IT spending projections decreased in the last quarter of 2006, with CIOs (chief information officers) predicting spending increases of just 5.8 percent over the next 12 months. That's down from expectations in the previous quarter that spending would be up by 6.5 percent next year.

The findings come from the quarterly CIO Magazine Tech Poll, released on Friday.

According to the survey, almost two-thirds of CIOs surveyed – 63.6 percent – have no plans to invest in Microsoft Office 2007 or its new Vista OS (operating system) in the next year. However, they do plan to invest in computer hardware, storage and security.

"This forecast decline in tech spending is in sync with other recent reports suggesting businesses will scale back capital spending in 2007," Gary Beach, publisher at CIO Magazine, said in a statement. "However, with nearly two-thirds of CIO respondents indicating plans to focus on either growth or innovation in 2007, the question for CIOs remains how to implement these agendas with budgets that are largely flat."

CIOs said their IT budgets had increased by an average of 5.8 percent over the last 12 months. In the last CIO Tech Poll, released three months ago, CIOs said their budgets were up an average of 5 percent over the previous year.

When asked about spending across eight specific IT categories, 40.7 percent of CIOs said they plan to boost spending over the next 12 months, up slightly from 39.7 percent in September. The percentage of those who plan to decrease spending remained essentially flat at 13.7 percent.

Computer hardware is the top spending priority among CIOs surveyed for the poll, with 55.8 percent of CIOs planning to increase spending in that area, compared with 46.9 percent in September. Only 11.7 percent plan to decrease spending in the year ahead, compared with 16.3 in September. Storage systems and security software were other areas where CIOs expect to spend more money in the coming year.

"The supply of labour tightened, with 5.8 percent of respondents reporting IT labour is 'plentiful' (versus 6.2 percent in September); 56.7 percent say IT labour is 'available' (versus 59 percent in September) and 35 percent report that IT professionals are 'hard to find' (versus 31.1 percent in September)," according to the survey.

Of those eyeing potential upgrades to Microsoft Vista or Office 2007 in 2007, 20.7 percent said they need to evaluate pricing and user training costs before considering any such move, according to the survey. Of the 15.8 percent who said they will upgrade, 8.3 percent plan to upgrade to both, while 5.8 percent said they will upgrade only to Office 2007 and 1.7 percent said they will upgrade only to Vista.