Article

Crystal ball: Blogging is so over; companies waste $100 billion on networks

Linda Tucci, Executive Editor

By the end of next year, 75% of companies will fall victim to undetected malware aimed at doing financial harm, according to Gartner Inc. Blogging will peak in 2007 and by 2008 nearly half the world's data centers will lack the power and cooling capacity to maintain high-density equipment. On the outsourcing front, Gartner predicts that the 10 largest IT outsourcers will see their market share slip to 40% by 2009, from today's 43.5%, a revenue shift of some $5.4 billion.

The predictions, culled from nearly 50 reports, are included in

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Gartner's year-end look at 2007 and beyond. Other trends to watch for, according to the Stamford, Conn.-based consulting firm, include:

  • By 2009, corporate social responsibility will surpass compliance on your CEO's priority list.
  • The average total cost of owning PCs will plummet 50% by 2010.
  • By 2010, 60% of the global "cellular population" will be "trackable" by the so-called follow-me Internet.
  • During the next four years, companies and organizations will flush $100 billion down the toilet on networking technologies and services that are wrong for their businesses.
  • Vista marks the last major release of Microsoft Windows.

Counterintuitive IT forecasts

Daryl Plummer, a vice president at Gartner, said the predictions that intrigued him most were the "counterintuitive" forecasts, such as the ebb of blogging or reduction in revenue for outsourcers.

"We're not saying that outsourcing is going away, by any means, but the way people do outsourcing and how selective they are, are changing right now," Plummer said.

And it doesn't hurt to see executives going to jail for doing the wrong thing.

Some of the services the big outsourcers offer now will migrate to or be spun off to smaller companies. In addition, those smaller service providers likely will be more regional. "The first thing that comes into your head when you say outsourcing is India. But there's going to be a lot more geographical choice, in Asia/Pacific as well as in Europe and in the U.S," Plummer said.

The implication for CIOs is that their companies will have more choice, but CIOs will have to become more skilled at "selective outsourcing," Plummer said. "They will have to be much more critical of which contracts and which providers they are actually willing to work with."

Actually, the splintering of the outsourcing market was on the horizon nearly a year ago, when outsourcing advisory firm Technology Partners International Inc. (TPI) in The Woodlands, Texas, estimated that close to $100 billion worth of large outsourcing contracts were due for renewal by 2008, setting the stage for a global shakeup in the market. TPI estimated then that a whopping 72% of those contracts are held by the "Big Six" of outsourcing: Accenture Ltd., Affiliated Computer Services Inc., Computer Sciences Corp., Electronic Data Systems Corp., Hewlett-Packard Co. and IBM.

But as companies such as General Motors Corp., ABN Ambro and others move to a best-of-breed approach, spreading their large single contracts over multiple, smaller providers, and as Indian companies continue to add capabilities, the kings of outsourcing are in danger of being dethroned, TPI predicted.

Forrester Research Inc. analyst Julie Giera also saw the outsourcing market heading for a shakeup. She said she doesn't believe its impact will be limited to the Big Six, however, or will be fixed by splitting large contracts into smaller ones among multiple providers.

"The problem is that most outsourcers, even the Indian offshore guys, approach a customer with a one-size-fits-all outsourcing model: Here's the service, here is your service level, and here is your price," Giera said. "That business model is broken."

She said what she believes will happen is something Forrester calls "adaptive sourcing," an outsourcing offering for IT and Business Process Outsourcing that evolves, or "flexes," as the customers' needs change over time.

Making rules vs. doing the right thing

Another Gartner prediction Plummer said will gain currency in 2007 is the importance of social corporate responsibility. Compliance, governance and getting people and customers to follow corporate rules have dominated the IT agenda at corporations in recent years, as companies have struggled with issues ranging from compliance with the Sarbanes-Oxley Act to security breaches, he said.

"It's been all about regulation. Companies are going to have spend more of their effort 'doing the right thing,' whether that's with regard to the environment or their employees or to their customers," Plummer said.

If companies cannot demonstrate their commitment to doing the right thing, they might find themselves under fire from the rapidly growing ranks of investors who put their money into companies which reflect their social values and keep it out of companies that don't. In recent years, socially responsible investing, as it's called, has expanded beyond investing in companies that reflect one's personal values to actively pressuring companies to change, said Timothy Smith, a director at Walden Asset Management, a Boston firm that specializes in socially responsible investments.

Many much larger investment firms have taken note, and increasingly deem monitoring a company's performance on social issues a matter of fiduciary responsibility. "That is a huge change," Smith said. He pointed to the Carbon Disclosure Project, a recent initiative to petition global companies to disclose their carbon emissions. The project was backed by 250 investors, including New York-based financial giants Citibank and Merrill Lynch & Co., with more than $31 trillion in assets under management.

Plummer agreed that a new generation of investors will bring their influence to bear on companies. "And it doesn't hurt to see executives going to jail for doing the wrong thing," he said.

The companies that focus on doing right by employees, the environment and other societal issues will have an easier time recruiting and keeping employees, Plummer predicted. And if they don't, "they're going to get unwanted attention," he said.

"Today's Internet is only a small version of what tomorrow's will be. The fact that people are able to put comments of their own out there in the Internet Ethernet means you can now start criticizing companies anonymously. That will be put more pressure on these companies," he said.

Okay, so what about that blogging prediction? Does Gartner really believe it's peaking when the demographic for blogging is basically the world?

"We make it for a lot of reasons," Plummer said. "If you look at the stats on the Web, you'll see there is a life span of three months and declining on the active Weblogs out there." He said the vast majority of bloggers are coming through on their way out, as opposed to being consistent contributors. Even MySpace.com and Facebook are losing visitors, he said.

"As people get out there, there is a huge explosion of submissions to these communities and blogs, and then they taper off. They realize they've gotta live a life."

What are your predictions for 2007? Let us know what you think: email Linda Tucci, Senior News Writer.


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