IT budgets will experience solid growth during 2007, with IT chiefs at small and medium-sized businesses likely to enjoy the biggest increase in their investment warchests, according to a new study from AMR Research.

The report found that while overall IT budgets across Europe's biggest three markets - the UK, France and Germany - are expected to climb by 6.4 percent, it is midmarket firms with sales of less than $250 million that will experience the greatest growth, with budgets predicted to expand by over 12 percent during 2007.

Report co-author Nigel Montgomery said the increase in IT budgets at smaller firms was being largely driven by their realisation that they need to comply with the raft of new corporate legislation that has appeared in the past few years. "The smaller guys increased budgets are earmarked for security and compliance, which the bigger guys have already invested in," he explained. " They are playing catch-up and have finally realised the spreadsheets they have been using can't cope with the complex legislation they now have to comply with. "

The report also highlighted manufacturing and operations systems as well as business intelligence (BI) software, such as performance and knowledge management technologies, as other areas likely to enjoy increased investment.

"Overall, it looks like IT managers budgets will grow, but they will only grow in specific areas," said Montgomery. "The focus will be on systems that provide firms with information visibility and help them get value out of the systems they already have.