Brighter outlook for IT budgets in 2007

By James Murray on Jul 12, 2006 9:42 AM
Filed under Strategy

A Datamonitor survey suggests more firms will invest in IT projects to
improve efficiency and comply with regulations.

IT directors are optimistic about the outlook for 2007 and budget increases, according to a new report published today by analyst Datamonitor.

In a survey of 200 IT decision-makers in the US and Western Europe, 43 percent of respondents said they expected their IT budget to increase in 2007, compared with 32 percent who saw their budget increase between 2005 and 2006.

Meanwhile, just 17 percent thought their budget would fall in 2007, compared with 21 percent who saw their budget cut for 2006.

However, the situation was less encouraging in Europe than in the US, where almost three quarters of firms expect to see their IT budget increase next year.

Tim Gower, lead analyst at Datamonitor, said in a statement that an average GDP growth for the UK, France, Germany, Italy, Spain, Benelux and the Nordics of just 1.9 percent had made firms more reluctant to spend more on new technologies. But he added that with stronger economic growth forecast for the rest of the year, 2007 should see a reduction in the "the degree of caution in IT budget setting".

The survey also found that IT chiefs continue to rank efficiency gains and cost cutting as their primary objectives for IT investments in 2006. However, the goals of increasing company revenue and ensuring regulatory compliance are becoming more important for IT projects.

"More favorable economic conditions have ensured that, on average, enterprises are planning to increase their IT spending in 2007, with an enhanced focus in particular on software and IT services,” said Gower. “Solutions that help enterprises cut costs, enhance efficiencies and achieve or maintain regulatory compliance will generate the most interest and vendors and services providers should always look to meet these requirements with their offerings.”