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Economic future not bright enough for shades

Experts are predicting a slight uptick in IT spending next year but say improvements won't be significant enough to get all warm and fuzzy about.

"When the economy turns around …" has been a catch-all expression of hope for IT and business leaders alike for nearly four years. Soon that hope may finally be realized.

According to industry analysts and several recent studies, the long wait for an economic turnaround may be over. But don't get too excited; we're not going back to the heyday of 1990s' IT spending, analysts say.

A new report from the American Electronics Association, which said 234,000 tech-related jobs are expected to be lost this year, was welcomed as good news in some publications because the decline was lower than in previous years.

"It's on the road to picking up," said Fenella Scott, senior research analyst with Boston-based AMR Research. "There are economic and geopolitical issues that might affect growth, but [the economy] is definitely better than it was."

Muted optimism abounds. Research groups pretty much concur on the numbers. Tech spending will increase by as much as 5% next year.

"A year ago we were looking at cost cutting and investing in IT that would optimize what companies already have," Scott said. "They're thinking more strategically now -- toward the customer, improving time to market and gaining a competitive edge."

Security sparks spending

Forecasts of where the majority of that money will go vary from firm to firm, but there are some clear priorities.

According to Forrester Research, the top priorities for CIOs are security and disaster recovery. Additionally, compliance with regulatory issues like the Sarbanes-Oxley Act is expected to drive investment.

"There's nothing that stands out in particular," said Scott Evans, research director at Gartner. "We do see networking, hardware and a trend toward [buying] Microsoft next year. We interpret that as people putting in more, smaller servers with Microsoft. So to run them they need more hardware to connect them."

AMR's Scott said companies are also looking at creating real-time connections between suppliers, customers and employees.

It's not all good news for everyone, however. Scott predicts supply chain management and point solutions will see little growth in 2004. Additionally, according to Forrester's survey of CIOs, only 5% said moving systems to Linux is critical to their strategy. A recent study by International Data Corp., Framingham, Mass., found a spending bubble may form around radio frequency identification (RFID), chips for tracking products through the supply chain. But that bubble will burst as costs and practical tracking become clear, the researcher said.

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