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Forbes editors and writers take a good look at the information technology industry in 2003. Click on each author to read more, and click on the crystal ball to go back to The Year Ahead.
"In terms of information technology spending and buying, the cheap revolution continues unabated. Customers will further squeeze vendors, who will squeeze their suppliers." More
"As spending on corporate information technology starts to improve, the migration of related jobs overseas will continue, but not to the exclusion of jobs closer to home." More
"A lot of IT companies cut costs by shutting plants and turning to contract manufacturers. Some of those arrangements are going to turn sour." More
"I said it last year, and I'll say it again this year (my wisdom has not yet been proven): Information security is over-hyped." More
"Sony can now pack an entire PlayStation 2 on a single chip; expect a massive proliferation of integrated gaming devices." More
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Lisa DiCarlo
The Big Trend
In terms of IT spending and buying, the cheap revolution continues unabated. Customers will further squeeze vendors, who will squeeze their suppliers. Cheap Linux systems grow in strategic importance. Offshore outsourcing continues to grow, as U.S. companies look for ways to grow earnings through lower expenses. But that trend runs counter to an organized movement by tech leaders and academics to make the U.S. more competitive, and an interesting clash develops. Tech spending encompasses security, wireless and Linux.
The Unconventional Wisdom
Freedom from tyranny in Iraq and Afghanistan creates some new, interesting opportunities for tech companies in terms of building telecom infrastructure.
The Misplaced Assumption
Convinced that he must steer the company in a radically different direction, a humbled Scott McNealy and Sun Microsystems make a fantastic comeback (no, really). The move by computer companies into consumer-based gadgets will not be easy, because consumers are more fickle than anyone can imagine. Everyone launches online music stores, but nobody makes any money, and the majority of music downloaders continue to do so illegally.
The Watch List
Jeff Clarke: A young, talented operations whiz who co-led the integration between Compaq and Hewlett-Packard. He recently left the merged company. Look for him to turn up in a C-level position elsewhere.
India-based companies: As more U.S. companies move technology development and services outside the United States to cut costs, groups like Wipro will benefit.
Gateway: With PC shipments expected to grow 15% in 2004 (after two years of contraction) HP and Dell will be the primary beneficiaries, but a rising tide lifts all boats, and the ailing Gateway will get a boost from industry growth.
The Bold Prediction
More cash-rich tech companies start to pay dividends. Microsoft continues to struggle to make its software secure, which means another great year in 2004 for Symantec. The complexities of integrating Legato and Documentum weigh down EMC. HP's stock doubles. IBM buys SCO to shut it up.
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Arik Hesseldahl
The Big Trend
As spending on corporate information technology starts to improve, the migration of related jobs overseas will continue, but not to the exclusion of jobs closer to home. Companies looking to invest in strategically important IT initiatives will look to increase the mix of people overseeing these projects close to home. The job outlook for IT pros of every stripe will improve markedly, boosting salaries accordingly, though not to the level seen during the bubble years.
The Unconventional Wisdom
The continued small but persistent successes of Advanced Micro Devices with its Opteron 64-bit chip will stick in the craw of rival Intel which will continue to struggle to build a business around its Itanium 2 chip for servers. By the third quarter, expect Intel to respond by finally talking publicly about plans to follow AMD's model for 64-bit computing by extending the life of its core x86 instruction set into the 64-bit world. Meanwhile, watch for AMD to land an unexpectedly large purchase order for Opteron chips from a major computer manufacturer.
The Misplaced Assumption
The chip market may be back, but that doesn't mean all sectors of the chip market will be as healthy as they can be. Look for persistent shortages of flash memory chips into the summer, and for DRAM computer memory prices to remain low as supply continues to be out of balance with demand. Many DRAM manufacturers will start cutting back in order to shore up prices which will rebound by the third quarter.
The Watch List
Scott McNealy: Will he step down as president and chief executive of Sun Microsystems but remain as chairman?
The memory chip industry: It will be rocked by a price-fixing scandal as the results of an investigation by the U.S. Department of Justice are made public no later than March.
Windows: Confidence in Microsoft's Windows operating system will be shaken badly worldwide by the disclosure of a security vulnerability so severe it will force the company into crisis mode to help customers cope with lost productivity, and to launch an emergency plan to rush the release of Longhorn, the next major upgrade of Windows.
The Bold Prediction
Wal-Mart will scale back or shelve its plans to deploy Radio Frequency ID tags by year-end.
