The Economics of IT

Arthur Cole
Slide Show

The Top 10 Strategic Technologies for 2012

Use this list in your strategic planning for 2012.

There's an old saying on Wall Street that it's OK to have two friends who are economists as long as they promise never to discuss the economy.

Economics is a science, but it is not in the same class as physics or chemistry in which known causes and effects can be quantified and repeated. Economists have yet to agree on the very fundamentals of what they are measuring and how to measure them, so much so that identical sets of data can often lead to wildly varying conclusions.

So I had to chuckle this morning when I started reading reports of how Gartner has "slashed" its IT projections for 2012 and that the coming year will now be a lot tougher for the IT vendor community. What usually gets lost in the headlines is that the cut is only in the rate of projected growth for next year, not the overall market value. That means there is profit to be made, but maybe not as much as we once thought.

As CNET's Lance Whitney calmly explains, Gartner has cut its worldwide IT growth forecast for the coming year from 4.6 percent to 3.7 percent. In real numbers, this means Gartner expects the market to hit $3.8 trillion in 2012 rather than its previous projection of, ready? $3.83 trillion. True, this is a $30 billion adjustment, but it represents less than 1 percent of the entire market - and this at a time of dramatic shifts in data architectures where predicting the future is exceedingly difficult.

Indeed, a $30 billion tick is well within the margin of error that Gartner and others employ when making year-out predictions. Last year at this time, for example, Gartner was forecasting a total 2011 IT spend of $3.575 trillion, $85 billion under the actual mark.

And as usual, the more significant data is buried deeper within the report. It seems that some sectors within the overall market are due for a greater cool-down than others, particularly when compared to last year's growth rates. Telecom services, for one, will see growth drop from 6.1 percent in 2011 to 2.3 percent, while IT services are projected to drop from 6.9 percent to 3.1 percent. The latter number is surprising considering the cloud is widely expected to lead to significant increases in SaaS, PaaS and other services.

Also interesting are some of the longer-term predictions Gartner uses to guide IT development. These include the rise of smart grid architectures to leverage the cloud for Big Data applications, increased use of applications specializing in vertical markets, such as health care-tailored CRM, and the development of social networking and cloud-based applications to deliver insurance, banking and other products. And by the way, Gartner is not very bullish on Europe, predicting a string of national defaults that will shutter a third of the nation's banks by 2014.

Scary stuff, certainly. But again, even the most detailed economic report begins with assumptions and criteria that can produce dramatically different outcomes should the actual numbers fall just a little north or south of the target. Probably the biggest unknown right now is the health of the U.S. job market, which seems to be on the mend but, well, it's the holidays, so maybe not.

Perception, then, is everything in economics. And for those looking to gauge whether their industry is on the rise, the fall or somewhere in between, the all-important question is not whether you think things are getting better or worse, but what others in your field think is happening.

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