How IT is shaping up in 2004

With rising demand for IT workers, renewed interest in ambitious projects and stable hardware sales, the beginning of 2004 looks to be the tail end of a long, painful slump.

In December, key findings of a survey of 600 IT executives conducted by market researcher Gartner revealed notably greater confidence than a year ago, indicating much higher spending in 2004.

Now their predictions of capital spending budgets beginning to grow again are being realised - if only at a modest pace - and spending is following the traditional path, with software taking precedence over hardware.

What's hot?

Security, storage, wireless LANs, Linux and business intelligence software have become the top priorities for corporate IT budgets so far in 2004 and look set to lead the market for the remainder.

Arnie Berman, a technology analyst who took part in Gartner's survey said: "Controlled spending and a strict focus on return on investment will remain the rule in 2004."

Gartner even predicts some pleasant surprises over the year, given the confidence that corporate IT buyers are showing in their companies' business prospects to date.

Market research company IDC said it expects worldwide spending on computers and software to rise six to eight per cent in 2004, much of it fuelled by businesses.

That contrasts with less than one percent growth expected in 2003 and spending declines in 2001 and 2002.

IDC says in the coming months there will be an 18 per cent boost in global chip sales to $189bn. That would be the biggest jump since 2000, when chip sales increased 37 per cent.

Jobs market

On the jobs front, Jeff Taylor, founder of the online jobs board, Monster.com, says: "The technology job market is still in a slow recovery mode, as technology workers are likely to continue to face the effects of the boom-and-bust period."

Silicon Valley shed some 180,000 jobs from August 2000 through to September 2003, an 18 per cent decline.

He continued: "Technology spending will gradually increase, but that won't necessarily lead to a return of double-digit salary increases and the large bonuses that we saw back in 1999 and 2000.

"With companies continuing to closely monitor expenditures in all areas, money will be used efficiently for technology and for technology workers," he added.

On the ground, Simon Mortimer, manager of Canary Wharf-based Code Recruitment - which specialises in software development contractors - recently said his agency was experiencing heightened activity in recent weeks.

"We've been inundated," he said, "especially with requests for permanent IT workers, but also some contractors."

He said the sudden rise in demand for IT workers was probably a result of organisations that had projects tabled at the end of the year, but were waiting until the start of the New Year to initiate them.

"Four out of our five leading clients who were notoriously quiet last year have all just inundated me with requests simultaneously - so it's fair to say it's on the up," he said.

Whether it is just the initial release of the valve rather than something that will continue throughout the rest of the year remains to be seen, however, he said.

In the US, the administrator of the Small Business Administration, Hector Barreto, said: "I think that 2004 is really shaping up well for small business. The economic problems are subsiding, and business confidence is going up.

"This ultimately means more jobs will be created. All signs indicate that small business is well positioned to lead, and to enjoy, full economic recovery," he added.

Indian outsourcing

Meanwhile, in India, IT outsourcers are continuing their trailblazing progress this year.

Wipro announced last week its most recent net profits jumped 19 per cent from a year earlier to a record $60.36m.

Azim Premji, chairman of Wipro, attributed the better-than-expected performance to "sustained volume growth coupled with a stable pricing environment and operational improvements.

"Business momentum continues to be strong," he said.

Market analysts say the outlook for the infotech sector is looking bright in 2004 following the results from Wipro and Infosys Technologies.

Infosys, India's second-largest software services exporter, reported last week third-quarter net profits jumped a better-than-expected 28 per cent to $71.3m.

Revenue in the third-quarter from Wipro's global information technologies business totalled $250m, beating earlier guidance by the company of $241m.

"Looking ahead for the quarter ending March 2004, we expect our revenue from our global IT services business to be approximately $269m," Mr Premji said.

The company's core global IT services and products revenue rose 41 percent year-on-year, accounting for 75 per cent of sales and 88 per cent of profit.

Wipro's global IT services and products division added some 24 new customers in the quarter to its blue-chip roster of clients.

The Indian IT giant has also just increased its number of employees by 2,872 - the majority in its IT services business - bringing its total workforce to 27,137.

Outsourced IT jobs to the Indian subcontinent may remain an issue in the West, but such results, coupled with a better looking global ITC market potentially means better business for everyone who was forced to spend the last two years wondering when things would improve.