The reason for the caution is obvious to Georgia-Pacific Corp. CIO James Dallas, particularly when it comes to a major companywide software deployment such as CRM. The wood-products and chemicals manufacturer is shopping for sales-optimization software this year as part of a project to make salespeople more productive. "CRM has a graveyard as big as Arlington Cemetery," he says. "We want to make sure what our focus and target will be before deciding on a solution."

Dallas is being pragmatic about this year's budget, focusing on cutting costs and optimizing return. The company is cutting its IT spending about 10% this year, mostly by reducing infrastructure and postponing or slowing deployment of some projects with lower returns on investment. Because Georgia-Pacific underspent its 2002 IT budget, some of that will carry over into support for this year's projects.

Many companies are focused on consolidating IT infrastructure in order to lower costs, with about three-quarters of managers saying that a better return on IT capital investment is a priority. At Georgia-Pacific, which had $25 billion in sales last year, CIO Dallas is doing that by tying the business units' infrastructures more closely to the size and type of business they do.

By the end of the first quarter, Georgia-Pacific will introduce a standards-based buffet of telecom, Internet, and technical services designed to meet the wide range of business-unit needs. Dallas' organization will define the service levels for the various offerings and specify what applications can run on each one. Business-unit managers will choose the one that fits their needs. For instance, smaller paper mills don't need as much Internet bandwidth, so they'll be likely to use a "bronze" service package that probably will offer VPN communications through high-speed DSL, while a larger mill might opt for a more comprehensive "platinum" service package. Dallas says it makes more sense to offer classes of standardized services rather than consolidate on a one-size-fits-all package that's bound to be overkill for many units. Plus, this approach addresses the different cost structures the business units have based on the markets in which they compete. "Some are in commodity businesses, some aren't," he says.

When asked what the most important project will be for the coming year, the most common answer is enterprise applications such as enterprise resource planning or financial apps. In many cases, that involves leveraging what companies have by adding features or modules to existing systems.

At Bechtel Corp., where the IT budget will be down this year, a main focus is on deploying new Oracle financial software modules. The construction and engineer- ing company has used the Oracle financial software since the mid-'90s, and new modules include one that allows project accounting to track the revenue and costs of individual jobs. Because that module didn't exist in the earlier release of the software, Bechtel built its own project-accounting program. But the new Oracle module will give Bechtel a broader view across projects, better cost controls, and a shorter business cycle, CIO Geir Ramleth says.

Atmos Energy Corp. will take a similar approach to its billing system. The natural-gas supplier handles about 90% of its billing with software from SCT Corp., CIO Les Duncan says. Because the last 10% of the billing is too complex for the system, it's processed by hand. In the months ahead, Atmos will add an SCT module to handle more complex bills such as those for national accounts. Atmos, which began its fiscal year Oct. 1, will spend about $100 million on IT this year, Duncan says. That includes a two-thirds cut in IT capital spending, but a slightly higher IT operating budget than last year. Duncan looks at the capital spending as a "one-year phenomenon" and says that any projects cut this year will be taken up later in the company's five-year planning cycle.

Atmos also will work on improving customer services via the Web. The company recently launched online billing for consumers and is adding energy-management services that will let customers analyze energy use over the Web, factoring in the effect on their bills of using appliances at certain times of the day or lowering the temperature of their homes.

Increased regulatory scrutiny is driving spending for some companies. The highest-profile examples have been health-care companies that face stricter patient recordkeeping rules, and banks and brokerages that have been compelled to disclose E-mail exchanges. But every public company will need to reassess its record-storage capabilities in light of changing Securities and Exchange Commission rules and liability concerns, says David Nettles, director of IT planning at Rayonier Inc., a $1.2 billion-a-year manufacturer of timber and other forest products.

Rayonier is evaluating how to create a companywide record-management system that will store everything from EDI transactions to SAP records to E-mails. It wants to make them accessible to executive and legal staff, but the company also wants to manage records closely enough that it's sure of dumping the right data when there's no longer a legal or business reason to keep it. Rayonier is likely to hire a vendor to implement the system so that it's operational this year, which will probably lead to more storage purchases. But the biggest challenge, Nettles says, will be training people in how and when to keep documents and electronic records in the system.