Little cash for new IT as budgets growth stalls

There will be little cash available for new IT projects this year, with IT budgets only creeping up by one or two per cent.

UK-based IT departments will get a little more money to play with than their continental counterparts, though. UK businesses plan to grow IT budgets by 2.3 per cent in 2006 with 20 per cent of this earmarked for new IT investments.

By comparison, European enterprises as a whole will raise IT spending by just 1.6 per cent next year, with slightly more - 21 per cent - going to new investments, according to a study by Forrester Research. The previous estimate for budget growth had been a healthier 2.9 per cent.

Companies will put their money into security software applications such as antivirus, host intrusion prevention and web applications, the analysts predicted.

But money for consultants may be in short supply as nearly half of businesses have made reducing their IT services spending a "critical" or "important" priority this year, leading to downward price pressure.

Big technology providers such as Cisco, HP, IBM, Microsoft, Oracle and SAP dominate the year's vendor purchasing preferences.

Forrester said overall 2006 industry prospects look promising, with almost 60 per cent of companies expecting next year to be either very good or OK for their industries but pointed out that IT investment plans look a lot more conservative.

Forrester associate analyst Manuel Ángel Méndez said in a statement: "Pressure on IT departments to support business goals more efficiently, coupled with an ongoing focus on securing and automating the IT infrastructure, will cause companies to further squeeze IT budgets."