What will tech's recovery look like: a U, V or W?
So far, X (no recovery) seems least likely in near-term outlook for the tech industry
Computerworld - There was a lot of difficult news for the high-tech industry this year. Hardware sales -- servers in particular -- cratered and equipment makers cut payrolls aggressively. But the damage, by some measures, wasn't as bad as it may have seemed, and new data suggest IT managers reduced hardware spending to save jobs.
In fact, more than half of the 243 companies surveyed by the Society of Information Management (SIM), an organization of senior level IT managers, cut their budgets this year -- double the percentage of previous years, according to a new survey. But in 2010, only 28% of those managers said their budgets will be cut and 27% predicted an increase. The balance won't see any increase or decrease in spending.
Here's another sign of improvement: The tech industry group Computing Technology Industry Association (CompTIA) said on Wednesday that a survey of 200 U.S.-based IT organizations found that 48% of the companies expect to increase R&D investments, and a third plan to hike their own tech spending over the next six months. The number of companies that plan to hire also edged up to 29%.
Tim Herbert, vice president of market research at CompTIA, said he sees "a shallow U" shaped recovery for tech, partly because the industry didn't suffer as steep a decline as in some other industries. "It is not going to have the same sharp increase that a few other industries are now experiencing," he said.
Jerry Luftman, who conducted the survey for SIM, said the data shows that IT managers see a 2010 budget environment that's "less bad than this past year but not what it was, when things were good," he said, referring to pre-recession spending. Luftman is a distinguished professor and director of information systems programs at the Stevens Institute of Technology in Hoboken, NJ. IT managers "are not sure whether it's going to be U, V or W recovery," he said.
In responding to the recession, the portion of IT budgets allocated to hardware declined to 33% versus 42% in 2008. The portion of the budget devoted to internal staff increased, reflecting smaller budgets but also an effort to keep employees rather than buy new equipment. "Rather than layoff people, they cut equipment," Luftman said. They also increased use of outsourcing services.
From January to June, the tech industry shed 2% of its workers, a net loss of 115,000 jobs out of a workforce that is nearly 6 million, says analysis of U.S. labor market data by the TechAmerica Foundation, which is one of the groups to emerge out of the merger of the AeA and Information Technology Association of America earlier this year.
The job cutting impact grows if measured over the 12 months to June. The tech industry lost 224,100 jobs, a 3.7% percent drop over the period. TechAmerica measures employment in the tech industry, which counts everyone from engineers to accountants, in that industry.
In contrast, The TechServe Alliance, a group that represents IT services firms, analyzes a different set of U.S. government data differently, focusing on occupation. That data suggest IT workers took a slightly bigger job loss hit, when industries outside of tech are included as well. In June, IT employment was at 3.8 million, for a year-over-year decline of about 5%. But the decline in June was just .4%, indicating some moderation.
Josh James, director of research and industry analysis at the TechAmerica Foundation, points out that the federal government's economic recovery bill -- the nearly $800 billion measure approved earlier this year -- will soon be kicking in. That bill includes large sums for tech IT spending, especially in health care and broadband deployment.
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