000 for mid-market enterprises with 500 to 1,000 employees.

The US SME and mid-market-focused web hosting market was $4.4 billion and growing at a rate of 6 per cent. Software-as-a-service is gaining ground in the business applications market. The main drivers to adoption remain "lower expense rates" and "increases in productivity".

Meanwhile IDC predicts that moderate IT spending growth will force many information technology vendors to rethink their product and service offerings, merger and acquisition opportunities, innovation strategies, delivery models, and the competitive landscape.

"The IT and telecom industry convergence, consolidation, and realignment of the past two years will continue in full stride in 2006," said Frank Gens, senior vice president of Research at IDC. "A critical new ingredient we'll see is the acceleration of disruptive business models – 'open innovation' in IT product and service development (the open source effect) and online delivery of IT as a service (the Google effect). These disruptive shifts will force most vendors to perform a strategic gut check as they enter the year."

Geographically, IT industry expansion will be driven by continuing double-digit growth in emerging markets: China, India, Central and Eastern Europe, and the Middle East and Africa.

In 2006, IDC expects the shift from products to services to accelerate. It expects to see the announcement in 2006 of next-generation versions of applications delivered as an online service from one or more of SAP, Microsoft, and Oracle.

It argues that what it calls the "Google effect" will spur traditional players to hasten their move to disruptive models. The impact of "Google as a disrupter" will be most evident in enterprise applications, information management and IT services.

"The companies that can quickly adapt their business models, product and service offerings, and industry relationships to meet the industry's changing dynamics will be the ones to succeed in the long run," noted Gens. "And with all these changes taking place, the companies that stay too close to their comfort zone will most likely get swamped by the innovators."