Tech Execs See Improving Sector Fueled by Growth Outside the U.S., While Overall U.S. Recovery Now Extending to 2012: KPMG Survey

Still expect sector to recover ahead of U.S.

View cloud computing, mobile applications as top growth drivers

Jun 22, 2010, 10:27 ET from KPMG LLP

NEW YORK, June 22 /PRNewswire/ -- Anticipating substantial increases in global information technology spending outside the U.S., senior technology executives in the U.S. see stronger revenue and profit ahead for their industry in 2011, although they see a longer path to recovery for the overall U.S. economy, according to the results of a recent survey by KPMG LLP, the audit, tax, and advisory firm.  

KPMG found that nearly 90 percent of its survey respondents expect corporations globally to increase IT spending this year, and ranked China and India first and second respectively as the countries expected to have the highest revenue growth and the highest employment growth during the next 12 months.

The technology executives' view of growth in China and India contrasts with their expectation for the U.S. economy. In a similar survey conducted by KPMG last summer, technology leaders predicted on average that the overall U.S. recovery would take hold in May 2011.  Now, on average, they project the U.S. economic recovery to take hold in March 2012, indicating full economic recovery is almost two years away.  

However, seven in ten technology executives believe strongly that their industry will recover ahead of the overall U.S. economy.  

"The fact executives see the full recovery stretched into 2012 may mean a slower rebound, but also may indicate a sustainable recovery rather than a possible W-shaped recovery which has been a concern in some markets," said Gary Matuszak, partner, global chair and U.S. leader for KPMG's Information, Communications & Entertainment practice.  "While they remain guarded on general U.S. economic conditions, tech executives continue to grow more confident that the worst is behind the sector and that the engine of innovation which has traditionally led the tech sector growth is still there."

IT Spending Up and Cloud Computing and Mobile Applications Key Growth Drivers

KPMG's survey results show 86 percent of U.S. technology executives believe that corporations globally will increase IT expenditures this year, with one-third of them anticipating spending increases in the 4-6 percent range, and one-quarter thinking it will be at least seven.

When participants were asked to name the biggest drivers of revenue growth over the next three years in the technology sector, 54 percent named cloud computing, 51 percent said mobile applications, 43 percent identified client computing/virtualization, and 42 percent said advanced analytics.  

"About half the respondents believe the growth rate for both cloud computing and mobile applications could exceed 10 percent over the next two years," said Matuszak.

Improving Business and Employment Outlook

Almost nine out of ten respondents said they expect business conditions in the technology sector to improve in 2011, and nearly three-fourths of the respondents expect their companies to add headcount in 2010, with more than a third expecting a headcount increase of seven percent or more.  But they expect most of the employment gains to come in China, India, and Brazil, all of which the executives ranked ahead of the U.S.  

Nearly nine of ten expect stronger revenue and eight out of ten expecting improved profitability, both increases over the KPMG fall survey, with the revenue figure up nine percent and the profitability number up 10 percent.

Shift To Investing From Cost Cutting

The KPMG survey asked the executives to indicate if their current strategic focus was on cost cutting or investing for long-term growth.  The results overwhelmingly show that technology executives are focused on building their business, as 73 percent indicating they are investing for growth.  

"Our spring 2010 survey results find tech execs growing increasingly more optimistic on the industry, indicating that their strategic shift from cost cutting to investing is well on its way," said Gary Matuszak, partner, global chair and U.S. leader for KPMG's Information, Communications & Entertainment practice.

Triggers For Economic Recovery

In addition to asking the executives to identify their industry's top revenue drivers, the survey asked them to identify the top three triggers they think will accelerate economic recovery in the tech sector.  Most frequently identified triggers were improved access to capital (62 percent), improved consumer confidence (58 percent) and increased hiring as the result of improved business conditions (52 percent).

The three triggers cited least frequently all revolved around government intervention. They were effective government regulation aimed at improving trust in the financial system (12 percent), additional government stimulus spending (11 percent) and the government-funded legislation to create jobs (8 percent).  

The KPMG Technology Industry Survey

The KPMG survey was conducted in the U.S. in April - May 2010 and reflects the responses of 130 CEOs and other C-level suite executives in the hardware and software computer industry.  Of the 130 respondents, 17 are companies with revenues exceeding $1 billion, 36 are companies with revenues in the $250 million-$1 billion range, and 77 are companies with revenue below $250 million. Clarion Research Inc. conducted the survey and compiled the data.

About KPMG LLP

KPMG LLP, the audit, tax and advisory firm (www.us.kpmg.com), is the U.S. member firm of KPMG International Cooperative ("KPMG International").  KPMG International's member firms have 140,000 professionals, including more than 7,900 partners, in 145 countries.

Contact:

Mike Alva


KPMG LLP


Tel: 415-963-5426


Email: malva@kpmg.com



SOURCE KPMG LLP



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