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10/12/2005
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U.S. Spending On IT Expected To Rise Modestly Next Year

Despite this, the job market is still fairly limited, according to new research by both Gartner and Forrester; application development and mobile computing are expected to be growth areas.

U.S. businesses next year are expected to increase spending by 5.5 percent, with some of the additional money going to a renewed focus on application development and integration, a research firm said Wednesday.

Gartner Inc.'s projection, however, was less than competitor Forrester Research Inc.'s, which reported this week that it expected IT spending in the United States to reach 7 percent next year.

Gartner said spending on security and storage would level off in 2006, as businesses placed an increasing emphasis on buying software development tools and middleware. Mobile devices were expected to become a major purchasing priority, the research firm said.

“Despite the spending increase, the message to IT managers is clear: you must continue to improve the efficiency of established IT investment areas if you want to fund substantial growth in IT or add IT professionals to the workforce,” Gartner analyst Barbara Gomolski said in a statement.

Gartner based its projections on a summer survey of more than 1,500 U.S. IT managers. The research firm also found that the IT job market would remain "challenging," as companies intended to devote more of their budgets to project and program management, IT administration and system and network management.

Small and medium-size businesses planned to increase spending more than large organizations, Gartner said. The service sector expected to increase spending by 11 percent, the most of any other industry.

“On the surface, these results paint an optimistic picture of long-awaited IT spending recovery, but the increases involved are relatively modest,” Gomolski said.

While IT spending is expected to increase overall, as a percentage of revenue, spending was actually expected to decline in some businesses, the analyst said.

Forrester, on the other hand, expected spending to shrink from 7 percent in 2006 to 2 percent in 2007, due primarily to changes in the overall economy and the state of new technology adoption.

"Technology spending is currently very brittle," Forrester analyst Andrew Bartels said in a statement. "Without a 'must-have technology,' most businesses are only investing in technologies with tangible (returns on investment).

"That means they will respond quickly if corporate revenues and earnings start to slow in an economic slowdown, which seems likely at some point in the next couple of years."

Among the factors that could lead to a drop in consumer spending, which would, in turn, impact business spending, are rising interest rates, high energy prices and a potential drop in the housing market.

Nevertheless, the economic downturn is expected to be short lived, and IT spending is expected to rebound to near double-digit growth by the end of the decade, Forrester said.

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