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Upturn seen for IT spending in 2004

Small and medium-size companies are set to lead a recovery of IT spending in 2004, with software taking priority, according to Gartner and SoundView.

Small and medium-size companies are set to lead a recovery of IT spending in 2004, with priorities returning to more traditional patterns.

These are key findings of a survey of 600 IT executives and decision makers, conducted by market researcher Gartner and securities firm SoundView Technology in late October. The report, released on Monday, reveals notably greater confidence than a year ago, indicating likely higher spending next year, the firms said.

Capital spending budgets will begin to grow again at a modest pace of 1.6 percent next year, according to the IT buyers surveyed, and spending will follow the traditional path, with software taking precedence over hardware. Security, storage, wireless LANs, Linux and business intelligence software were ranked among top priorities for IT budgets in 2004.

A host of surveys have pointed to a possible recovery in 2004. IDC predicted last week that IT spending will grow by 6 percent to 8 percent or more, revising its earlier forecast of 4.9 percent.

The new survey "highlights that the prior 'stall mode' has finally begun to give way to 'controlled spending,'" Arnie Berman, technology strategist for SoundView, said in a statement. "Controlled spending and a strict focus on return on investment will remain the rule in 2004. For the largest companies, the budget outlook for 2004 appears to be flat to down."

Gartner analyst Brian Smith said there may be pleasant surprises, too, given the confidence that corporate IT buyers are showing in their companies' business prospects.