IT salaries are set to rise by up to 15 per cent over the next three years with ERP, security and database skills most in demand.
The "2004 IT Staffing and Compensation Guide" by Meta Group says highly skilled staff will be tempted by "greener pastures" as the economy and jobs market improves and that CIOs will have to pay a premium to keep hold of them.
Salaries will increase by as much as 10 to 15 per cent over the next three years and will account for 55 per cent of a company's IT budget by 2007, according to the report.
Maria Schafer, senior programme director at Meta Group, told silicon.com there is strong demand for SAP, PeopleSoft and Siebel implementation and coding skills.
"For the packaged applications out there it is hard to keep good people," she said.
Security remains a specialized area and Schafer said those staff with all their security certifications can "name their ticket". Database administrators will also stay in demand, particularly where they have cross-platform knowledge of multiple databases.
The survey of 650 US companies also cuts through some of the offshoring hype, with just 19 per cent saying they use offshore IT skills.
Schafer said that while many of the software and high-tech firms have been forced to move a lot of development to companies such as India, it is not the same for most businesses.
"For the average user organization using offshore labor sources requires an organizational construct more complex than many even want to think about," she said.
While she admitted that offshoring will continue to increase, Schafer said the customer-facing and project management roles will continue to be needed on-site.
The report also warns that as well as forking out top dollar, CIOs and IT directors will be faced with a challenge to come up with more innovative recruitment, retention and incentive policies to keep hold of good IT staff.