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IT spending remains low, study says

Businesses continued to spend below budget on information technology in October, but new data from Gartner shows that may change in the coming year.

American companies continued to spend less than the amount they budgeted for information technology in October, according to a report from Gartner released Friday.

The Gartner Technology Demand Index for October was 85, down from 87 the previous month. An index value of 100 means companies spent exactly what they had budgeted for the month.

But the market research firm said the scenario could change in 2004. The index points to a likely increase in spending by mid-size and large companies in the coming year. This segment makes up for nearly 44 percent of total IT spending. So, if these companies spend more, it could drive the overall demand for IT products and services.

Recent surveys have suggested that a recovery is forthcoming for IT markets. Forrester Research this week reported that IT budgets are expected to increase to $729.2 billion next year, up 1.7 percent from the level anticipated for this year. More companies are saying they will spend more than they did in this year, but the increases may not be dramatic.

The preference for vendors, as reflected in the Gartner's Vendor Demand Index, indicates gains for Dell over Hewlett-Packard and Sun Microsystems in the server market. The third-quarter vendor index for Dell is 114, compared with HP's 108 and Sun's 99. Vendors ranked high in this index stand to gain the most in demand in 2004 relative to 2003, Gartner said.

"The overall projected demand for 2004 has rebounded to levels approaching the highs of last June and July. A major question in the final weeks of 2003 will be what decision-makers decide to do with any unspent dollars," Martin Reynolds, group vice president and research fellow at Gartner, said in a statement.