Are We There Yet?

Like a cranky kid on a long car trip, just about everyone these days eagerly wants to know how close we’re getting to our final destination. That is…a stable, healthy economy.

Several key macroeconomic indicators, as well as CompTIA’s recently released 2010 IT Industry Outlook, suggests we’re making steady progress.

CompTIA’s bi-monthly survey of over 300 tech companies points to improved business confidence, which moved into solidly positive territory on the 100-point scale (up 6.3 points to 56.6). Furthermore, intent to increase capital expenditures, R&D spending and staffing also showed improvement, which serves as a proxy for strengthening demand for IT products and services.

Looking at the big picture for 2010, CompTIA forecasts worldwide IT industry growth in the 2 – 4 percent range, reflecting the cautious optimism held by many in the industry. Opportunities for hitting the upside of the forecast certainly exist though. IT executives in the survey were most bullish on the growth prospects for IT services; predicted to grow at 5.5 percent under the optimistic scenario.

With lots of pent-up demand from firms who had postponed IT hardware and software purchases during 2009, these categories could also hit the upper limits of their growth forecast. Keep in mind however, downward pressure on both pricing and companies moving to alternative, cheaper solutions, such as netbooks, software-as-a-service or open source applications, could dampen the overall industry growth rate (which is revenue based).

What else could cause delays or detours on the road to recovery?

•    Business confidence among the very small (<$1 million in revenue) IT companies lags medium and larger firms. Small businesses contribute significantly to job growth, so any hiccup in the recovery for small IT firms could be a sign of prolonged economic malaise.

•    Many IT executives continue to express concern over a tight credit/lending environment. Companies wanting to expand to new markets or invest in R&D or new product lines need capital. Obviously, constraints in this area can and do have a severe impact on economic growth.

•    Consumer spending affects all areas of the economy. The American economy is in the precarious position of needing consumers to spend, which then drives spending in other areas (including the IT industry), but at the same time needing consumers to clean up their household budget and save more.

So, the bottom line: the situation has clearly improved as measured by a number of economic indicators, IT industry business confidence, industry investment and sales of IT products and services. Many signs point to solid growth, but there are still enough lagging areas of the recovery and enough unknowns to remain cautious about 2010. Stay tuned for the March release of CompTIA’s next iteration of the IT Industry Business Confidence Index for more insights on the state of the economy and the IT industry