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.
