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Forrester: IT budgets to jump 7 percent in '05

Of business leaders surveyed, 54 percent have a positive outlook for the performance of their companies next year.

A report released Monday by Forrester Research says business leaders are expecting to increase their IT spending by 7 percent in 2005.

Forrester indicated, however, that companies may well increase their IT spending to an even larger extent, as the research company believes that respondents to its surveys tend to underestimate how much money they intend to spend. The predictions are based on a survey of 1,300 North American IT executives.

Of those surveyed, 54 percent in general harbored a positive outlook for the performance of their businesses over the coming 12 months. A year ago, only 44 percent did, the study said. That finding jibes with earlier research by Forrester, which identified an increase in the overall confidence of chief information officers during each quarter of 2004.

Among the organizations expecting the biggest increases in IT spending are those in the public sector, including companies working in the government, health care and education markets. They expect to increase their budgets by 7 percent, Forrester said. Companies in those markets decreased their spending during 2004.

Other companies expecting to enlarge their budgets are those in the professional services, financial services and insurance sectors; they're expected to increase their IT spending by 5.1 percent.

Forrester, which is based in Cambridge, Mass., said that spending on software applications will be one of the hotter areas for growth next year. Some 59 percent of the individuals surveyed detailed plans to buy new applications or upgrade packaged software they already own. A year ago, business leaders listed security as the leading area for spending.

Another market primed for increased spending is the regulatory compliance arena. Forrester said that 38 percent of the people it interviewed consider support for regulations such as the Sarbanes-Oxley Act a critical priority, while 65 percent identified such support as a priority.

Budgeting for analytics, or business intelligence, software is expected to increase by 9 percent, with the demand for regulatory compliance technology aiding that gain. Another related market, financial applications, is expected to grow by 4 percent.

The report also says that the content management sector will grow by 15 percent compared with last year.