IT budgets will begin to grow again next year as companies replace ageing systems and invest in new technologies, according to analyst Gartner.

US budgets will grow by around five per cent next year. European spending will also improve, but by a smaller amount, due to the more conservative nature of its businesses.

Spending will continue to grow until at least 2006, the analyst said.

Steve Prentice, hardware and systems research chief at Gartner, explained that increases in IT spending are linked to an improvement in high-level economics figures.

"We are looking at an improvement in the situation. What we are anticipating is a return to positive growth," he said.

"We are pretty confident that we are reflecting a general sentiment. Things have been static for so long, and the world has moved on and demands a faster pace of business. IT has to reflect that."

New technologies that companies are likely to look at include secure broadband wireless, and always-on mobile devices with very low power consumption requirements.

But Prentice warned that saving money will remain critical. "Just because things are getting better, don't think the screws will come off," he said.

This means that strategies such as server virtualisation to cut back on excess capacity will be important, along with the increased use of open source and more standard systems.

"Many organisations do not have the level of standardisation that would benefit them," said Prentice.

Companies will also build systems from small software components that can be taken out and replaced, rather than larger riskier projects, according to the analyst.

"There will be a much bigger focus on architecture and governance. This focus will be much amplified in the coming years, as it's a way of avoiding inefficiency," he said.

"What is changing in the IT sector now is that, after years and years of cuts, the challenge for IT leaders is to stick their heads above the parapet and start investing strategically again."