The year just gone was widely seen as one in which the IT sector came back from the dead. 2004 was the year in which 2003's pall of pessimism transformed into guarded optimism.

Spending on essential technologies marked the first half of the year while in the second half, dust-covered pilot programmes were finally given the green light. In many sectors, growth was hardly stellar, but everyone was happy with quarter-after-quarter of steady growth - the first real sign that things were going back to normal.

Analyst IDC has predicted that worldwide IT spending will grow by 6.1 per cent in 2005, a marginal improvement over the five per cent growth rate predicted for 2004. In real terms, it accounts for an extra $60bn up for grabs in the global IT market. IDC estimates this will exceed the $1 trillion mark this year.

Every year, certain technologies tend to shine more than others. The trick is pinning down the ones that will generate more cash than hype. Some niche technologies will finally break into the mainstream while existing mainstream winners look set to continue their run of success from 2004 well into this year and beyond.

Let's have a look at what the leading market watchers and those in the channel think will be making it big in 2005. Among the top 10 strategic technologies for 2005, outlined by analyst Gartner, are instant messaging, IP telephony, wider use of wireless LANs (WLANs), RFID tags, and network security.

There are others, but they relate to outsourcing, services and approaches to software development. Other technologies that will be big in 2005 are notebooks and voice/data devices in general, blade servers, LCD displays, external disk storage devices and a number of security technologies.

Since the events of September 2001, and the rapid rise in internet- and email-based virus attacks, security has rocketed to the top of the IT shopping list for many companies. No longer an after-thought, security solutions are often installed alongside any new hardware equipment.

As a market, security has become big business not just for the vendors, but for the channel. From complex, enterprise software solutions to security appliances targeted at the resilient SME sector, the security market is still thriving, despite falling growth rates.

"The security market is still strong, probably not as strong as it was few years ago, but there is still healthy growth there compared with other IT sectors," says David Ellis, director of e-security at Unipalm.

"New threats are coming along all of the time. From a channel perspective it's all good news, with constant opportunities for up-selling, consultancy and after sales service."

Axel Lagerborg, head of software and licensing at distributor Ingram Micro, says: "The perennial favourite, security, still continues to amaze. Every year I think it has to slow down, but I'm still pleasantly surprised at how it continues to thrive.

"Again, I think security will be the biggest seller for us in 2005. Anti-virus solutions are the biggest segment within the security software market, alongside firewalls and content filtering solutions."

In a recent study, IDC said 2003 was "calmer" than 2001 and 2002 saw growth rates for security software falling from 25 per cent to 17 per cent. Revenues topped $2.5bn in 2003 and despite the slowdown, it expects the market to hit $5bn by 2008, representing a compound annual growth rate (CAGR) of more than 15 per cent.

As healthy as the demand for software security solutions is, the security appliance market is doing even better. Security appliances, which combine hardware and security software in a single device, are set to become even more popular in 2005.

"Organisations continue to turn to the ever-increasing selection of security appliances to solve their most pressing security issues," says Thomas Raschke, programme manager at IDC's European security products and strategies research team.

"The two main security product markets, software and appliances, continue to take different roads. IDC forecasts that the security appliance market will outperform the security software market by more than seven per cent CAGR until 2008."

In its recent quarterly look at the European security appliance space, IDC reported that Q2 factory revenue was up by 70 per cent on the same period in 2002, while unit growth had rocketed by over 100 per cent. Making up 75 per cent of the market are firewall/VPN appliances, a share which is dropping as different appliances emerge.

Newer unified threat management (UTM) appliances, which house firewall, gateway anti-virus, intrusion detection and prevention applications, are proving increasingly popular, accounting for 10 per cent of the market and rising fast. Leading vendors of UTMs include Symantec, Fortinet, ISS, SonicWall, ServGate, and Secure Computing.

Lagerborg says: "Security appliances are becoming cheaper, easier to use and more effective. Just like the PC server market, prices are falling all of the time."

The other major security threat for 2005 is spyware and, according to IDC, there is money to be made from this. In a short space of time spyware has gone from being a minor annoyance to home users to a 'major plight in enterprise environments.'

Spyware now infects millions of computers with the goal of tracking net usage, stealing personal information, and identity theft, all of which can be sold on to others. The tiny $12m market for anti-spyware software in 2003 is expected to hit $305m by 2008.

"A lot of spyware is coming from peer-to-peer sites," Ellis says. "So-called 'harmless' spyware can slow your systems down dramatically while more malicious spyware records keystrokes in an effort to discover password, personal and financial information. Anti-spyware products will be important in 2005."

The irony is that some of the other leading technologies for 2005 are those that help ensure that security remains a profitable sector. These include notebooks, hand-helds and wireless LANs, all of which look good for this year.

The drive to remote and wireless working may have opened up a can of worms for security but remains relentless in growth terms.

"Notebooks were very good in 2004, with sales massively exceeding our expectations," explains John Turner, business manager at Midwich. "I don't see the market continuing as it has been, but it will still be big. Vendors such as Acer and Samsung will continue to encroach on the existing market leaders.

"The entry-level notebook spec is becoming so good and so cheap - about £549 - that people that wouldn't have bought a notebook are now buying them."

In the third quarter figures from IDC, notebooks were still the strongest sector of the UK PC market, with growth rates of more than 23 per cent. Even corporate PC sales rallied in 2004, with businesses finally getting around to replacing all those outdated millennium machines.

But it's notebooks that remain the star, thanks to the SME sector and consumers. In the coming year, competition is expected to remain fierce with new models sporting faster graphics, more secure wireless technology, bigger hard disk drives and widescreen displays.