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Daniel Lyons
The Big Trend
Two big trends: More spending; and more consolidation. Customers will finally start opening their wallets and buying IT equipment, which means some IT vendors are going to have a very good year. Meanwhile, hardware and software companies will continue to consolidate, and the pace of consolidation will accelerate.
The Unconventional Wisdom
The end of "free." Free didn't work for dotcom pet food stores, yet much of the rhetoric around technologies like Linux and voiceover-IP still involves this crazy notion that companies can make money by giving things away. They can't. One sign that some are recognizing that this is folly: Red Hat's move to migrate its Linux customers to a paid-for "enterprise" version of its software. Others will follow suit. The interesting moves around voiceover-IP will not involve "free" phone calls; rather they will be the way telecom vendors can use this technology to get an edge on rivals.
The Misplaced Assumption
A lot of IT companies have cut costs during the downturn by shutting down plants and turning to contract manufacturers. But some of those arrangements are going to turn sour. And companies that thought they were becoming "lean and mean" now are going to find themselves in a heap of trouble.
The Watch List
Scott McNealy and Sun Microsystems: Worth watching, though they may be difficult to see as they sink further and further out of sight.
Vonage: The voice-over-IP guys will have a big year.
The Bold Prediction
SCO Group will settle its lawsuit against IBM. Both sides will declare victory. The Linux community will turn on IBM.
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Victoria Murphy
The Big Trend
Being cheap. Tech buyers will still look for bargains, as budgets remain tight in 2004. So smart vendors accommodate the penny pinchers by being cheap too. Those vendors will send commodity development and support abroad, while outsourcing some of it. Already Oracle and Autodesk have shops offshore, and venture capitalists continue to favor funding new software outfits building code cheaper outside Silicon Valley.
The Unconventional Wisdom
I said it last year, and I'll say it again this year (my wisdom has not yet been proven): Information security is over-hyped. Original software vendors should take on the task of minimizing bugs and releasing patches to reduce security risks. It's in their interest to keep customers in touch and coming back for more secure products, and of course, upgrades. There are still too many niche security players feeding off fears and cluttering the market.
The Misplaced Assumption
The so-called software revolution sparked by Linus Torvalds is now a revolution from within that's farther-reaching than the hotly debated Linux vs. Microsoft showdown. It's a new way to develop software that's lowering costs for industry incumbents like IBM, Novell and Oracle.
The Watch List
Maintenance revenues: This is dull, but crucial for software companies. It is money that props up overall revenue in downtimes and often accounts for a large chunk of profits. Customers pay a lot to keep their systems running smoothly, traditionally to the vendors who sold them the software. If that changes, and customers look to outsource support elsewhere, the software industry is in for a fundamental shift in its business model. Savvy vendors will see this as an opportunity, and offer customers even more support services at a lower cost.
The Bold Prediction
Microsoft warms up to open source, and tries to make a buck off it.
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Michael Noer
The Big Trend
Consoles on a chip. Sony can now pack an entire PlayStation 2 on a single chip. Since making microchips is a classic economy of scale, expect a proliferation of integrated gaming devices. It has begun. For the holiday season, Sony launched the PSX in Japan, a box that combines a PlayStation 2, a satellite television tuner, DVD-recording, music/video playback and Ethernet networking. PlayStation Portable, a handheld device that will also play music and video, is due in the United States in the coming year. Microsoft's next generation Xbox is expected to integrate a variety of functions. Both companies are angling to have their hardware at the center of the digital living room. Nintendo, continuing down its quixotic path, claims it will stick just to gaming.
The Unconventional Wisdom
PlayStation Portable will fail to make significant inroads against Nintendo's Game Boy. The handheld gaming market is huge--the Game Boy Advance outsells all consoles combined--but it is also a younger group. Older gamers, despite larger disposable income, are unlikely to take to portable gaming in droves. Nintendo's great strength remains its game offerings for the preteen set. This software library, combined with an enormous installed base, will leave Nintendo in easy command of this lucrative segment.
The Misplaced Assumption
Gamers are young and male. Market research shows that women 18 and older now comprise 26% of the gaming audience. Six to 17 year-old boys? 21%. Folks over the age of 50 account for 17% of players.
The Watch List
Xbox Live: With more than 500,000 subscribers, Microsoft's online gaming network is larger than Sony's competing service and Microsoft has been more aggressive about pushing game developers to support it. Xbox Sports Network launched in the United States this fall and early indications point towards a major hit.
The Bold Prediction
To repeat last year's prediction: "In 2004, Nintendo will have followed Sega's lead by exiting the console business." In 2004, it will.