Ensuring Australia's future as a successful, thriving, and cohesive knowledge-driven economy is a key objective for all of us. Governments and companies globally have been spending consistently to achieve the necessary infrastructures and as a result the percentage of citizens worldwide who are technology users is rapidly increasing.

This represents a different game with a different set of rules than we have been playing for the past 40 years or so. Now the requisite natural resources to succeed are brains, education, and fast-moving bits. What this means, I think, is that Australian vendors need to embrace the situation and take more of an offshore market focus. In many cases they need to view offshore markets as the primary initial markets and then expand from there, possibly back into the Aussie marketplace.

From an Aussie vendor's perspective this news isn't as good as it might sound. There remains a deep-rooted conservatism within Australian IT decision-makers. When the spending spigot is turned on a little bit, most of the spending goes to the mega-vendors for established product types. And funds are used to upgrade and augment the existing infrastructure rather than to change things radically. Established sector leaders will probably do quite well but others will not benefit directly as much.

There will be exceptions in various discrete market segments. M&A activity will continue in 2008 because the big companies need to keep refreshing their product lines.

Over the past few years, enterprises have learned that they can live without the latest new things, to the point where it might be job-risking to even suggest a different vendor, especially an Aussie one. It will take time to flush this out of decision-makers' collective memory and for IT people to start taking buying risks in the hope of big gains.

The competition for the still under-served small and mid-market segments also offers opportunities as different breeds of aspirants try to gain market share in this space. History has demonstrated that these companies exhibit certain buying characteristics that must be understood and effectively addressed regardless of their size or business sector.

There have generally been four drivers of the IT industry's growth: inventory levels, the overall economic environment, customer confidence, and IT innovation. It has taken a few years to burn through a lot of excess capacity. IT can't grow without the support of a solid economy. A lot of customer confidence and perseverance is also required. Many sources of IT spending growth in future will not necessarily be part of the traditional IT budget.

Len Rust is publisher of The Rust Report