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AFTERMATH: Attacks Set IT Back Even Further

Analysts see the slump continuing for another year.

Later rather than sooner is the projection for a tech-sector recovery, according to new analyst reports. Forrester Research, for example, projects just 2.2% spending growth in the tech sector in 2002 and an end to the slump in the third quarter of the year.

As much as anything can be predicted anymore, Forrester anticipates a true recovery during 2003 with more spending on collaborative software, infrastructure security, and hosting services. Forrester's report estimates a 12% growth rate for the industry in 2004. According to the report, CIOs and IT managers next year will use the technology that they overbought in 2000. The emphasis will be on achieving a tangible return on investment.

Expect to see deceleration in mobile applications and personalization investments, says Forrester analyst John McCarthy. "They offer little value-add, they're too expensive, and there's no clear set of standards," he says. A Merrill Lynch survey of 50 U.S. and 15 European CIOs backs up Forrester's recovery horizon. Of those surveyed, 17% don't expect a boost in spending until 2003. In a Merrill Lynch survey prior to Sept. 11, most CIOs expected a recovery in the second quarter of next year.

Forrester expects the overall U.S. economy to have an increasing impact on the IT sector, because technology has become integral to several industries. "CIOs need to watch economic news," McCarthy says. "Their budgets are not sacrosanct."

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