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2005: More money means more decisions

IT budgets may be up next year but managers are going to have to spend the extra cash wisely
Written by Andrew Donoghue, Contributor

2004 saw the spending lockdown of 2003 continue. Although there were a few exceptions for some pieces of key infrastructure, IT managers and chief technology officers had pretty clear marching orders: make better use of what you've got before planning new projects. That effectively meant investing in application integration projects to allow previously discrete systems to communicate more effectively.

2005 will see this cautious approach continue but the difference is that despite a potentially slower world economy next year, IT budgets are actually set to increase. "Beneath the surface of an almost boringly moderate growth rate of 6 percent, 2005 will be a year of enormous turbulence in the IT market – with lots of convergence, consolidation, and realignment," according to industry analyst IDC's latest forecasts.

Forrester Research takes an even more conservative stance, predicting an increase in IT spending of just 3.9 percent, but again sees signs of more robust investment plans than in 2004 from most of the IT managers it surveyed. Fifty-four percent of IT executives polled claimed to have a positive outlook for their business in 2005, compared with 44 percent last year.

This boost to budgets should also translate into a more robust job market next year. Chief information officers in the United States and Europe are planning to increase their information technology staff rosters next year, according to a report from Merrill Lynch. Of the 25 European and 75 US CIOs surveyed, 47 percent said their IT staffing will be up in 2005.

However, although this increased optimism seems like a good thing on paper, it may actually translate into a more difficult year for IT management. After two years of being told not to spend, IT departments are now being trusted to invest in technology again – as long as the investments reap rewards.

"The next few years will differ sharply from the previous three because most businesses have re-established growth agendas in 2004. This requires an IT leadership switch from a focus on cost reduction toward revenue growth. IT leaders must change their own and the organisation's direction, and set a new course for the people who work for them," claims analyst Gartner in its latest forecast, CIO 'Must do' Resolutions for 2005.

But how do you go about deciding what technologies or strategies to invest limited budgets on? If you're at chief information officer level, Gartner's advice is to decide what business you are in, then invest in your skills. IT management who can blend business and technology are most valuable and most in demand.

"Each CIO has to decide: are you primarily in your employer's industry or are you primarily an IT professional? If you have a technology background, spend 15 percent of your 2005 working on a major business project (preferably one with no technology component). If you have a business background, spend 15 percent of your year working on a technology infrastructure project," the analyst group counsels.

For more, check out ZDNet UK's predictions for 2005 so far:

Forrester sees IT spending growth ahead
Spending in IT is likely to be driven by the public sector in 2005, according to the analyst firm
IDC forecasts software spending growth
The research firm sees software revenue rising globally by around 6 percent in 2004 - and it sees open-source products becoming increasingly popular

CIOs bullish about hiring in 2005
Nearly half of chief information officers are planning to take on staff in the new year, according to a survey

IT skills set for pay boost in 2005
Niche IT skills could be rewarded with pay rises in 2005 as money that has been tied up in compliance is released
Compliance and cash to dominate 2005
Senior management will start to demand more concrete demonstrations of cash benefits from their IT departments in 2005, according to Butler Group
Intel to deliver on 64-bit promise in '05
Intel has executed a sharp policy U-turn, saying that it will make 64-bit chips available in desktops by the end of 2005, in a bid to stop AMD stealing a march in that market
3G sales to be weak 'until 2006'
Analysts expect 3G demand to remain strong in Japan and South Korea, but sales will only start to pick up for the rest of the world in 2006
Gartner: Offshoring 'less prevalent than you think'
Amid conflicting views on the benefits of offshoring, a report from Gartner casts doubt on how prevalent it really is
DRAM market set for 2005 'downturn'
The memory market has seen big revenue growth in 2004, but is set for a cyclical fall next year
Gates: I'm going to make life easy for IT managers
Microsoft IT Forum: The chairman of Microsoft has pledged to make IT managers' jobs less complicated

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