Waltham, MA (November 18, 2004) – IT spending in the U.S. will grow by 8%-10% in 2005, says management consulting and research firm Kinetic Information LLC. This growth will be driven by customers' ongoing need to improve system security and ensure process auditability, and will be aided by continuing improvement in the overall economy. More than half of the increase, the company says, will occur on the services side of the house, rather than in the sale of software licenses or hardware.

In an Intelligence Brief it published today, Kinetic Information writes that “buying, delivering, and using technology on the same basis as buying, delivering, and using electricity is an option that organizations are finding very attractive.” However, the company cautions, how quickly this model becomes a fixture in the market depends upon whether “customers choose to adopt it on their own or have it imposed upon them by their major vendors.” The pace of change in licensing fee structures and maintenance pricing also will play a major role.

Kinetic Information believes security and compliance will remain high on customers' priority lists, and expects software vendors of all sizes to create a billion-dollar market for add-on solutions that address these issues. As they do, the company writes, “CIOs and regulators will come to treat instant messaging as a full-fledged enterprise platform and will be seeking strategies and technologies to manage instant messaging, email, and all their communications and correspondence in a much more unified way.”

According to the Brief, customer demand is intensifying for solutions that better target their specific problems than they perceive is the case today. As a result, vendors are being forced to become more consultative in their sales practices and will develop more flexible pricing models that more accurately reflect the business value they deliver. They also are being pushed to make their systems simpler to deploy, manage, and use, with the end goal being that of near invisibility. These imperatives are especially relevant to the market of small to mid-sized businesses (SMB).

Kinetic Information's Intelligence Brief is available on the Web at www.kineticinfo.com/oando/05forecast11-04.htm. Additional information can be obtained by contacting Steve Weissman by telephone at 781.893.4690 or via email at [email protected].