US IT spend to mark modest growth

US IT spending will grow by seven per cent next year, according to Forrester Research. The analyst firm predicts that spending on IT goods, services, and staff will remain at seven per cent over the next three years. This estimate pegs IT growth at slightly above overall economic growth, a sharp contrast from the dotcom boom of the late 90s - and the slump that followed it. Forrester reckons the US is halfway through the current IT business cycle, which started in 2001.

Its study IT Spending Outlook: 2004 To 2008 And Beyond provides a breakdown of estimated growth rates by technology segment. Growth in computer hardware spending will average out at around nine per cent over the forecast period, peaking at 14 per cent next year before levelling off. Improved price/performance, the spread of Linux and other open source software, and the growing adoption of blade servers will drive near-term growth.

In 2005, software spending will grow only three per cent, with systems management, storage software, and security applications showing the largest increases. Forrester thinks spending will pick up in 2006 and beyond as applications based on web services become more mainstream. Software spending will grow by seven per cent a year between 2004 and 2008.

Network equipment spending growth will reach only four per cent in 2005, after posting double digit growth (16 per cent) this year. Even though the need to replace aging LAN equipment and investments in network security appliances will drive demand from enterprises, carriers will cut investments leading to slower growth overall.

IT consulting and integrations will also grow more modestly than other IT segments, with compound growth of around four per cent between now and 2008. Decreased demand for large enterprise apps is hitting services revenue. "Future growth will come from companies backfilling projects with consultants rather than new hires and the need for consulting on emerging technologies like RFID, open source, and business process management software," Forrester said.

Looking at the health of the IT market from a different angle, Forrester polled 195 chief information officers at North American companies in its third quarterly review of CIOs' confidence. Confidence is high, with 71 per cent of respondents expecting their companies to grow over the next three quarters. By contrast, only five cent of CIOs reckon their organisation's business will decline over the same time. ®