Technology Sector Will Lead Economic Recovery, Survey Says

 
 
By Nathan Eddy  |  Posted 2009-08-20
 
 
 

A survey of 130 CEO and other C-level hardware and software company executives conducted by audit, tax and advisory firm KPMG found the respondents believe that the technology sector will recover from the current economic crisis substantially more quickly than the U.S. economy, with senior business leaders expecting improved revenue and profitability in 2010 and about half seeing an improved job picture.

In the KPMG survey, two-thirds of these senior technology executives said they thought their industry would fully recover from the current economic crisis ahead of the overall U.S. economy.  Silicon Valley-based executives were even more bullish - 77 percent expect the technology sector's recovery to outpace the U.S. recovery.  About 43 percent of the technology leaders surveyed expect the U.S. economy to recover after 2010 while 39 percent predict the economy will recover by next year. The survey found eight out of 10 executives expect business conditions in the technology sector to improve in 2010, with 78 percent expecting stronger revenue and 72 percent expecting improved profitability.

"The results are in line with recent earnings reports in the technology sector which suggest business conditions are starting to improve," said KPMG partner, global chair and U.S. leader for the organization's information, communications and entertainment practice, Gary Matuszak. "There are also reports of software industry sales expanding five to ten percent annually after the recession, so while it's far from blue skies in the industry, the worst seems to be behind us."

The survey also asked the executives to indicate if their strategic focus was on cost cutting or investing for long-term growth. The results show that most technology executives are focused on building the business with 69 percent indicating they are placing emphasis on long-term growth versus 31 percent who said they are focused on cost cutting. When asked how they responded to the economic downturn in the past year, the most frequently cited action was reducing headcount (68 percent). Only 14 percent of respondents said they are planning or considering further reductions in 2010. The survey found technology executives are actually cautiously optimistic about the industry employment picture in 2010: Forty-nine percent said they expect it to be better.

When asked to identify the biggest challenges they currently face in dealing with the economic downturn, the executives most frequently said finding new sources of revenue (66 percent), managing costs and restoring business confidence (42 percent each), and adjusting to changing customer demand (37 percent). Survey respondents also identified the top three triggers they think will spur an economic recovery, with 42 percent of executives citing improved business confidence, 41 percent listing improved consumer confidence, and 32 percent naming an improved job market.  Increased consumer spending was fourth (30 percent) but was most frequently cited by hardware technology company executives (39 percent). The three triggers cited least frequently were effective regulation (six percent), government stimulus spending (five percent) and the government bailouts (four percent). 

Rocket Fuel