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Tech Industry

Report: IT spending unlikely to climb

Overall information technology spending in the United States is stabilizing but not likely to grow much in the near future, according to a Merrill Lynch survey.

Overall information technology spending in the United States is stabilizing but not likely to grow much in the near future, according to a Merrill Lynch survey of chief information officers it released Thursday.

"While business conditions have improved over the course of 2003, CIOs we survey are simultaneously displaying a growing level of conviction that IT spending improvement is unlikely" before the second half of 2004, if not 2005, authors Jennifer Dugan and Michael Maestas wrote.

The report, which involved 50 CIOs from businesses and government, reached a different conclusion from a similar study Goldman Sachs released last month. That study found that American businesses have continued to spend conservatively on tech during 2003 but that a modest recovery is likely in 2004.

IT spending dropped 4.1 percent in 2002, on top of a 0.5 percent decline in 2001, according to research firm IDC.

The Merrill Lynch authors wrote that CIOs say the second quarter of 2003 was the high point in total spending for the year and that the remainder of the year will be tight.

"In previous years, tech vendors could count on a year-end spending binge, as CIOs hurried to 'use it or lose it,'" the authors wrote. "Anecdotally, we are hearing that CIOs' bonuses are keyed to underspending the budget in ?03, similar to ?02."

Spending on technology in general and IT services in particular will likely lag an overall recovery in the broader economy, the authors added.