Top Ten Predictions for 2005

While 2004 started out with a whimper for the technology market, it ended with a sense that the momentum that had been missing from the market was finally beginning to take hold. Hurwitz & Associates predicts that the coming year will offer some interesting opportunities as well as challenges. Here are our top ten predictions:

1. Emerging Technologies

Leveraging emerging technologies in innovative ways to transform business will be the key driver in 2005. While many organizations are able to provide a predictable payback from technology acquisition with relative ease, the bar is being raised. The insightful companies are looking for technology to become a core competitive asset. For many industries technology innovation has the potential to transform business practice. We expect that this focus on technology as the foundation for business transformation will become the norm – not the exception. Traditional ROI methodologies will begin to be viewed as outdated. We expect the buying pattern to move away from cost saving technology purchase towards technology that offers business opportunity.

2. Open Source

While the Open Source market will continue to expand at a rapid rate some customers will begin to experience problems because of poor, undocumented implementations executed by inexperienced contractors. Customers will begin to learn the hard way that all open source is not the same. Companies that provide verification and certification of open source offerings will gain major momentum in the market. More software companies will continue to try to regain market momentum by putting their crown jewels in the open source arena. We predict that many of these efforts will be viewed skeptically and will not be commercially successful.

3. Data Quality

Quality in general will become a massive issue in 2005. This crisis will extend both to data quality and software quality in general. Data Quality, traditionally viewed as a back office function will begin to emerge as a major crisis in organizations. Studies are showing that few managers have confidence in the quality of their organization’s data. With tough regulations (Sarbanes Oxley, etc.) bearing down on companies, the quality of data becomes a front office issue. We anticipate that predictable data quality will become a battle cry for many CIOs and their bosses in the coming months. As software becomes the personification of the company, software quality moves form the isolated Q&A department.

4. Integration

How organizations are able to manage their information across departments and across organizational boundaries will be one of the hottest markets in 2005. While many software companies are beginning to leap into this emerging market, most will fail to gain critical mass. Customers will want to buy a well integrated package from a highly trusted source. Therefore, we expect to see many more acquisitions in this market. Those weaker players who are not acquired will go out of business.

5. IT Security

Security is moving from an applications play to an infrastructure play. Today there are thousands of small security companies focused on small pieces of a bigger puzzle. We expect that companies like IBM, CA, HP, Symantec, Novell, and BMC will position them for leadership by providing a consolidated set of offerings both at the infrastructure and the application level.

6. IT Security Innovation

Innovation in security will be driven by the need to anticipate problems before they materialize rather than having to react to threats – a move to real-time and away from reactive security. We anticipate the real action in startups will be in this area.

7. Linux

The Linux operating system will continue to gain significant market share at the expense of traditional Unix and Microsoft platforms. Innovative emerging software vendors are increasingly selecting Linux as their platform in order to compete with larger, more established players. The net effect will be a renaissance in innovative applications that do not need the same funding to approach the market. This will have dramatic implications for the SMB market. The barriers to entry are indeed being broken.

8. Middleware

The definition of middleware will change in 2005. We anticipate that what had been viewed as industry specific packaged software will begin to be seen as corporate infrastructure and middleware. This has the potential to change the balance of power in the market. Oracle’s acquisition of PeopleSoft will start an avalanche of acquisitions by unexpected players who have not been in the packaged software market.

9. Software As A Service

This is the year that software as a service will become the norm. Increasingly, we are seeing customers accept that software can and should be bought as a service rather than in a perpetual license mode. This model will change the dynamics of software: it will be much easier for companies to walk away from their vendor if they become dissatisfied.

10. Software License Management

Being able to more easily manage software licenses will become a major market factor in 2005. Until now, it has been difficult for large organizations to know what software is installed on desktops and laptops throughout their organization. Activity will be driven by a combination of increasingly tight budgets, regulatory demands for accuracy in software fees, as well as security concerns, Increasingly, companies are unwilling to pay for software licenses that users do not access and do not need.

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