Quarterly index remains flat for Q4 as concerns around customer demand persist
The CompTIA IT Industry Business Confidence Index remains essentially unchanged for Q4, but concerns about government gridlock took a sharp upswing in the latest survey from CompTIA, the non-profit association for the information technology (IT) industry.
The Index came in at 58.1 on a 100-point scale for Q4, compared to readings of 57.9 in Q3 and 58.0 in Q2. The forward-looking component of the Index, a measurement of technology business sentiment produced by CompTIA for more than five years, projects a gain of 2 percentage points over the next two quarters.
One notable change occurred in sentiment about the overall economy. It fell 1.1 percentage points in Q4, the first decrease in over a year.
“Up until this point, IT industry executives viewed the economy as progressing steadily towards stability and modest growth,” said Elizabeth Hyman, vice president, public advocacy, CompTIA. “A portion of the concern can certainly be attributed to the impasse in Washington and the shutdown of the federal government.”
Concern over government action (or inaction) and its impact on the overall economy jumped from 31 percent in Q3 to 42 percent in Q4.
“One in four IT companies does regular business with some branch of government,” Hyman noted. “The federal government alone purchases more than $80B in technology each year, so the effect of a shutdown directly impacts the bottom line of these companies.”
During the shutdown, only “essential” federal government activities are permitted – those necessary for the safety of human life, protection of property or otherwise authorized by law. All other activities must cease, meaning federal employees and contractors are prohibited by law from creating new obligations, making payments for funded but non-essential obligations or working or volunteering on non-essential activities.
“There’s also the potential for a longer-term impact if federal departments and agencies are unable to plan for and allocate current and future IT resources,” she added. “The technology companies and workers they’re doing business with will be in limbo, too. There will be hesitancy to hire people.”
Outside of the government procurement process many tech SMBs rely on federal financing through the Small Business Administration. The processing of these loans may be delayed.
Customer Demand Concerns
On par with the previous quarter’s Index, 49 percent of IT industry executives expressed concern over price sensitive customers reluctant to spend money on technology products and services.
“Realistically, after a prolonged period of economic sluggishness, it will take a period of sustained economic strength for customers to fully regain their confidence in longer-term capital or operational investments,” said Tim Herbert, vice president, research and market intelligence, CompTIA.
Also in the Q4 Index, 16 percent of IT firms report they are tracking ahead of revenue goals for 2013, down slightly from the previous quarter (22 percent in Q3).
At the same time, fewer firms also report lagging behind goals (24 percent vs. 32 percent). The smallest firms (fewer than 10 employees) voice the most concern about potentially missing their revenue targets – 31 percent place themselves in the lagging category.
On the investment front, IT companies expect to boost spending over the next two quarters in two key areas: staffing and new products or business lines.
“These often go hand-in-hand,” Herbert explained. “Expanding into a new product category, such as cloud or big data, typically requires an investment in human capital as well. This may occur through new hires or training for existing staff.”
CompTIA’s IT Industry Business Confidence Index is comprised of three metrics: opinions of the U.S. economy, the IT industry and one’s company. Data for the Q4 Index is was collected through an online survey of executives at 334 IT companies conducted during early October. The full report is available at no cost to CompTIA members.
CompTIA is the voice of the world’s information technology (IT) industry. Its members are the companies at the forefront of innovation; and the professionals responsible for maximizing the benefits organizations receive from their investments in technology. CompTIA is dedicated to advancing industry growth through its educational programs, market research, networking events, professional certifications, and public policy advocacy. For more information, visit www.comptia.org.