IDC Eclipses Industry Prediction for Internet/Intranet Market

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IDC Eclipses Industry Prediction for Internet/Intranet Market

By Ed McKenna

Contributing Writer

The market for Internet and intranet-related services needed to build the wired marketplace of tomorrow will grow by 50 percent through the end of the decade, well exceeding the average growth rate for the information technology industry of 10.5 percent for the period, according to consulting and market research firm International Data Corp., Framingham, Mass.

Yielding $19 billion in revenues last year, this market is ranked at the top of IDC's top 10 growth opportunities in the IT market through 2000, according to Frank Gens, senior vice president of IDC.

"This is not just a vision," said Gens. "The wired marketplace is under construction right now, and in the last year we've seen a tremendous increase in the number of corporations who are putting up storefronts on the World Wide Web," he said. The number of Fortune 500 companies with corporate Web sites jumped from 34 percent in 1995 to 80 percent last year, while the number of Internet users increased from 16 million to 34 million. "We expect another near doubling of the number of users in this marketplace in 1997," said Gens.

In addition, Gens said, "in 1996 over $1 billion in business transactions were conducted and completed on the World Wide Web, and we're forecasting that will increase to over $5 billion in 1997."

The Internet and intranets are "replacing the PC as the engine of growth in the IT industry," Gens told a conference in San Francisco March 19. But, he said, the coming year is a terrific time to be hunting for growth opportunities in this marketplace.

"In our view, we're actually at the beginning of a period of IT market growth and expansion," Gens said, reviewing the top 10 growth opportunities for an industry gathering sponsored by IDC.

The network equipment market ranks second on IDC's list. Increased spending by Internet service providers on remote access equipment and by corporations on local area networks has led IDC to project both segments will grow by more than 30 percent.

However, local area network and wide area network suppliers "are on a collision [course] ... because this wired marketplace construction is ... blurring the line between where the LAN ends and the WAN begins," he said.

Indeed, there has been considerable industry consolidation among suppliers during the past month. A prominent example is last month's merger between 3Com and U.S. Robotics. The shakeout in the networking hardware industry continued last week with the announcement by Ascend Communications Inc., Alameda, Calif., that it will buy Cascade Communications Corp., Westford, Mass., for $3.7 billion. Some analysts said that the Ascend-Cascade deal would create an industry powerhouse capable of competing for Internet service provider business with companies such as Cisco Systems, San Jose, Calif.

Driving this growth will be an expanded corporate mission from using technology to automate their own employees "to wiring their customers, employees and business partners together in what we call a wired marketplace," said Gens.

Also, IDC projects the gigabit Ethernet market that stood at $4 million in 1996 will grow by 319 percent during the next four years.

Commodity servers are next in the growth opportunities line. Gens singled out "the building block low-end servers that really are the physical foundation ... [for] the wired marketplace."

For the servers using Windows NT, IDC is forecasting growth of 44 percent over the next four years on average. Servers that use Intel microprocessors at their core are projected to grow at a rate of 23 percent during the same period.

According to Gens, one of the most prominent ways in which this marketplace is changing is in distribution channels. He said that server revenues going through indirect channels will jump to 42 percent in the year 2000 from 20 percent in 1997.

PCs and network computers are next in the IDC rankings. Most of the growth will occur in the home market with the desktop saturation looming in the business sector, said Gens. While the ratio of desk workers to desktop PCs already is about 1-to-1 in the United States, IDC research indicates there are PCs in only 35 percent of the homes, he noted. "That leaves 65 percent to penetrate. To me, that's a story of promise," he said.

"The big issue is price," he said, noting that prices must likely come down to the $600 to $800 level. This would take a joint effort by PC and chip suppliers, he said, adding that IDC "is forecasting that within the next 12 to 18 months, Intel will step up to the plate and make some big moves to make this happen."

Also, while small compared to the PC market, the NC market is expected to grow to $24 billion in the year 2000, which will keep pressure on PC and chip suppliers "to make those pricing and design changes they need to penetrate that home market," he said.

Web site software is the fifth leading growth market. While it will total only $800 million to $900 million in 1997, the projected build-out in certain product areas are the next opportunities for customer lock-in for the software suppliers, Gens said. "This is why you see IBM, Microsoft, Netscape, Oracle fighting tooth and nail to get every scrap of this tiny market."

Rounding out the IDC list of key market growth areas are: data access and management tools, Internet application servers, Internet/ intranet services, the Asia Pacific market and the year 2000 problem.


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