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Survey: IT spending to grow modestly next year

CIO confidence is up in third quarter, according to Forrester poll.

IT spending is forecast to grow in the high single digits next year and remain on that pace through 2008, according to two reports released Monday by Forrester Research.

IT spending on goods, services and staff is expected to grow 6.4 percent in the United States next year, according to Forrester Research's quarterly survey of chief information officers. That expectation reflects modest growth and an improvement from the past two quarterly polls of CIOs.

"Despite the negative perception from oil prices and software vendors putting out quarterly warnings, CIOs are generally expecting a modest growth cycle," said Tom Pohlmann, Forrester research director.

In the third quarter, 15 percent of CIOs surveyed indicated their confidence in the health of their respective industry was "very strong," compared with 5 percent in the previous quarter and 4 percent in the first quarter, Pohlmann said.

Add to that group the CIOs who rated their confidence for their particular industry as OK or strong, and the total was 76 percent, slightly up from 73 percent in the previous quarter.

Thirty-nine percent of CIOs surveyed are on pace to exceed their budgets for the year. That's up from the 34 percent who said so in the previous quarter.

Forrester also offered its own IT-spending predictions, based on its forecast models.

The research firm expects computer hardware spending to peak at 14 percent next year and then to level off, with an average growth rate of 9 percent through 2008.

Software is expected to take a different tack, with only 3 percent growth next year but rising in subsequent years for an average 7 percent growth rate. Systems management, storage software and security applications are expected to drive the increase in software spending next year, while Web services and composite applications are anticipated to drive spending in future years, according to the report.

Network equipment and IT consulting are both expected to average 4 percent growth through 2008.

Corporate customers faced with a need to replace aging LAN (local area network) equipment will drive the growth in network equipment, while carriers are expected to scale back their investments.

Spending on IT consulting and integration work will increase slightly as companies outsource, versus increasing their ranks through new hires. Emerging technologies such as RFID, open source and business process management software are also expected to drive the increase.