And while spending on consumer IT has dominated this decade, this trend may be changing somewhat. Yesterday's Wall Street Journal [subscription required] reported that business IT spending, which plunged after the dot-com crash, is starting to rise modestly. One forecaster expects business software spending to rise 9% this year to $143 billion.

Here are three reasons businesses are shifting to software-based development projects and related services:

• Companies are trying to connect existing applications in new ways. Many companies want to let customers track orders or employees manage their own benefits, which has required new software.
• Companies are automating their data centers and the management of their computers because IT departments are spending 70% or more of their budgets on paying their own employees to manage and upgrade their existing systems and they want to reduce those costs.
• Companies want to reduce their server costs. In particular, companies are trying to cut the cost of buying and operating server systems by moving to inexpensive new models that consume less power and virtualization software that helps machines make greater use of their capacity.

Here's my assessment of four companies which have been benefiting from the increase in spending on corporate software development:

• International Business Machines Corp. (NYSE: IBM): moderately expensive. Last Wednesday, IBM said four of five major sectors boosted spending: financial services, the public sector and communications all grew by 11% or better in the second quarter, while the distribution sector grew 8%. Only industrial customers' spending didn't grow, primarily due to auto companies' problems. IBM trades at a Price/Earnings to Growth (PEG) ratio of 1.4 -- based on a P/E of 17.9 and earnings expected to grow 12.8% to $7.85 in 2008. IBM has risen 46% in the last 12 months.
• Microsoft Corp (NASDAQ: MSFT): expensive. On Thursday, Microsoft Chief Financial Officer Chris Liddell said he thinks Microsoft is getting "a higher share of the wallet from some of our customers" citing strong renewals in the three months ending June 30 of Microsoft's long-term contracts with its largest customers. Those bookings were reflected in a surge of Microsoft's deferred revenue, which reached $12.6 billion, a 26% increase from the previous quarter. Microsoft trades at a PEG ratio of 1.7 -- based on a P/E of 22.3 and earnings expected to grow 12.9% to $1.93 in Fiscal 2009. Microsoft has risen 32% in the last 12 months.
• Oracle Corp. (NASDAQ: ORCL): expensive. Oracle, the enterprise software company, trades at a PEG ratio of 1.6 -- based on a P/E of 25.1 and earnings expected to grow 15.6% to $1.33 in Fiscal 2009. Oracle has risen 35% in the last 12 months.
• SAP AG (NYSE: SAP): moderately expensive. SAP, the business software company, trades at a PEG ratio of 1.5 -- based on a P/E of 24.3 and earnings expected to grow 16.2% to $2.46 in 2008. SAP has risen 12.6% in the last 12 months.

I wonder whether the consumer technology stocks are already priced for perfection. This was born out when Google tumbled 5% last Friday after missing earnings expectations. Meanwhile these four business software companies, while expensive on a PEG basis, may be on an upswing.

Peter Cohan is president of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter. He has consulted to News Corp.'s CEO and has no financial interest in the securities mentioned in this post.