Enterprises plan to increase IT spending by 3.9 percent in 2005, according to a new survey of more than 1,300 IT decision-makers from Forrester Research, Inc. (Nasdaq: FORR).

The report is based on the largest demand-side survey in the industry. It affirms the 7 percent increase in overall North American IT spending that Forrester projects for 2005, which includes spending by small and medium businesses, as well as spending outside IT departments. Past analysis also indicates that CIOs and technology decision-makers tend to be conservative when predicting future spending.

Forrester surveyed 1,368 technology decision-makers at North American and European enterprises regarding the health of the IT industry in 2005.

  • Fifty-four percent of the executives polled have a positive outlook for their business in 2005, compared with 44 percent last year. These findings are consistent with the increase in CIO confidence Forrester has seen in its quarterly CIO Confidence Poll. Optimism continued to increase each quarter in 2004, with 54 percent describing the current business climate as strong or very strong, compared with 33 percent in Q1.
  • Business services, and financial services, and insurance were the most optimistic industries, with 63 percent of each industry indicating a positive outlook. This directly translates into spending, as business services expect to increase IT spending by 5.1 percent in 2005.
  • Public sector organizations — government, healthcare, and education — are increasing IT spending by 7 percent in 2005, compared with a decrease last year.

Application Upgrades Are Top Priority For 2005

Applications are the big winner for budgets in 2005. Fifty-nine percent of decision-makers surveyed identified deployment or upgrade of major packaged applications as a priority, replacing security as the top priority from the past year.

  • Regulatory compliance tops agendas. Thirty-eight percent of decision-makers consider support for governance, such as Sarbanes-Oxley, a critical priority, while 65 percent said it was a priority.
  • Demand for business intelligence (BI) increases 9 percent. Regulatory concerns and an increasing quantity of data caused BI to retain the top spot in planned purchases. Demand for financial applications also stayed on top in 2005 with 4 percent growth.
  • Content management could be the next “killer app.” Purchase plans for content management increased 15 percentage points from last year, as firms adopt enterprise-wide strategies for managing Web content, documents, records, and digital assets.
  • Enterprises are turning to outside help.
  • IT outsourcing remains strong.
  • Application outsourcing is fueling Forrester’s forecasted growth of 9 percent for the category, with outsourcing for applications maintenance growing 27 percent in 2005. Sixty-nine percent of companies that identified application upgrade as a priority will purchase consulting help for those projects. Overall, the demand for systems integration services increased 10 percentage points this year, from 34 percent planning to purchase in 2004 to 44 percent for 2005.

The research, “2005 Enterprise IT Outlook: Business Technographics™ North America,” and “North American IT Spending In 2005,” also includes data on planned spending in the computer hardware and networking categories.

The research mentioned in this release and the “CIO Confidence Poll: Q4 2004” are available to Forrester WholeView 2® clients and can be found at