Gartner predicts vendor bloodbath

Gartner analysts have painted a desperate picture for suppliers across all technology sectors, predicting widespread consolidation and company failure.

With little hope of an increase in spending by corporates, sales of hardware, software and telecoms equipment will remain flat.

Some 65 per cent of chief information officers believe that next year their budgets will be flat or reduced.

Betsy Burton, vice president and research area director at Gartner said: "By 2004 half of the vendors that were in business in 2000 will not be anymore," she warned.

Gartner sees little innovation to offset future falls in licensing revenues as the emphasis shifts to services.

Many vendors will push into the outsourcing market, but struggle because it fundamentally changes the way they have traditionally worked with customers.

The analyst does not expect to start seeing growth in the software sector until 2008, and believes that Europe will lead the US in its take-off.

With the fall out, customers may see several established names disappear. Gartner said there is a 0.7 (from one) possibility that web services supplier BEA has no long-term future. It also believes that SunSoft is in danger.

"BEA is in a good position. The issue it has is that it must figure out how to expand beyond the application integration area," said Burton.

She added that Oracle has made it clear that "BEA is camping on its property and wants to kick it off". Under that pressure, the analyst does not believe the company can survive.

Borland is also in a difficult position. Having been forced to go on the acquisition trail to grow, it must now tie its new companies together.

"It's not impossible, [but] it's a challenge," said Gartner vice president Nick Jones. "Borland has to grow or shrink, because it can't stay at where it is today."

Burton explained that Siebel must move beyond customer relationship management and has to overcome its restrictive cultural reputation if it is to attract talented employees.

Among the hardware vendors, Gartner suggested that any company outside the top three of IBM, Dell and Hewlett Packsrd could be in danger. The possible casualties include Acer, Fujitsu and Apple.

In telecoms across Europe, there are many players but no leaders and little vision, the analyst said. For 3G, said Gartner, read 3D: Debt, Delay and Doubt.

"There are far too many mobile operators in Europe," commented Jones. "There's room for three operators in most countries and for three big pan-European operators."

He also attacked the way mobile communications standards are developed, describing Bluetooth as a disappointment and warning that Mobile Messaging Service will not reap the financial rewards many are hoping for.