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IT buyers lay out new plans for 2004

Linux will expand its presence in key markets, while offshore outsourcing will continue at a brisk pace in 2004, Forrester Research predicts.

Linux will expand its presence in key markets, while offshore outsourcing will continue at a brisk pace in 2004, analysis firm Forrester Research predicted Wednesday.

Forrester, which based its forecasts on several reports and a survey of 528 information technology buyers, also predicted that PC pricing and dial-up subscriptions will continue to feel the pain in the new year, while companies that develop RFID (radio frequency identification) technology for the consumer goods market will reap investments.

Looking ahead
Based on conversations with IT decision-makers about their plans for 2004, here are some of the key trends Forrester Research has identified:

• Linux will cement its place in the data center. By the end of 2004, nearly 10 percent of 2,000 of the world's largest companies will have migrated from Windows servers to Linux.

• Offshore outsourcing continues. The Indian IT services market, for instance, will grow at least 30 percent during 2004.

• RFID adoption will remain limited to niche verticals. Wal-Mart Stores will get what it wants, but widespread adoption of radio frequency identification technology requires a more explicit business case.

• PC prices will continue to plunge, as major brands like Dell, Hewlett-Packard and Gateway slice already thin margins to kick-start device sales in the consumer electronics market.

• ISPs will see their dial-up base fall 10 percent or more as broadband adoption grows. Amid the turmoil, cable operators' revenue per subscriber will jump in 2004.

• Customer relationship management will stay flat, with CRM license revenue growing only 5 percent to 10 percent through 2005.

• Application architectures are moving toward a service-based model, but businesses shouldn't invest heavily in secure Web services just yet.

• IT is becoming increasingly important to health care stakeholders. Clinical software will take hold as the next hot application.

Nearly 10 percent of 2,000 of the world's largest companies are expected to have migrated from Windows to the Linux operating system for their networking servers by year's end, according to the survey.

"Linux will cement its place in the data center," Forrester stated. "Linux reached a new level of maturity with the latest version, maturing distributors and increased application support from larger vendors."

Customers are increasingly asking for database software that is cheaper to run and easier to manage. The price of open-source software and its ability to integrate with other software has propelled its use among customers, industry analysts say.

Offshore outsourcing also is expected to continue its momentum in 2004. The IT services market in India is anticipated to grow at least 30 percent this year, according to Forrester.

EarthLink is one of the latest tech companies to announce plans to ship work overseas. The Internet service provider said it will outsource its call center operations to companies in India and the Philippines in an effort to cut costs. Meanwhile, other tech companies, such as Google, are turning to India's pool of engineers to develop software.

RFID companies that serve the packaged consumer goods market will capture investors' attention in the new year, according to Forrester. Wal-Mart Stores is planning to require all its suppliers to add RFID tags to their products, so the retailing giant can track its merchandise. The company has asked its top 120 or so merchandise suppliers to coordinate the U.S. launch of the technology, set to begin in 2005.

PC makers will continue to feel pricing pressures this year, while dial-up ISPs will experience an ever-widening outflow of customers, according to Forrester.

"PC prices will continue to plunge, as major brands like Dell, (Hewlett-Packard) and Gateway slice already thin margins to kick-start device sales in the consumer electronics market," Forrester said.

Meanwhile, Internet service providers such as America Online, Microsoft's MSN and EarthLink are likely to see a 10 percent drop in their dial-up subscriber base this year, as more customers switch to broadband, the research firm said.

"Cable operators' revenue per subscriber will jump in 2004," Forrester said. "Cable will take back satellite wins with unique advantages like video on demand, bundling with broadband Internet access and local HDTV channels--none of which satellite can match."

At this week's Consumer Electronics Show in Las Vegas, cable wiring will be pitched as a key to creating the digital home.