Gartner Spells Out Changing Tech Scenarios

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REDWOOD SHORES, Calif. – The coming few years will feature continued consolidation, financial pressures and changes to the hardware business, requiring different IT strategies for the future than what people have been using in the past.

IT consultancy Gartner made these predictions during its Hardware Insight conference here Thursday. Employees of firms like Intel, HP and Sun listened to presentations that often focused on where their companies may be headed in the coming years.

Some of the usual trends will continue, like market consolidation. Research Vice President Roger Cox noted that 85 percent of the storage business is in the hands of seven vendors, and “they are not advancing the technology. They are just moving along, milking their huge user bases.” It’s the startups that are bringing out new, innovative products, and will likely be acquired, he said.

In the next four years, Gartner sees continued consolidation of vendors, consolidation of servers through virtualization, a move toward green IT, an expansion of cloud computing and “hardware as a service” – i.e. hardware rental.

Green IT won’t be just confined to the U.S., it will be a global effort. Gartner estimates two percent of worldwide carbon emissions are attributable to IT. “IT vendors are seen as part of the problem, so it will be necessary to get your house in order,” said Cox.

Even though it is viewed as an emerging market with a much smaller IT infrastructure than the U.S., China is already concerned with power consumption and the government is coming up with guidelines on for businesses on power consumption policies. Those policies have not been released yet, but it shows the issue is one even for high-growth areas, not just mature ones.

A late start to the slowdown?

Gartner Research Director George Shiffler then spoke of hardware spending as it relates to the economy. He ate some crow and admitted Gartner’s earlier predictions of a downturn in sales due to economic conditions didn’t manifest. Hardware spending remained strong in the first half of 2008.

The U.S. did better than expected in the first half of this year, “despite some awful headlines,” thanks to interest rate cuts, policy actions to give liquidity to banks, the falling dollar making exports more appealing and the tax rebates for consumers.

Citing research from the financial analysis firm Global Insight, Shiffler said there could be a notable drop in spending in the U.S. and Europe, which would result in slowdowns in sales in the second half of this year and the first half of next year. Hardware spending would rise 6.6 percent in 2008, down from the 10.0 in 2007, and fall to just 3.8 percent in 2009.

However, it’s a slowdown, not a plunge like after the dot com bubble popped. “We don’t see the bottom falling out in spending like we did in 2000-2001, even in the worst case scenarios,” said Shiffler. How much impact it will have is an open question. “Spending is not affected so far. The U.S. hasn’t slowed enough yet to impact the market,” he said.

He later told InternetNews.com that the cost of energy, while dipping slightly in recent weeks, remains a problem, people spent their tax rebates from the government very fast, and Europe is now having housing problems of its own. But don’t panic yet. “It isn’t people stopping, it’s people going slower and seeing how this plays out,” he said.

Changes in the server and desktop market

The server market has to deal with a number of changes all at once: the economy, the decline of RISC and ascension of x86, the game changers that are virtualization and cloud computing, and the drop in average selling prices (ASPs).

In the U.S., from the first half of 2007 to the first half of 2008, unit shipments rose 7.1 percent, but revenue fell 4.3 percent. Dell was the leader in unit shipments while IBM was the dollar leader. HP held steady and Sun declined in both units and dollars.

One reason for that, according to Heeral Kota (CQ), a senior research analyst at Gartner, is that cheaper x86 servers are being sold. “A lot of times people buy more than they are using. So now they are buying minimal and buying more if they need it. You can always buy more capacity,” she told InternetNews.com.

Changes in the server and desktop market

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