IT sector on track to curtail double-dip

Business confidence in IT and technology is higher than in any other key industry and is grounds to suggest the current double-dip recession is likely to be short-lived, a second quarter report says.

In its latest business confidence monitor, Grant Thornton scored the ICT sector at plus 26.5 - up from 4.7 in the first three months of the year, and representing the highest level since Q2 2011.

The rising confidence among technology and technical staff employers is being led by increased forecasts for domestic sales, which are expected to leap 6.3% over the next 12 months, compared with only 3.2% growth in the last quarter.

On a national basis, IT is also in front.  According to the business monitor, the sector is on course to outperform on growth to turnover (7.3% vs. 4.6%), gross profits (7.4% vs. 4.3%) and sales volumes.

”The strong improvement in confidence across the board suggests the current recession is likely to be short-lived, with quarter-on-quarter growth of 0.6% forecast for the second quarter of 2012,” Grant Thornton reflected.

“When the downturn first hit in 2008-9 IT budgets were frozen or heavily restricted. The speed of change in the technology since that period means that many business have no choice but to restart or continue investment.

“Because there is also a cost reduction angle to many technology sales there is also a short term spend/long term saving argument which is a useful one in the current market.”

The present conditions were also said to be fertile for disruptive business models that are designed to drive cost savings for users or customers in the long-term, but which require spending in the short term.

“Examples of this include moving to a cloud-based service, software as a service and infrastructure as a service,” explained Grant Thornton’s head of technology Wendy Hart. “At the same time, businesses supplying the consumer market are seeing consistently high appetites for new technology, devices and applications which in turn drives sales.”

"Despite this, export expectations have fallen slightly in the last quarter, suggesting that Eurozone uncertainty continues to be an issue and this can only have increased since the survey was undertaken. R&D expectations have also slipped a little reflecting the on-going challenges of recruiting appropriately skilled staff, which is a recurring challenge for businesses in this sector."

 

May 21, 2012