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IT budgets to inch up in 2004?

A new report says information technology budgets should grow 2 percent in 2004, driven by a replacement of older systems as IT managers anticipate an improved economy.

Information technology budgets should grow 2 percent in 2004, with programs devoted to enterprise resource planning and supply chain management increasing their share of the software spending pie, a new report says.

A survey of 500 IT executives released Tuesday by AMR Research shows budding financial optimism on the part of the survey's participants.

"We are seeing purse strings begin to loosen up with the growing demand to replace older systems and the belief that the economy is beginning to improve," said Jim Shepherd, an AMR senior vice president, in a statement.

Enterprise resource planning applications are expected to increase their share--already the largest--of the IT software spending pie. ERP is expected to account for 27.2 percent of IT software spending next year, up from the 26.6 percent that's anticipated for this year.

Supply chain management software, meanwhile, should increase its share of software spending by 16.3 percent next year, compared with the 13.6 percent expected for this year, according to the report.

AMR's expectations of modest growth next year contrast with anticipated flatness for 2003. Other research companies have scaled back their IT spending forecasts for this year. In June, Forrester Research cut its forecast for North American IT spending to 1.3 percent from 1.9 percent.

Although the picture for IT spending is rather bleak for this year and only slightly encouraging for next, research company IDC said it anticipates IT spending to increase 26 percent by 2007, to $1.1 trillion.