Economic confidence rears its lovely head

Pinch yourself -- it looks like IT spending is waking up and doesn't plan to hibernate in 2005.

Spending on IT is really starting to pick up at the FWMurphy, and company executives believe the trend won't be ending anytime soon.

Mitch Myers, vice president of operations for the Tulsa, Okla.-based manufacturer, said that the bleak climate of cynicism and shrinking IT budgets is finally giving way to a new economic confidence. And several new IT projects are underway.

"All the indicators we have say that things are going to stay good," Myers said. "When things are good, you tend to invest a little bit, and that is what we're going to do."

FWMurphy is not alone. Results of a new survey from Cambridge, Mass.-based Forrester Research Inc. reveal that a significant percentage of IT decision makers throughout North America and Europe are cautiously investing -- or preparing to invest -- in the future.

The survey of 1,300 executives representing a cross-section of industries found that 37% will spend more on IT in 2005 than they did in 2004.

The biggest IT spenders overall will be large North American companies with at least 20,000 employees, according to the survey. Forrester predicts that 46% of those companies will increase IT spending next year.

Looking at different markets, Forrester found that the major IT spenders will be in the financial services and insurance industries. More than half of the survey respondents working for such firms reported plans to ramp up their IT investments going forward.

"I think what we've been seeing, especially over the past year, are high levels of optimism regarding the current business climate," said Nick Wilkoff, a senior analyst with Forrester. But "I would say that the buyers are being cautiously optimistic overall."

CRM customers to increase budgets

Interestingly, said Wilkoff, about 40% of respondents who identified themselves as customers of Siebel Systems Inc. or PeopleSoft Inc. reported plans to make significant IT investments next year. Siebel and PeopleSoft are competing vendors in the enterprise resource planning (ERP) and customer relationship management (CRM) application markets.

The survey results did not indicate whether those customers planned to spend more on ERP and CRM applications specifically or on IT requirements in general. But for Myers and FWMurphy -- a major PeopleSoft customer -- this "cautious optimism" about the economy is translating into significant investments in both areas.

For starters, FWMurphy recently completed a major overhaul of its network infrastructure, which included the implementation of Microsoft's Active Directory, five new file servers and three domain controllers. The company plans to implement Microsoft's Systems Management Server (SMS) for desktop management and SQL Server as a database platform.

Myers said his company plans to migrate to the newest release of PeopleSoft's EnterpriseOne suite of ERP and CRM applications after it becomes available in early 2005. When that time comes, the company expects significant infrastructure reorganization and conversion costs, and will spend money to enlist the help of third-party consultants who will assist with implementation and training.

"Back in '02, things were pretty dismal," Myers said. "This year the requirements are really ramping up, and we feel like we can afford to invest."

For more information:

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Who wins the budget battle: the CIO or CMO?

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Slow but steady growth

Vendors also report a slow but sure increase in the levels of optimism about the future.

Stacy Schneider, senior architecture manager at Siebel, said after a long time where customers were spending less money, things are beginning to change.

"The big deals are somewhat back," Schneider said. "In the last few years, we haven't seen the mega deals, but they're starting to creep back."

While some individual companies like FWMurphy are making major investments, don't expect to see giant IT spending increases across the board, at least not right away, said Forrester's Wilkoff.

"We're definitely not at the point of returning back to the glory days of big swings in IT spending toward the positive," Wilkoff said. "I think people are being much more controlled about the way that they're making IT investments."

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