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8/30/2004
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CIOs Cheerier About Future Spending

Chief information officers in the U.S. are surprisingly optimistic about the future and think IT spending will climb nearly seven percent in 2005.

Chief information officers in the U.S. are surprisingly optimistic about the future and think IT spending will climb nearly seven percent in 2005, a research firm said Monday.

Forrester Research, which polls North American CIOs each quarter, cited numbers that indicate enterprise IT leaders are more confident than earlier in 2004. For the first time in the past three quarters, said Tom Pohlmann, research director at Forrester, a majority of the surveyed CIOs (52 percent) said that their industry business climate was at “strong” or “very strong.” In the first quarter, that number was only 36 percent.

“That's a surprising jump,” said Pohlmann. “Pretty much everyone is optimistic about the future. For these IT pros, the future's not as bad as all the negative media news, about, say, oil prices, or some software vendors posting poor earnings.”

Conversely, only 17 percent of the CIOs polled said that the business climate was “challenging” in the third quarter, down by almost half from the 31 percent who saw doom and gloom in the first quarter.

On average, the CIOs surveyed thought that their IT spending would climb 6.4 percent in 2005, on pace with Forrester's own earlier estimate of a 7 percent increase in spending next year.

“There's lots of correlation between the CIOs' optimism and spending,” claimed Pohlmann. “Now they're saying, 'I'll take my budget for 2004 and boost it. It's really the first time that they're feeling that strongly.”

CIOs are putting their money where their mouths are, said Pohlmann, with spending momentum growing each quarter. In the third quarter, 39 percent spent above their budgeted run rate -- in other words, nearly 4 in 10 have already spent more than 75 percent of their allocated 2004 budget -- while during the second and first quarters, that number was only 32 and 25 percent, respectively.

Two out of three CIOs said they plan to spend more in 2005 than in 2004.

The CIOs survey give credence to Forrester's other spending projections, said Pohlmann, including a sustained growth in IT spending that should hit about seven percent per year through 2008.

“If you look at new investments, the future is even brighter,” said Pohlmann, who highlighted computer hardware spending as the one category that will hit double digits next year. Other spending classifications, such as IT consulting and software, will see much lower growth rates in 2005 of just 3 percent each, he said.

“The story is that it's not all bad news,” said Pohlmann, who like the CIOs he's surveyed, seem to look on the bright side. “There's definitely signs of healthy life in IT.”

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