Tech Index Shows Steady Growth

The tech industry looks nothing like the shell it was after the dot-com bubble burst. That’s what a report released Monday thinks of the U.S. market.

According to a benchmark study by Forrester
Research and the Information Technology Association of
America (ITAA), the United States tech industry continues to rebound from the 2001-2003 recession.

The groups said the study is based on 11 measures of IT demand, supply
and the strength of U.S.-based IT providers.

“Until now, no one has been able to definitively answer the question, ‘How
is the tech industry doing?'” Harris Miller, president of ITAA, said in a
statement. “Although IT is one of the major drivers of the U.S. economy, no
single comprehensive measure of the health of the sector existed in the same
way that the U.S. Consumer Confidence report tracks consumer spending.”

Miller said the Forrester/ITAA Index indicates a stable industry that should
be “attractive to IT customers and career planners alike.”

Forrester CEO George Colony said the first published data of the study
indicates a “continuing saw-toothed pattern, which further supports
Forrester’s findings that the tech economy is not yet in a period of strong
steady growth.”

In the near term, Colony added, “Don’t weep for the U.S. tech sector, but
don’t break out the champagne, either. Save it for 2008.”

Colony predicted both moderate increases and declines over the coming year
in IT.

While the third quarter of this year is the first published index, Forrester
compiled historical data to provide a baseline and reveal trends occurring
after the low point of the recession in 2002. All 11 indices are weighed
evenly in the overall index score, using a 2002 quarterly average of 100
points as the baseline.

In Q3, the index rose 3.9 points above the second quarter to 121.6, which
nearly matches a three-year high of 122.3 in the fourth quarter of 2004.
Strong gains in CIO confidence about the health of their budgets and future
spending prospects largely improved the overall index.

Demand forces including CIO spending outlooks, U.S. technology exports and
U.S. revenues of 39 large IT vendors, recorded the biggest growth — 8.5
points — and were a primary driver of the third quarter’s increase in the
overall index.

Forrester’s outlook for business investment in IT was the only measure in
the index to fall, which Forrester said was due to expectations that IT
spending in the fourth quarter will be less than what was reported in the
third quarter.

Supply indices, including the health of venture-capital funding, IT
employment and U.S. technology exports, dropped 0.6 points. Forrester said
the decline was much smaller than those in recent memory, which may point to
an overall strengthening in new technology funding.

Although VC investment was down, similar drops have occurred in each third
quarter of the last three years.

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