European enterprises have a more positive outlook about 2007 than in the previous two years. Despite the increased optimism, IT budgets show modest growth of just 0.7%. However, there will be more budget available for new investments, as well as for R&D and security. Three major themes for IT organizations are: upgrading the security environment; improving IT's efficiency; and curtailing IT services spending. Firms expect to increase their spending on software and hardware more than on IT services. Almost 40% of firms apply financial justifications to all projects that involve significant costs. To obtain approval and to make the business case, most firms look at return on investment and total cost of ownership.