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Upgrades, HR costs squeeze British tech budgets

A U.K. survey finds that little money is left over for new IT investment and that Linux is not leaving its mark on the desktop.

Windows upgrades and IT staffing costs remain the biggest drains on British corporate IT budgets, with operational expenses reducing the amount of money left for new investment, according to a new report.

A survey of 168 organizations in the United Kingdom found that more than half expected IT spending to increase over the next year by an average of 1.9 percent. The annual Benchmark of IT Spending was conducted by Britain's National Computing Centre.

That figure of 1.9 percent varies widely over different sectors. In central government, manufacturing and finance, overall IT spending is predicted to actually fall over the next year.

Ian Jones, head of content and publishing at the NCC, described the outlook of IT buyers as "cautiously optimistic."

The bulk of IT budgets is still taken up by running and maintaining the existing infrastructure, with operational costs making up 68 percent of total spending. Fresh investment in IT only accounts for 28 percent, with the rest accounted for by end users and other sources within the organization.

Again, the figures differ in each sector, with IT investment greater in central government and finance, and lower in construction and manufacturing.

IT staff remain the single largest budget item, accounting for almost a third of overall budgets. The average level of IT staffing is 26.5 techies per 1,000 end users in a company, which is slightly down from 31 last year. The finance sector has the highest ratio, at over twice this year's average.

Desktop replacement is the most important IT department activity, and 42 percent of Windows systems are expected to be upgraded over the next two years, mainly to Windows XP.

The proportion of sites running Linux desktops remains low, though strong growth is predicted. Jones said the Linux vendors had come in for "a real kicking" after all the rhetoric and hype about open source on the desktop.

"It has really made no impact whatsoever on the desktop," he said. "The Linux vendors need to raise their game."

The big area highlighted by user organizations is thin-client desktops. These are currently only used in 16 percent of firms, but that is expected to rise to 24 percent over the next two years.

Laptops and PDAs are also expected to grow proportionately much faster than desktops, at just more than 50 percent over two years, though the actual numbers remain a lot smaller.

The Windows 2003 server upgrade is also a major project on the table for many companies, while the decline of the mainframe continues apace. The number of respondents using a mainframe architecture fell from 69 percent last year to 59 percent this year.

Andy McCue of Silicon.com reported from London.