Integrating applications and buying security software are in, and CRM software and new hardware purchases are out, according to a survey of chief information officers released Wednesday.

Morgan Stanley's August survey of 225 CIOs indicates that information technology spending isn't soon likely to change much from levels set in the first half of 2002. Forty-nine percent of the respondents said their IT spending plans will be flat in the second half, with 28 percent predicting they would spend less. A mere 16 percent planned to boost spending.

Analysts said worries about the economy and the stock market have created a cautious spending environment. "The results suggest the traditional fourth-quarter budget flush, if it materializes at all, will be modest," the Morgan Stanley report said.

But not all IT spending is created equal, according to the survey. The top priorities for CIO are applications integration, security software and enterprise resource planning (ERP) software upgrades. ERP moved up as a priority in August from the No. 9 spot in July.

Eighty percent of respondents said they had launched new development projects this year, but CIOs remain wary of software for customer relationship management. Among the CIOs surveyed, 20 percent thought CRM is "useful, but not a high priority at the moment" and another 20 percent noted they were unsure about the potential return on nvestment. Twenty-nine percent said they either didn't need CRM or were skeptical about it.

Linux, meanwhile, continues to creep into IT budgets. Among the respondents, 29 percent said they owned Linux servers and 8 percent are formally considering buying them. On an informal basis, 17 percent of the CIOs said they were considering Linux servers. The remainder (46 percent) noted they don't own and aren't considering Linux.

For those that have recently purchased new Linux servers, 31 percent were adding capacity, 31 percent were replacing Windows systems, 24 percent were replacing Unix and 14 percent were replacing other operating systems.

Among the other findings:

• The outlook was mixed for hardware purchases, as 44 percent of CIOs said their servers were running at 41 percent to 60 percent of capacity and 27 percent said 61 percent to 80 percent. Asked when they'd have to buy more server hardware, 28 percent of CIOs predicted the second half of 2003, followed by 18 percent eyeing the first half of 2003. A big block (28 percent) was unsure.

For PC upgrades, 41 percent said they will replace PCs "as needed," indicating that the costs were low to maintain older computers.

• While application integration, security and ERP software were the top priorities, Windows 2000/XP desktop upgrades, e-commerce initiatives and Microsoft Office upgrades rated high.

• Among the CIOs, the leader for help desk and sales automation software was Siebel, with PeopleSoft, Oracle and SAP close behind.

• Fifty-one percent of CIOs said they would spend about the same on network equipment in the second half of the year compared to the first half, with 26 percent spending less.

• Wireless local area networks were also slow to get rolling, with 40 percent of CIOs indicating they had no intention of setting wireless LANs. Twenty percent are considering the installation of wireless LANs, 4 percent are currently implementing them and 34 percent have them deployed selectively.