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Security tops IT budgets, but spending strategies shift

Security will remain a top spending driver in 2006, according to research firm IDC. But differences exist.

Security will continue to drive IT spending budgets in 2006 at a majority of firms worldwide, according to a survey released today by IDC. With the exception of China, business leaders at large companies also expressed confidence in the stability of the IT markets, predicting that budgets will be spread evenly over the next four quarters. The massive upgrades to IT infrastructure made by companies in 2005 are past their peak, but managing and optimizing infrastructure remains a top spending priority, the survey found.

The world may be flat, but the survey pointed to some sharp differences across continents both in spending priorities and mood. Stephen Minton, vice president of worldwide IT markets at IDC, said that in distinction to their European and Chinese counterparts, U.S. firms are taking a more strategic approach to IT, focusing on how to use technology to enhance business operations, better serve customers and stave off the competition.

"What we see is that it's the business managers, from the CEO down to the line-of-department manager, who are really helping to drive spending by understanding the possibilities of what can be changed by something like business intelligence," Minton said. The growing appreciation of technology by nontechnical business people represents a shift from just a few years ago, he added, when "everybody was in the 'IT doesn't matter' and good-enough computing mode."

"Good-enough computing" still holds sway in Western Europe, he said, where large firms are taking a conservative approach to new investment and risk falling behind U.S. companies in innovation.

The biggest news to come out of the survey may be the growing alarm expressed by a majority of Chinese firms over the possibility of an economic slowdown in their country in the next 12 months. Some economists also believe the Chinese government may institute policies in the next 12 to 24 months that could lead to a tightening of credit, Minton said. "It means that U.S. companies have to tread a little cautiously, because if there is a slowdown in the Chinese economy, one thing we know is that it will have an effect on the rate of IT spending, as well," he said.

The big U.S. IT providers in China, such as IBM, might want to take note of this survey finding: Large Chinese companies that are buying technology voiced growing dissatisfaction with the U.S. technology providers. "Chinese firms don't believe U.S. firms are really delivering what they need. It is really quite difficult for a foreign firm to understand how business is done. There are just so many differences compared to the U.S.," he said, including all the Chinese government regulations peculiar to each industry.

The lack of understanding by American companies opens the door for Chinese IT companies to compete effectively against the U.S., Minton said, particularly in the hardware markets.

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

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