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NEW YORK (MONEY Magazine) -
You know that boss you've been hoping would retire? He soon will, along with tens of millions of other senior employees across the country.
Baby boomers, expecting longer, healthier lives, say they are going to retire later than their parents. And they very well may. But retirement research firm EBRI says most people call it quits earlier than they plan.
Executives get sick, are pushed out or decide that golf and better weather are appealing after all. According to the Bureau of Labor Statistics, 35 million boomers will retire between 2000 and 2020. Another 23 million will pack up their offices in the following decade.
Sure, immigration will fill some of the gaps. But corporate America will have to continually find ways to boost productivity and learn how to do more with fewer of its most experienced workers. That means an opportunity for two sectors that help companies get more from less, technology and consulting.
Software
Research firm IDC predicts that technology spending, which stalled in the past half-decade, will jump 6 percent annually for the next four years. Many of those dollars will be spent on software, which can offer the biggest boost to productivity.
The easiest way to invest in the trend is the iShares Goldman Sachs Software Index Fund (Research). The exchange-traded fund's 47 holdings span from giant Microsoft to tiny Ariba, which makes software that analyzes corporate spending patterns.
A good long-term, though riskier, software play is the fund's second-largest holding, Oracle (Research). It is the world's largest maker of databases, the digital file cabinets that are fundamental to any technology system requiring computers to store and retrieve information. Oracle's next generation of software will allow databases to handle day-to-day tasks like approving expense accounts and negotiating prices.
"People will be needed only on an exceptional basis," says Robert Shimp, Oracle's vice president of technology marketing. Oracle is also growing through acquisitions, and that's a risk. Late last year, Oracle bought PeopleSoft, one of the largest makers of business applications that make use of databases. Large acquisitions rarely go off smoothly.
For that reason, Oracle's shares, at a recent $13, have a lower price/earnings ratio than those of rival SAP -- 21 vs. 27, based on 2005 earnings. That could mean more upside for long-term shareholders.
"As businesses look to grow and increase productivity, technology companies, and specifically Oracle, will benefit," says Jason Maxwell, a portfolio manager at TCW Group, which owns 13 million Oracle shares.
Consultants
Most executives can handle decisions about budgets, marketing and production. But the massive changes that will result as the boomers retire are far from ordinary.
Cue the consultants. Accenture (Research), the largest publicly-traded U.S. consulting firm, helps managers with everything from staffing to software needs. In the past few years, much of the growth in consulting has been in moving jobs overseas. That's hurt Accenture, which has lost clients to less expensive foreign rivals.
But Walter McCormick, a senior portfolio manager at Evergreen Investments, says companies will return to Accenture when it comes to issues beyond cutting their labor costs.
What's more, Accenture's Indian competitors have to deal with wage increases at home.
"The gap is closing pretty quickly between what it costs to hire Indian consultants vs. Accenture," says McCormick, whose company holds 2.2 million shares of Accenture in its funds. The company's stock, recently trading at $25, is worth $30, McCormick maintains.
Next: Strategy 3: Follow the wealth
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