Glass half-full?

IT spending predictions are rosy, until you talk to the check-signers

Good news. The Wall Street Journal is reporting that analysts say IT spending in the United States is on track for an encouraging rise of 5 percent to 7 percent this year, to nearly $800 billion. These figures compare with a 3 percent to 4 percent rise last year and a slight decline in 2003. Why such an improvement? The economy is going strong despite high oil prices, and CIOs are opening their wallets for "must-do" spending in areas such as security and compliance.

Specifically, IDC predicts an overall increase of 5.3 percent this year, and Forrester expects a healthy jump of 7 percent. That's interesting, because when I talk to IT execs these days they usually tell me that their budgets are flat or down and that there's a culturally ingrained expectation that they should be able to reduce IT costs every year, just as Dell and Wal-Mart lower prices year after year for the same goods, without fail. The exceptions -- companies significantly boosting their IT budgets -- tend to be fast-growing industry leaders (if you're at one of these companies, you'll know it).

So what gives? Is this like Garrison Keillor's Lake Wobegon, where everybody thinks their children are "above average"? Where's all this added money coming from?

Let's play devil's advocate with the projections. Start by subtracting inflation from the analysts' growth numbers; depending how you count, it's between 1 percent, the core consumer price index, and something much higher, if you fully count gas and housing prices. Now factor in currency fluctuations: The dollar was actually up for the past six months, so higher U.S. IT spending wasn't really up as much on a currency-weighted basis.

And where do the analysts get their data? For one, they get it from vendors, who have every reason to be hopefully optimistic about a big year-end spending flush; for another, they get it from government agencies like the Department of Commerce, which as far as I can tell has been using the same industry classification codes since the 1800s.

Not to be a curmudgeon -- these growth projections have their place -- but I think changes in how today's IT dollars are spent are much more interesting than the single-digit up-and-down data. CIOs are shifting dollars from maintenance and support to new app development, from legacy systems to Web apps, from internal IT to outsourced and offshore vendors, from IT dialtone to innovation.  Forrester tips a hat to this latter trend in the title of another recent report: "Memo to CEOs and CIOs: IT Innovation Capacity -- Not IT Spend -- Is What Matters." Now wouldn't it be nice if the data showed that IT innovation capacity went up 7 percent a year!

Customer appreciation: Speaking of growth, AMR Research is reporting that the market for CRM is once again growing after a four-year stint in the shelfware penalty box -- and that the software-as-a-service model is helping the category's image. "Enterprises are again opening their purse strings," says AMR analyst Robert Bois, reporting good growth from relative CRM newbies such as Microsoft, RightNow,, and SAP. It's about time.