CIOs' 2005 Spending Up

Spending is up, but not by much, according to a recent IT spending forecast by Forrester Research, which expects North American IT spending to grow at 7 percent in 2005, up a small margin from 5 percent in 2004. The 2005 total IT spending is expected to reach $783 billion, up from $732 billion in 2004. In terms of revenue potential, total new IT investments in computers, peripherals and communications equipment is expected to reach $251 billion in 2005, up from $236 billion in 2004.

"In 2004, there was a big surge in computer and communications equipment purchasing," says Andrew Bartels, research analyst at Forrester. "That goes away in 2005, but the big investment value carries over."

Bartels forecasts software spending to remain about the same as last year; ditto for IT services and outsourcing. "Spending looks pretty modest overall," he says.

Spending forecasts by CIOs are typically conservative at the start of the year, Bartels adds, and once revenue and profits begin to increase, the spending will follow suit. "The budget plans at this point are low, but they'll actually spend higher," he says.

A recent Merrill Lynch TechStrat Survey of 75 U.S. and 25 European CIOs also reports modest spending growth anticipated for 2005, with CIOs reporting only about a 2 percent increase in their budgets.