Turner says: "From what I hear, it's as economically viable for panel manufacturers to cut widescreen displays as it is to cut regular displays. At the moment there's a £50 delta for end-users wanting widescreen notebooks, but that will disappear early this year.

"Widescreen will start to become the standard format in notebooks next year".

Other mobile devices, including handhelds, Smartphones and BlackBerry devices had a strong 2004, and predictions are good for the coming year. In western Europe during Q3 2004, IDC found that sales in the mobile device market (Smartphones and PDAs) jumped 38 per cent to 1.8 million devices.

The market was mainly driven by Series 60 Smartphones, but BlackBerry sales were also very strong.

It is in the market for converged devices that the real growth is occurring. Hand-held devices, which now account for 30 per cent of the mobile device market, grew by just four per cent in Q3 2004. In contrast, converged devices now account for 70 per cent of the market and grew by 60 per cent.

Low-cost Pocket PC vendors, such as Medion and Mitac, are also growing their share, and the bundling of GPS software on devices is boosting sales.

Continuing with hardware, blade servers, Linux servers and grid computing are also tipped for big things this year. So far, blade servers have been slow to take off, thanks to their hefty price tags and a general lack of awareness in the business community.

Signs that things were changing appeared in the latter half of 2004, and this year may be the breakout year. IDC certainly seems to think so. For Q3 2004, blade server shipments rose by 44 per cent. This accounted for $287m in sales - about 2.5 per cent of total server revenue for Q3. It may not seem like much but it was higher than expected.

Dell finally re-entered the blade market in Q4 2004, after a short-lived foray in 2002. Typically, the PC giant has let slip that aggressive pricing will be on display, which should force market leaders IBM and Hewlett-Packard (HP) to react in kind.

Terry Fisher, business development manager for the HPC (high-performance computing) division at system builder Compusys, says: "We are already seeing more blade deployments; we are in the middle of rolling out a blade server solution at the Albert Einstein Institute in Berlin now. Like any other sector, it's about volume and the prices are becoming more reasonable.

"2004 was mostly early adopters, but this year will see wider adoption, new players and new blade technology."

Jessica Yang, research analyst at IDC's global enterprise server solutions, says: "End-user spending for blade servers in Q3 exceeded our expectations. We saw a shift away from single-processor blades to dual- and quad-processor blade systems. As more SMEs begin to adopt blades and with Dell re-entering the market, blade servers are on pace to surpass $1bn in revenue worldwide in 2004."

Linux servers had a great 2004 and are expected to continue chipping away at the dominance of x86 Windows-based servers throughout 2005.

For Q3 2004, IDC reported that Linux servers posted their ninth consecutive quarter of double-digit growth. Quarterly revenues passed the $1bn mark for the first time, accounting for more than nine per cent of the total Q3 server pot. HP, IBM and Dell control 64.5 per cent of the market.

This year will see grid computing adoption in western Europe breaking out of its HPC niche and into commercial data centres, according to IDC. Revenues by 2008 are expected to be $1.8bn across HPC and commercial environments.

A growing number of companies are moving beyond the pilot stage and as long as the feedback from real-world roll-outs remains good, grid computing is set for growth.

"The scientific community has been aware of the benefits of grid computing for some time. It fitted into their constrained budgets," according to Fisher, whose company Compusys has just signed up with Grid software firm GridXpert.

"They found their money went further in terms of price/performance and that value is being recognised by large corporate users."

After a few years of moderate success and many security scare stories WLAN technology looks set for decent year in the business sector. Thanks to the improved security protocols introduced this summer, many feel that 2005 will see corporates get over their security worries.

Nick Bharadia, pre-sales engineer at D-Link, says: "WLAN implementations will be good this year. Data transfer speeds have hit 54Mbps and the 802.11i standard will appeal to a lot of enterprises because it is more secure.

"Also, there is the QoS protocol, 802.11e, which will help drive wireless into the IP realm. People have held back so far on implementing voice over wireless because there was no QoS."

Despite the increasingly numerous Wi-Fi hotspots, corporate take-up is still low and it will take a big push by vendors, operators and the channel to get it through the doors.

IDC claims that although WLAN equipment sales in EMEA for the first half of last year were strong, interest levels by enterprises in using WLAN hotspots remains very low. The analyst claims that if operators want their customers to use these services they will have to do much better job of educating them on the business benefits.

On the IP front, both VoIP and IP storage look set for a good year. IDC, Gartner and others agree the hype associated with VoIP is finally being outpaced by actual sales. Gartner believes that telephony will be combined with email, IM and other communications technologies to create unified communications platforms.

Telephony, networking and messaging software companies are set to go head-to-head, so much so that Gartner predicts that anyone entering the market this year will have merged, been bought out or failed by 2010.

On the storage front, IP SANs - especially the iSCSI SAN - have popped up on the radar and will grow strongly throughout the year.

"During 2005, we will see IP storage and specifically IP SANs catching up with, and even overtaking traditional, Fibre Channel SAN on speed and reliability," says Paul Klinkby-Silver, Intransa's EMEA general manager.

"This will allow resellers with standard TCP/IP networking skills to compete with specialist storage players."

IDC reported that iSCSI's Q3 revenues in 2004 were up 44 per cent on Q2. The market is expected to top $1bn in sales for 2004.

CONTACTS

Compusys (01296) 505 100
www.compusys.co.uk

D-Link (020) 8731 5555
www.dlink.co.uk

IDC (020) 8987 7100
www.idc.com/uk/

Ingram Micro (0870) 166 0160
www.ingrammicro.com

Intransa (020) 7152 4022
www.intransa.com

Midwich (01379) 649 200
www.midwich.com

Unipalm (01638) 569 600
www.unipalm.co.uk