Businesses will increasingly hand control of their IT departments to large suppliers, with web services as a key driver, according to Butler Group's annual technology review.
Martin Butler, president of the analyst group, explained that companies cannot continue to increase external spend on IT at the rate they have been, and that vendors will instead target internal spend.
"Two-thirds of the spend on IT in the average corporation is internal - people, training, buildings, desks, coffee - and does not reach the hands of the vendors," he said.
"Conversion of internal to external spend is going to be the big factor in the growth of IT for the next 10 years and beyond."
While companies will still have an IT director they will be monitoring an externally maintained service offered by IT suppliers with the ability to harness huge amounts of computing power, according to Butler.
Web services adoption will be the key to converting this spend and sustaining the growth of the IT industry, he claimed.
"The key to enabling this is web services because, if you can provide a set of services via a well defined interface that is standard in the industry, then it becomes viable and much cheaper to do," said Butler.
With many organisations currently only engaging web services in small-scale projects, Butler maintained that it would be the end of the decade before credible web services are offered to large organisations as an alternative to buying applications and maintaining their own infrastructure.
And the analyst predicted that grid computing will have to merge with web services to form a viable platform with the scale and power to provide these external services to users.
On the supplier side Butler said that the "gang of five" - IBM, Microsoft, Oracle, Sun Microsystems and Hewlett Packard (HP) - is set for a major shakeout with just two companies dominating the market.
"IBM and Microsoft: their long-term vision is right on the dot. They are the long-term winners in this," he said.
But HP is set to lose ground after its merger with Compaq, according to the analyst. "It is a marriage made in hell," said Butler. "HP has sacrificed its long-term position for short-term gain. It won't be a heavyweight player in the IT industry."
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