IT spending is expected to rise 4% to 6% in 2007, down from 8% last year, as companies seek to rein in the expense of running their computer systems, according to a consensus of industry forecasts.
However, spending growth rates are expected to be higher for small to medium-sized businesses (SMBs) and in emerging economies globally than in more mature markets, according to the consensus report from AnalystPerspectives, a unit of IT and business books publisher SkillSoft.
The report also notes some seeming contradictions. It forecasts growth in the use of virtualization in data centers to reduce the number of servers needed, but still predicts strong growth in sales of server hardware. Virtualization makes it possible for a server to run multiple software applications and operating systems on the same physical server. The report forecasts healthy 6.5 % growth in server sales, but also says more companies will be running those new servers as virtual servers.
This year, businesses will be able to invest more in strategic IT initiatives than they did last year, according to a forecast from Gartner, one of several analyst firms included in the report.
Increased energy costs, regulatory compliance demands and other overhead meant that much of the IT budget in 2006 went to keep operations going, wrote Jed Rubin, director of Gartner Consulting.
“This increased ‘run-the-business’ spending has consumed budget resources that were originally earmarked for more strategic and transformational investment. IT leaders are now planning to optimize their spending in these areas in the year to come,” Rubin noted.
The forecasts also anticipate stronger IT spending by SMBs — businesses with less than US$1 billion in annual revenue — than enterprises with more than $1 billion in revenue.
AMI-Partners forecasts global SMB IT spending to grow by 10% in 2007. By contrast, Gartner forecasts large enterprise IT spending to grow by 2.8% this year, down from 6 percent growth in the first half of 2006. The consensus is that SMBs are realizing the importance of IT to the success of their businesses.
IT spending growth will be strongest in some of the emerging economies. IDC, for instance, forecasts “scorching” IT spending growth of an average 14% in such places as China, Eastern Europe, the Middle East, Africa and Latin America. But India will top them all, with a forecast 23% increase. By contrast, IT spending in the United States may grow 6.3%.
Even though Microsoft’s Windows operating system is a significant presence in the business market as well as the consumer market, the market reaction has been “lukewarm” to its new Vista OS and Microsoft Office 2007 set of business applications.
AnalystPerspectives cites a CIO magazine survey that showed 15.8% of CIOs planned to upgrade to Vista or Office 2007 and 8.3% planned to upgrade to both. The survey showed that 20.7% needed more information before deciding on an upgrade, but that 63.6% had no plans to upgrade.
CIO is owned by International Data Group Inc., the parent company of IDG News Service.
