While the economy component of the Index continues to drag on the overall reading, that trend may be turning around.
Unexpected shocks that
roiled global markets also took their toll in the latest CompTIA IT Industry
Business Confidence Index, but IT industry executives still expect business
conditions to improve and sales growth to resume in 2011.
The index, based on a 100-point scale, fell by 5.1
points in the second quarter to 54.9. The results were derived from an online survey fielded to IT industry
executives and professionals in late March 2011; 395 IT companies participated.
IT industry confidence was
shaken by the same events that affected other segments of the economy-natural
disasters in Japan; unrest in the Middle East; and rising prices in a number of
areas, especially oil prices.
Looking ahead, IT industry
executives expect the recent bout of uncertainty to abate and sales growth to
resume. The index is projected to increase 5.2 percentage points over the next
two quarters, making up the ground lost in the Q2 reading. Despite the Q2 dip,
the report found IT industry sentiment is still on solid footing: The latest
reading exceeds confidence levels for most of 2010.
"Confidence levels about the
industry as a whole, and about individual companies, continue to reflect
optimism in a strengthening economy," said Tim Herbert, vice president of
research at CompTIA. "The net positive for the industry now stands at 62
percent, and for individual companies at 64 percent. Not long ago, both figures
were closer to 50 percent."
Herbert said another
positive sign is that hiring intent continues to move upward, increasing 2
percentage points to a Q2 rating of 42 percent.
"Hiring is a good indicator
of confidence and positive economic momentum," Herbert said. "Only firms with
solid business prospects are willing and able to expand their headcount."
The index is based on three
metrics: opinions of the U.S. economy, the IT industry and one's company. While
the economy component of the Index continues to drag on the overall reading,
that trend may be turning around, according to Herbert. "The gap between the
performance of the overall economy and IT industry appears to be closing
slightly, which should be viewed positively by IT industry executives," he
Another gap in index results
that's narrowing is the confidence level of small IT businesses, compared with
their larger counterparts. Throughout the history of the index, the smallest IT
firms (under $1 million in annual revenue) lagged behind medium-sized and
larger firms in business confidence. "This difference has narrowed, however, a
sign that the recovery has boosted prospects for businesses of all sizes,"
Among all firms surveyed,
the average revenue growth rate expectation for 2011 is 13 percent. The
majority of companies will stay in their comfort zone to achieve that goal.
Roughly three-fourths will turn to existing customers or new customers within
the same vertical market for growth, and one-fifth plan to seek out growth in
new vertical markets.
Expenditures by IT firms in
many categories will increase or hold steady. Compared with the Q1 Index, some
firms will slow the rate of increases in investments in new technology, new
business lines and marketing/advertising initiatives. "This may be a situation
where firms committed to the expenditures during Q1 and are now at the point of
execution or waiting to see the return on investment," said Herbert.
However, IT industry
executives voiced concern over the impact of new, unexpected shocks to the
economy. This rating increased nine points from Q1, rising to a concern rate of
41 percent. Offsetting this negative, a number of other concerns subsided,
including weak consumer demand, government regulation, competition from
international firms, and labor prices and availability.