Market Tracker Says Tech Growth Predictions Were On The Mark.(INTERNET & TECHNOLOGY)(Q & A)

Byline: MIKE ANGELL

It's tough to make predictions, especially about the future. Just ask George Colony. As the chief executive of Forrester Research Inc. in Cambridge, Mass., Colony is paid to predict the impact of technology on business. His prediction for 2003? Tech spending should grow slightly. He says the economy still needs to recover from a hangover inflicted by a $65 billion binge in tech spending. Some of that hangover stems from optimistic forecasts about the impact of technology on the economy. Once-hot tech companies used market studies from Forrester, International Data Corp. and others to lay claim to multibillion dollar markets. For example, Commerce One Inc. and Ariba Inc. included Forrester research in their 1999 initial stock filings to suggest the market for their services could reach $1.3 trillion by 2003. The two companies are expected to have combined revenue of $382 million this year. Colony says companies misquoted Forrester data to sell stock. He adds that a 2001 audit of Forrester research showed only three of 14 of its market-size forecasts were high. Colony spoke with IBD about technology and the research business. IBD: Why have companies throttled back on technology spending? Colony: When companies bought much of the new technology, there wasn't much change in their organization. If you just buy the technology without changing how you do business, it's a waste of money.

Many companies found out that the technology they were buying wasn't making them more efficient. Chief executives and chief financial officers are going on the warpath now about how they have all this technology but it's not increasing revenue or profits.

IBD: What's that mean for demand for tech products?

Colony: No technology company will survive unless they are also in the services business. Companies aren't going to just buy boxes any more. Rather, they're going to want to see how these products will fit with what they already have and how it will increase their profits.

(Former IBM CEO) Gerstner got it right when he said companies don't want to buy technology itself; they want to change the way they work. You can't just sell the box. You have to help them change the process for doing business.

IBD: Are the big tech firms doing a good job boosting services?