Budget brief: Sneak peek at 2006

Linda Tucci, Executive Editor

A majority of large U.S. companies plan to spend more on IT next year than they did this year, according to a Sept. 15 report from Forrester Research Inc. As part of its annual survey on IT governance, the Cambridge, Mass., firm asked executives for a sneak peek at budgets for the coming year.

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Overall, 53% expect their IT budgets to increase in 2006, while only 7% plan to cut budgets. The average increase is 4.3%, hardly a spending spree, but up from the 3.4% boost expected in 2005, and 1.4% in 2004.

Firms with 5,000 to 19,999 employees led the pack, with 62% reporting that IT budgets will likely increase in 2006 and only 4% anticipating a decrease. Companies with 20,000 or more employees, as well as companies with 1,000 to 4,999 employees, were not quite so bullish.

About 50% of them expect to spend more on IT in 2006 than in 2005, and a greater percentage -- 8% to 10% -- said they will spend less. The data, based on responses from 394 executives, was part of Forrester's larger annual survey on IT governance and yielded a couple of surprising tidbits related to IT governance and outsourcing.

Contrary to conventional wisdom, firms with centrally controlled IT shops are much more aggressive in their budget projections than companies that have adopted a decentralized or "business-unit-led approach: 60% of firms with centralized governance told Forrester they expect to increase their IT budgets in 2006, compared with only 46% of decentralized IT shops. The latter were also more likely to reduce budgets, with 9% expecting a decrease in spending, compared with only 4% of centralized firms.

Forrester found that 54% of U.S. firms that currently outsource will spend more on IT next year, compared with 40% of those who don't. Author Michael Speyer concludes that "cost savings generally associated with outsourcing won't translate into less spending on IT overall in 2006."

Let us know what you think about the story; email Linda Tucci, Senior News Writer.

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