The information technology (IT) industry loves to look at itself and make predictions. Like an adolescent it has a constant urge to appraise and define its changing form.
There is also a fundamental financial necessity behind continuous assessment Gartner Group, the market analysts, tells us the IT market will be worth $1 trillion dollars (£708 billion) this year. To put this into perspective, in 1970 that was the gross domestic product of the US. The figure is growing at 12 per cent annually. Senior Gartner analysts, Mr Bill McNee and Mr Davis Blair, recently pulled the IT market apart, limb from limb, and plotted a tentative future course for the next five years anyway.
In a tantalising concession to the miracle of technological progress, their seminar The State of the IT Industry was downloaded over the Internet.
They predicted the IT bull market will be sustained for at least the next three years. But the IT landscape is still experiencing a profound metamorphosis which makes it difficult to assess in its totality.
Most industries are usually measured and defined by their biggest players and what they are doing, but in the IT business the sands keep shifting and new players are superceding the old all the time.
In the 1970s, the hardware vendors were king. IBM was taking over the world with hulking great mainframe systems. But then in the late 1980s, the market for personal computers exploded, and the software vendors suddenly had the most to gain as they devised a thousand and one ways to drive the architecture, and make the buyers believe they were missing a vital organ if they did not own their particular brand of software. Microsoft and Oracle were the big winners here.
In the 1990s, vendors like J. D Edwards and SAP maximise on implementing and customising applications for commercial customers. Now as we peer into a new millennium, the new kings are emerging and they are something of a surprise in that they have been around for years, but have not been necessarily associated with the IT industry. They are the monster service providers like Arthur Andersen, KPMG and Price Waterhouse.
The companies that have built their names on management services are well placed to dominate the IT horizon. The IT industry is coming down with innovation and choice, but the reality is that large organisations do not want to tentatively pin their colours to the mast of one technology or another. They just want their machines to work and their customers to be happy. They want standards, and they want to be able to blame a hired expert if things go wrong. The IT services business now accounts for 30 per cent of the total trillion dollar market, and Gartner predicts it will grow from $302 billion dollars this year to $614 billion by 2002. We can expect a reduction of internal information systems (IS) staff, as the function is increasingly outsourced to external service providers. The IS unit is more likely to refocus its energies on project management, strategic planning and vendor management, while the service provider will take care of the nuts and bolts of making things physically work.
Instead of company staff choosing the best products and tailoring them for their own needs, Gartner sees the service providers introducing standards for business practice. These will be achieved through market forces, and the implementation of standard package applications from tried and tested vendors like SAP, J. D. Edwards, Oracle and Peoplesoft.
Once standardisation is achieved, then the movement of data between systems will be much simpler. Compatibility will only come about through the elimination of differentiating business practices. In a way, it's similar to the way Microsoft has been universally embraced, except this time there will be a package of products comprising the best providers in different fields, from hardware to software and the network in between.
As for Microsoft, Gartner does not fancy its chances with its latest operating system Windows 98. Obviously, Microsoft cannot sustain the exponential growth it has enjoyed for so long, but there are a couple of other factors that could contribute to a serious cooling-off period.
The year 2000 problem will certainly affect Windows 98 take up. Now that people are finally waking up to the gravity of the millennium bug they are allocating their IT budgets to fixing it, screaming "make it better now!". The last thing they will pay for is upgrading a perfectly operable Windows 95 that gives most employees more than enough functionality, right down to the grammar check.
This is pretty central to seeing beyond the hype. What does Windows 98 offer that Windows 95 can't? Well, it integrates the Internet Explorer browser, and has a universal serial bus which facilitates easier hardware connections, and that is pretty much it. As it stands, most people have the Internet Explorer browser already, so it is really down to the universal bus to make people rush out and buy Windows 98. Not likely. Serious enthusiasts will subscribe in their droves, but it will not be enough to match the $1.5 billion Windows 95 netted for Microsoft.
The growth in global PC shipments is slowing, and PC makers everywhere are getting edgy. Couple this with the sub-$1,000 PC frenzy in the US at present and profit margins are being tightly squeezed. Microsoft is coming under increasing pressure from the makers to drop its price for Windows, to offset the 36 per cent fall in consumer PC prices in the past year. Microsoft is holding firm on this, but it has indicated it would not be increasing the price for Windows 98 when it comes out.
Then there is the small matter of the antitrust case in the US. Nobody knows for certain that the Justice Department will not put a ban on the shipment of Windows 98, or at least outlaw the bundling of the browser.
Both measures would deal a critical blow to Microsoft, as it frantically works to get Windows 98 ready by the end of June a year later than planned.
As Microsoft switches its interests into the business server market it is trying to pre-empt the next wave just like every other technology company. A year is a very long time in this business, and forecasting the winners and losers is a formidable challenge.
