CIOs See Software Spending Spree

A new survey says nearly 60 percent of CIOs expect an increase in software spending through the rest of 2006.

Nearly 60 percent of CIOs anticipate increasing their software spending through the rest of 2006, while only 33 percent expect spending to remain flat and 2 percent expect a decrease in spending.

Those are the results of a new survey by Merrill Lynch analysts, who released their results on Aug. 16 in a report called "July 06 Survey of Software Spending Intentions."

The survey questioned 100 CIOs in North America during July 2006, about software spending and purchases.

Of those surveyed, 59 percent were from companies with $1 billion or more in revenue, and the rest worked at small and midsize businesses.

Of those CIOs who were questioned in the survey, many—88 percent—said that issues such as inflation and higher interest rates will not deter future spending on software during the year.

The Merrill Lynch analysts found that 59 percent of CIOs foresaw increasing their spending levels in 2006 from previous spending levels in 2005.

A similar survey in April 2006 found only 47 percent of CIOs intended to increase spending.

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"Only 33 percent of CIOs expect spending to remain flat, down from 42 percent in April," wrote Kash Rangan, the lead analyst.

"Combining these responses with the 2 percent of CIOs who are anticipating reduced spending due to macroeconomic concerns, suggests that software spending has a positive outlook for the remainder of the year."

The top spending priorities were business intelligence and data warehousing.

Those same CIOs reported that 24 percent of customers foresaw an increase of 5 to 10 percent in software spending during the rest of 2006, while 35 percent of customers saw spending increase of less of 5 percent or less.

Thirty-eight percent of CIOs spend 20 percent or more of their IT budgets on software.

In addition to spending more on software, 15 percent of CIOs plan to upgrade to Microsofts Vista operating system when its released in 2007. Only 8 percent responded in April that they would upgrade to Vista.

"We believe customers may be feeling more secure about release dates after the company initially warned of delays earlier in the year," Rangan wrote.

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Some of the other survey findings included:

  • Oracle customers are more comfortable with its Fusion middleware.
  • Service-oriented architecture is a priority for 80 percent of CIOs, with Microsoft edging out IBM in SOA mindshare.
  • Of those surveyed, 48 percent of CIOs expected to increase their usage of Linux during the rest of 2006, which was down from 59 percent in April. For those spending money on open source, Red Hat remained the top choice.
  • Spending on security remained consistent from previous Merrill Lynch surveys.
  • Analysts calculated a 5 to 6 percent growth in product development, product lifecycle management spending.

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