Enterprises To Boost 2005 IT Spending 3.9 Percent - InformationWeek

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12/20/2004
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Enterprises To Boost 2005 IT Spending 3.9 Percent

Research firm says IT spending will increase because 54% of companies have a positive business outlook.

Despite some apprehension about business next year, a research firm's survey published Monday said that enterprise-sized companies will spend more in 2005 wider on IT.

According to Forrester Research's survey of over 1,300 IT decision makers in companies with more than 1,000 workers, employer spending for information technology will increase by an average of 3.9 percent in 2005. A year ago, a similar poll found an average increase of just 1.7 percent.

"It affirms the 7 percent increase in overall North American IT spending that Forrester projects for 2005," said Tom Pohlmann, a research director at the Cambridge, Mass.-based research firm, in the report accompanying the survey results. "[That] includes spending by small and medium businesses, as well as spending outside IT departments."

One of the reasons why spending will grow at a fast clip, said their IT managers, is that more than half of them -- 54 percent -- have a positive outlook for their business in 2005. That's a 10 percentage point increase over last year's poll, and consistent, said Pohlmann, with the gradually increasing confidence that Forrester measured throughout 2004. In the first quarter, for example, only 33 percent of the chief information officers surveyed described their current business climate as strong or very strong.

Security remains one of the top line items scheduled for spending increases in 2005, noted Forrester, but it's no longer number one. Instead, it's slipped on the priority list to number four, with last year's number three -- deploying or upgrading a major software package -- jumping to the first spot.

"Applications are the big winner for budgets in 2005," said Pohlmann. Nearly six out of every ten enterprises will pop for new or updated applications this next year, compared to 54 percent which named security as one of the major themes for the year's spending. Among the most popular applications for 2005, said Forrester, will be business intelligence and content management, the latter perhaps the "killer app" of the year. Purchase plans for the category, which manages Web content, documents, e-mail, records, and other digital assets climbed by 15 percentage points compared to 2004's plans, with 38 percent of North American companies saying they would invest in such solutions.

Also on the spending list for 2005 were replacing or upgrading PCs (37 percent of the companies said they named it as a priority) and upgrading Windows on the desktop (33 percent).

Other technologies will draw interest in 2005, said Forrester's Pohlmann, including server virtualization and automated provisioning. The former garnered news this year with EMC purchasing VMWare early in 2004 and Microsoft finally entering the market with its Virtual Server 2005 this summer, and will be on 29 percent of the surveyed firms' buy list next year. EMC/VMware holds close to a 4 to 1 advantage over Microsoft in that market, however, as the vendor which will be considered the most.

Finally, Forrester estimated that about one in five corporate PCs will be replaced in 2005, with Dell remaining the clear leader as the most likely vendor. HP, however, has already gained on Dell this year (it's made up eight percentage points) and may make up additional ground next year if the IBM sale of its PC unit to the Chinese Lenovo Group disrupts the channel.

And Linux aficionados should take heart: Forrester's projected that 2005 will match the Mac's penetration in the enterprise, while it will blow by Apple's operating system in 2006.

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