IT budgets to jump but don't open the champagne yet

IT budgets are likely to increase this year as confidence in the business climate slowly returns, according to a new IDC survey of British finance directors and IT managers.

However, spending increases will mostly go towards purchases that have been delayed for the past few years, and will only go part-way towards relieving the ongoing pressure on IT departments, IDC said. Some factors exerting pressure on IT managers, such as lack of resources and shortages of skilled staff, were actually worse in this week's survey compared with the fourth quarter of last year.

Nearly half of respondents -- 42 percent -- said they believed their IT budgets would be larger this year, due to higher confidence and improvement in business conditions. Economic uncertainty is still the major business challenge, at 23 percent, but this is down from 30 percent in the previous quarter. Nearly two-thirds of companies planned to replace PCs, and 43 percent said they would replace server equipment. The respondents all had some say in the budget-making process.

The survey shows that IT departments are still struggling for what are seen as necessary purchases, according to IDC. When asked whether their companies would allocate "necessary budget increases" for IT spending this year, just under half felt only "slightly positive", and 17 percent felt positive. The remaining 46 percent therefore felt they were likely to be short of necessary funding, according to IDC.

"What we can see from this survey is that business activity is picking up, but IT funding has not followed yet," IDC analyst Elsa Opitz told Techworld. "The business decision makers are being very sceptical and cautious, and budgets are not growing as much at they should at the moment, placing pressure on CIOs and IT managers."

However, the trend is positive, Opitz said, noting that optimism had not deteriorated from the last quarter. "At the moment the attitude is cautious, but less cautious than the fourth quarter of last year," she said. In addition, companies will be re-evaluating their budgets later in the year, with the majority of spending planned for the second half, so that the situation could improve further, according to Opitz.

IDC warned last month that IT managers are facing a period of unprecedented pressure as their challenges increase while senior company executives try to hold down IT budgets. Pressure on IT managers is coming from several directions -- industry, technology, workforce and socioeconomic forces, according to Peter Hind, manager, end user programs, IDC South Pacific. A 2003 survey found that 80 percent of IT managers were concerned about staff burnout.

Figures from other researchers also show a positive trend in IT spending. The 11th annual CMA survey of telecoms managers, published in February, found that capital expenditure was on the rise during 2003, while companies spent less on telecoms services due to falling prices. This survey found that with restricted budgets, companies had tended to move to the safe haven of BT Group PLC, despite the telco's relatively low user satisfaction rating.

Separately, IDC said last week that IT spending in the E.U. overall could get a boost from the accession of ten new member states, effective at the beginning of May. IT spending in the more mature new member states is expected to shift from infrastructure to higher-level systems, with growth of 10 percent or more, IDC said.