IT sector is recovering, but firms stay cautious

US business spending on information technology is recovering, but corporations will remain cautious, a research firm said Wednesday.

Forrester Research estimates that IT spending will grow 4 percent next year, although its survey of top technology executives found they expect budgets to grow an average of just 1.7 percent.

Tom Pohlmann, a research analyst at Forrester, said some of the executives may be overly conservative in their budget outlooks, and suggested that the improving economy will help fuel a pickup in IT spending.

"Their budgets reflect today's economic realities," he said. "It's still primarily a consumer-led [economic] recovery and some of the old-school manufacturers are still expecting a challenging year."

Even though the US economy grew at a blistering 7.2 percent pace in the third quarter, companies are hesitant about spending for new technology, Forrester noted.

"Despite the improving economic picture, 2004 IT budgets remain conservative," Forrester said in issuing its outlook.

"We estimate that actual IT spending will catch up with the economy and grow 4 percent. Consumer sectors, e-commerce and security initiatives, and pent-up demand for servers and PCs will lead the way."

Forrester estimates that this year will end up showing 1.3 percent growth in IT spending after a decline last year.

"We think [the slump in IT spending] has bottomed out, but we are more conservative than some projections. The CIOs we're interviewing are still expecting a difficult year," the outlook said.