But technology's place in these companies isn't shrinking, even if IT budgets are. Just look at E-business. Companies report that 24% of their U.S. revenue this year will come from sales generated through the Web, EDI systems, and other E-business channels, compared with about 20% last year. Nearly 60% of companies say their E-business operations are profitable, up from 47% of companies last year. One subset of E-business that's flagging, though, is wireless commerce. More than a third of InformationWeek 500 companies say mobile E-commerce won't make a contribution to their revenue stream in the next year, compared with 28% last year.

How are companies doing more business electronically? One technology quickly gaining favor for tying together software that meets on the Internet is XML, a standard way of tagging data so it can be read and interpreted by a variety of Web browsers, servers, and clients, regardless of how it was created. Three-quarters of respondents say they use XML for EDI or transactions with customers or suppliers, up from 67% last year and 59% in 2000. Nearly 70% of survey respondents say they widely deploy XML-based applications, and only 5% of the InformationWeek 500 report they're not using XML in some capacity this year, compared with a fifth of companies two years ago.

J.P. Morgan Chase & Co. is using XML and other Web-services specs, which route data across the Internet, to build a grid of computers capable of serving up software that combines components of the financial-services company's foreign-exchange, credit, equities, and debt systems so it can deliver complex, individualized financial products to business customers without a lot of custom development. One example: a product that could let a U.S. manufacturer buying parts from Japan and selling finished goods in Germany hedge its business against foreign-exchange risk while also mitigating credit and macroeconomic risk. "Our product is totally information-based," says Steve Neiman, head of the company's high-performance computing group. J.P. Morgan's grid-computing infrastructure pulls components from a registry that spans the companies' business groups and requests data from these systems to deliver those products. "Grid computing is a way to make our infrastructure smarter," Neiman says.

Networked storage is another key tool for getting more out of the IT assets that companies already have on hand. By storing data on disks that can be accessed by many computers, instead of attached to just one, more users have access to information that can speed decisions. Eighty-two percent of the InformationWeek 500 reported using storage area networks, up from 75% last year and 68% in 2000. The amount of data on those storage networks is increasing, too: 46% of companies store more than a third of their data on networked storage devices, compared with 36% last year. Less than one in five companies say they don't store any data on storage networks, compared with one in four last year.

More-affordable SANs, fast network connections, and advances in distributed file systems help General Motors Corp. build large data farms to simulate the flow of air over its cars and trucks, says Kirk Gutmann, GM's global product development information officer. During the past year, GM saved $1 billion in engineering costs on vehicle development by using computer-aided design and other digital design tools. Use of 3-D visualization software to model factories and assembly lines before they're built has contributed to a 10% decrease in product launch times and a 25% drop in the number of defects found on assembly lines. Last month, GM said it bought 10 high-powered IBM p690 Unix-based computers that the automaker will link to form one of the world's largest supercomputers, a move that will quadruple its supercomputing capacity.