Forrester recently surveyed IT executives at North American and European enterprises just as they entered budgeting season for 2005. Overall, 37% of them will spend more on IT during 2005 than during 2004 -- led by large North American businesses and financial services firms -- compared with only 15% expecting to decrease their spending.
Forrester recently surveyed 1,377 IT and business decision-makers to learn about their approach to IT governance. Two-thirds of these respondents hold executive-level posts, so we asked them for a sneak peek at the directions of their IT budgets for next year.1 We found the most upside to IT budgets in the following sectors:
- Very large North American enterprises. Forty-six percent of North American enterprises
with at least 20,000 employees will spend more on IT next year, versus the 15% of them cutting
spend. And North Americans in general lead in their IT optimism across the enterprise sector as a
whole -- 40% will increase IT spending next year compared with 32% of European enterprises (see
Figure 1-1). Within Europe, French and Southern European firms show the most budget downside, while
Eastern European companies and those in Germanic-speaking countries have more positive
- Finance, media, and public sectors. Fifty-two percent of finance and insurance firms --
led by insurers -- will spend more on IT next year (see Figure 1-2). At the subvertical level,
media firms and nongovernment public sector organizations also show above-average propensity to
increase spend, while the electric and natural gas utilities and transportation firms will
experience more budget cuts than increases.3
- Firms with an autonomous CIO. Sixty-seven percent of enterprises have a cross-functional executive steering committee to oversee the IT portfolio. But those who don't, placing the IT budget solely in the hands of the CIO instead, show more budget growth potential. Forty-four percent of these soloists will increase spending next year compared with 35% of those with committees.
- U.S. firms with offshore experience. Costs savings associated with offshore services
won't lead to less spending on IT overall. Forty-eight percent of those North American firms that
currently use offshore help will spend more on IT next year, compared with 38% of those who don't.
In Europe, the trend is slightly reversed, where enterprises not using an offshore provider
are the most likely to increase overall IT spend in 2005.
- Siebel and PeopleSoft customers. Roughly, 40% of users who have PeopleSoft or Siebel as a core apps provider expect to spend more on IT next year. In fact, of the 115 companies in our sample that use both vendors, the percent of those increasing IT spend rises to 45%. This compares with a more flattish outlook for SAP users (see Figure 1-3).
Using the data
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1. Eight hundred sixty-seven of the respondents represent North American enterprises, while 510 work for European enterprises. We will write a more detailed Business Technographics Data Overview of 2005 IT budgets later in the year.
2. Forrester defines an enterprise as a company with at least 1,000 employees.
3. At the highest level of our industry taxonomy, we consolidate traditional power utilities with telecommunications firms to reflect the way many of our clients view their markets. But these subsectors show different 2005 outlooks. Only 19% of energy utilities will spend more in 2005 compared with 40% of telecom carriers.
Forrester is an independent technology research company that provides pragmatic and forward-thinking advice about technology's impact on business. Forrester offers products and services in four major areas: research, data, consulting and community. Established in 1983, Forrester is headquartered in Cambridge, Mass.
© 2004, Forrester Research Inc.