A recovery is under way but the price of long dry spell will be widespread layoffs The global demand for information technology products and services is starting to pick up after a long dry spell, but only half the number of suppliers will remain in business over the next two years. This is the prediction of Gartner Asia-Pacific research director Dion Wiggins, who also said the renewed adoption of advanced technologies and business processes would result in 'hundreds or thousands, if not millions, of workers being displaced'. The trend predicted was expected to emerge from early next year, at the end of a three-year slow-growth cycle for corporate IT spending worldwide. 'The past three years have been painful for everyone associated with IT - users, vendors and investors,' Mr Wiggins said. 'We now see reasonably strong signals of a modest IT industry recovery.' Gartner expected chief information officers and IT system heads at enterprises worldwide to take advantage of extra cash flow next year to invest in technologies that could help make their businesses more competitive and innovative. Martin Reynolds, Gartner group vice-president and research fellow, noted recently that the 'overall projected demand for next year has rebounded to levels approaching the highs of last June and July. A major question in the final weeks of this year will be what decision-makers decide to do with any unspent dollars'. The five largest Asia-Pacific markets for various information and communications technologies include the mainland, Australia, South Korea, Taiwan and India, which is also seen as the fastest-growing IT market in the world. Hong Kong is projected to grow its enterprise IT market next year by about 7 per cent to be worth just under US$10 billion; the mainland is expected to grow more than 7 per cent and be worth more than $60 billion next year. Mr Wiggins said the forecast reflected the progress the mainland IT market had made over the past 15 years. Gartner found that about 50 per cent of all Intel processor-based server computers shipped in the Asia-Pacific region this year would be sold in the mainland. Gartner said enterprise IT investments over the next two years were not expected to match the depth of spending seen in the latter years of the past decade, but they would deliver a convincing return on investment and align technology with companies' strategic business objectives. Apart from pent-up demand built up in the past three years (when corporate IT budgets were tightened), the increased spending in the next two years would be prompted by the need of many enterprises worldwide to replace already obsolete IT assets acquired from 1997 to 1999. 'Despite Sars, we have experienced steady enterprise IT demand in Hong Kong,' said Peter Yeung, managing director at Hewlett-Packard Hong Kong. He said sales from the quarter to September 30 were strong enough to almost offset all revenue-making opportunities lost at the height of the Sars scare last summer. Mr Wiggins said too many IT vendors believed their businesses would recover when spending improved. 'This is a terribly flawed notion,' he said. The global IT industry is headed for more consolidation, with strong competition expected to result in the acquisition of many small vendors while others are forced to close down. Large vendors were expected to dominate most segments of the IT sector. 'As many as 50 per cent of technology suppliers will be eliminated from the competitive landscape,' Mr Wiggins said. 'For example, there are more than 2,300 publicly traded software companies in the world. That's about 50 to 60 per cent too many. 'This means that those companies that survive can focus over the next several years on providing quality, and not have to be price-driven.' Another negative result of enhanced IT spending would be the loss of jobs. 'Many of them will be high-paying, white-collar positions across all industries,' Mr Wiggins said. Job losses would follow 'massive productivity improvements' and 'enormous infusion of innovation' in businesses that spend on technology advances.