2004: The year of controlled spending?

Companies are predicting bigger IT budgets next year - but how much bigger and what technologies and trends will drive tech investment during the next 12 months?

Companies are predicting bigger IT budgets next year - but how much bigger and what technologies and trends will drive tech investment during the next 12 months?

2003 saw the industry take its first tentative steps towards recovery. Will 2004 be the year when the up-tick in technology investment starts in earnest? And if it is, what technologies and trends will drive the recovery?

Mike Lynch, chief executive of information management company Autonomy, is the U.K.'s next best thing to an IT figurehead, being this country's first Internet billionaire, albeit briefly. He believes there will a recovery but that budgets will continue to be tight.

"It looks like we can expect some form of recovery in 2004, but it will be very return-on-investment focused," he says. Although budgets will be up, many large companies will try to keep hiring to a minimum to avoid too many overheads if the recovery takes longer than expected, he claims.

Emerging technologies such as Wi-Fi will become ubiquitous but there is still a big question mark over whether anyone will make money, adds Lynch. He believes that although there will be more money changing hands in the industry as a whole, there will continue to be consolidation amongst software suppliers.

"Loss-making software companies will be consolidated out and we will end the year with fewer but stronger software companies," says Lynch.

A trawl around the analyst community reveals a divergent set of predictions for 2004 but the general theme seems to be that some slack may have appeared in the tightly drawn purse strings that typified 2003.

Analysts Gartner and Soundview point to a modest recovery over the next year with capital spending budgets beginning to grow again at a rate of around 1.6 percent. "The prior 'stall mode' has finally begun to give way to controlled spending," says Soundview technology strategist Arnie Berman.

But Berman claims the strict focus on return on investment that became the watchword for 2003 will continue well into next year, and for the largest companies this could translate into an IT budget that is "flat to down".

Although technology managers are more optimistic about their company's general performance they are not convinced that they'll get to reap any of the benefits, says Gartner.

ZDNet U.K.'s Andrew Donoghue reported from London.