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For the first time in six months, information technology managers are forecasting a leveraged tech recovery in which spending on new equipment and software could grow faster than spending on overall information technology budgets, according to a recent Goldman Sachs survey.

The Goldman Sachs IT Spending Survey found that more than half of chief information officers polled in April -- 55% -- expect to increase tech capital spending this year, up from 49% in its previous survey in February, according to a note by Goldman software analyst Rick Sherlund. The note, released Tuesday, was written on Monday.

About 16% of respondents expect to increase capital tech spending by 10% or more, 13% expect to boost it by 5% to 10%, and 26% expect capital tech spending to go up between 0% and 5% in 2004.

Capital technology spending forecasts continued to inch upward to 2.4% annual growth from 2% in the February survey. But tech operating budgets -- which include staffing, services and depreciation -- remain conservative in 2004, with an average 1.9% growth forecast for the year.

Spending priorities remained largely unchanged since February's survey, with security software and hardware holding on as top priorities and the Windows XP desktop operating system sitting at the bottom of the list. CRM, although a volatile category, fell from the top to the middle tier of priorities.

The survey also suggested increased interest in new applications, with Web-application server software and enterprise portal software remaining high priorities, Sherlund wrote.










Mercury Interactive

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returned to the top tier of software providers gaining share of IT spending dollars, with

Red Hat


winning as the No. 1 company gaining share.

"Red Hat's position underscores Linux's deeper penetration into more mission-critical areas of the enterprise, as enterprise customers look to Linux as a way to reduce the cost of their infrastructure," Sherlund concluded.

Meanwhile, Sherlund said share gains by Microsoft, SAP and Mercury support his thesis that application spending and deployment are seeing a pickup. To further back up that thesis, about half of respondents indicated that they are increasing deployment of packaged applications, and an additional 30% are increasing custom development efforts.

Nearly one-third of respondents are increasing implementation of packaged applications from large vendors such as SAP,

Siebel Systems






Such increased interest in packaged applications may explain German software behemoth SAP's rise to the list of software vendors gaining share of IT spending and Siebel falling off the list of companies losing share.

"We expect leading vendors to remain vest positioned to benefit from this recovery in software investments," Sherlund wrote.

On the other hand,

Computer Associates


earned the dubious distinction of being the No. 1 software provider losing share of IT spending dollars.

That could be a function of the maturity of its mainframe business or "turbulence from senior management changes," Sherlund wrote in a euphemistic reference to the

demotion of the company's chief executive officer after a trio of former top finance executives pleaded guilty to fraud.