IT spending growth set to slow

IT spending is expected to increase by 4% to 6% this year – a smaller rise than last year’s 8% – as companies seek to rein in the expense of running their computer systems, analysts have forecast.

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IT spending is expected to increase by 4% to 6% this year – a smaller rise than last year’s 8% – as companies seek to rein in the expense of running their computer systems, analysts have forecast.

But spending growth rates are expected to be higher for small and medium-sized enterprises and in emerging economies around the world, than in more mature markets, an AnalystPerspectives report from SkillSoft says.

The report, which brings together the views of several industry analysts, also notes some seeming contradictions. It forecasts growth in the use of virtualisation in datacentres to reduce the number of servers needed, but still predicts strong growth in sales of server hardware.

Virtualisation 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 Gartner, one of several analyst firms included in the report.

Increased energy costs, regulatory compliance demands and other overheads meant that much of the 2006 IT budget went on keeping operations going, Jed Rubin, director of Gartner Consulting wrote.

"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 optimise their spending in these areas in the year to come," noted Rubin.

The forecasts also anticipate stronger IT spending by SMEs than large enterprises with revenues of more than £500m.

AMI-Partners forecasts that global IT spending by SMEs will grow by 10% in 2007. In contrast, Gartner predicts that large enterprise IT spending will grow by only 2.8% this year, down from 6% growth in the first half of 2006. The consensus is that SMEs are realising the importance of IT to the success of their businesses.

IT spending growth will be strongest in some of the emerging economies. IDC, forecasts "scorching" IT spending growth of an average 14% in China, Eastern Europe, the Middle East, Africa and Latin America. But India will top them all with a forecast 23% increase. In contrast, IT spending in the US may grow 6.3%.


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