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Economic Forecasts

IT: A Bright Spot in the Economy

Consumers and businesses may be tightfisted on most spending, but not when it comes to information technology.

The information technology industry is having a growth spurt — welcome news for a U.S. economy that’s otherwise barely creeping along. Spending on IT will climb by about 5% next year, following a 7% jump this year over last. Consumers shelling out for hot new gadgets play a part, but the biggest outlays are by firms upgrading equipment and services. Total U.S. expenditures on IT will come close to $625 billion this year, versus about $600 billion in 2011.

The IT sector’s strong upswing after several lackluster years is also good news on the jobs front. Overall, the labor pool of skilled IT workers is tight. Dice.com, a leading IT job-listing site, currently has more than 80,000 postings from companies looking for workers. The industry jobless rate was just 4.7% in July. For the U.S. as a whole, it was 9.1%.

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Among IT’s growth drivers: Business spending on powerful mainframe computers and the “cloud,” which lets firms store computerized data and tasks on the Web, freeing them from having to manage systems internally in whole or in part. Explosive tablet computer sales, social networking and other Internet services are also fanning the flames.

Mainframes. Used by businesses to crunch financial, sales and other data, these machines are undergoing a once-in-a-decade upgrade cycle — music to the ears of IBM, the leading manufacturer. IBM’s mainframe revenue will be up over 50% this year.

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Cloud computing. Look for American businesses to invest about 20% of their annual IT budgets on cloud applications by 2020, up from just 2% now. The payoff for firms will be huge. It costs just 3¢ per month to store 1 gigabyte of information in the cloud versus 75¢ in-house. With businesses collecting data in ever larger amounts, storage services by third parties will see demand soar. Providers include Amazon, IBM, Rackspace, Apple, Microsoft, Hewlett-Packard, Dell and Oracle.

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Spending on cloud computing and storage could top $1 trillion by 2014. Even Uncle Sam is getting in on the act. Government IT managers plan to shutter 800 data centers around the country in favor of cloud services from private firms. The most sensitive documents will be kept in-house, though.

The tablet phenomenon. Hard to believe these small, superthin computers burst onto the scene just over 15 months ago, because they’re already ubiquitous. The tablet turf is dominated by Apple’s iPad, of course, with a 61% market share. But keep an eye on Amazon and Barnes & Noble, which will offer tablet versions of their popular e-readers this fall. Odds are sales for both new products will take off.

Social networking. Figure on it becoming more splintered in coming years, with the emergence of many smaller sites geared to particular occupations or interests. One such example: Biznik, a networking site for entrepreneurs and small businesses.

The next big thing? A new Internet protocol, IPv6, to be rolled out by 2014. It will open doors to a slew of new devices — meters, home automation gizmos, sensors embedded in bracelets and many more — all able to send and receive data over the Internet. If you think a lot of apps are out there now, just wait a while.

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