IT Budgets At Highest Levels Since 1997

As a percentage of revenue, IT spending in 2006 in the U.S. and Canada stands at 2.0%. That's up from 1.7% in 2005 and 1.9% in 2004 according to the 17th annual Computer Economics IT spending and staffing study. The Irvine, Calif.-based research company Computer Economics notes that this figure is the highest since 1997 -- when companies were gearing up for Y2K and budgets hit 2.2% of revenue.

These numbers demonstrate that IT budgets are increasing faster than corporate sales. According to the study the median growth in IT spending on a dollar basis across all respondents in 2006 is 4.1%, outpacing the 2005 U.S. GDP growth rate of 3.5% in 2005.

"Companies simply have more money to spend this year," said Frank Scavo, president, Computer Economics. "But we see most of the new spending going toward hardware, software and outsourcing, with not as much toward adding to the IT staff."

Increased resources do result in increases in headcount, however the rate is only 2%, or about half the rate of the increase in IT spending, Scavo explained.

Looking at the sectors that comprise this increase, business services grew 9.7% in 2005, followed by healthcare, pharmaceuticals and medical devices. The weakest growth, though still positive, was seen in the process manufacturing, utilities/energy and wholesale distribution sectors.

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