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Ian Mitchell

City Briefing

It's traditional at this time of year to consider the year ahead. So, how will 2000 be for the IT...



Ian Mitchell

City Briefing

It's traditional at this time of year to consider the year ahead. So, how will 2000 be for the IT industry? In short, busy and profitable all round - there's sure to be an increase in the pace of change, but the rewards will follow, too.

With Y2K relegated to a clean-up operation, look for a period of optimism with fresh skills to be learnt and a more strategic role for IT professionals. The biggest trend of the year will be a close call between front-office systems and telecoms-related issues. In the City, don't expect a general crash in IT share prices - but look for a return to more realistic valuations.

Looking deeper, suppliers are gearing up to replace the focus on back-office systems by helping users implement software based on supply chain and customer relationship management. These projects have rapid payback times and will help IT departments prove their worth, forcing home the message that e-commerce is not just hype. IT will be shown to have such an impact on business costs that it impacts on the economy, helping to keep inflation under control.

Even the public sector will benefit from IT. Web-based services and call centres at local authorities, for example, will improve the delivery of public services and cut costs.

Telecoms companies are getting closer than ever to the industry, sometimes as competitors to existing suppliers and at other times offering complementary services. Major developments during the year will include the nationwide roll-out of asymmetric digital subscriber line (ADSL), mobile data and wireless application protocol (Wap), third-generation mobile networks, and voice and data convergence.

Telecoms companies are well placed to enter IT markets, as the $500m application service provision joint venture between Cable & Wireless and Compaq shows. Telecoms shares will continue to outperform the stock market.

As for the City, recent share price gains have been staggering, with the Techmark 100 up 52% since it was launched 4 November. There are worries about a correction in the market and some valuations are spectacular. But while it's hard to see the market continuing to rise at the current rate, it's not so difficult to justify most valuations on future earnings. During the year it is likely that some of the dot.coms will suffer - the market is valuing them all as winners and it's only natural that some will crash and burn.

Overall, the message is one of strong optimism restrained only by the question of whether there are enough hours in the day to achieve all of this. The safest prediction for the year is that you'll be seeing more of your colleagues than you will of your family.

Ian Mitchell is an IT analyst with stockbroker Beeson Gregory. His opinions should not be construed as investment advice.

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