Transcript The Information Technology Economy in Connecticut

The Information Technology
Economy in Connecticut
Three points:
1. Unprecedented downturn in IT
embedded in stagnant US
economy
2. Impact varies by IT sector
3. The future is murky at best
Perspective of a Data Center
Unprecedented Downturn
IT Recession Worldwide
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IT market researchers at IDC say the worldwide IT industry will suffer a
drop in revenue of 2.3% this year, the largest decline ever. This year's
revenue drop combined with a decrease last year means the IT industry has
shrunk by roughly 3% during the past two years, said John Gantz, chief
research officer at IDC in Framingham, Mass. This figure compares with an
average annual growth rate of 12% in the IT industry during the past 20
years.
-IDC as reported in Computer World, November 25, 2002
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The researchers predict the total worldwide IT industry revenue this year will
contract to $875 billion, a figure lower than forecasts issued as recently
as August, when total IT revenue for the year was expected to remain
above $900 billion.
For Information Technology the
Equivalent of Nuclear Winter
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"The IT spending environment continues to be brutal," Tucci said. "The
harsh reality of reduced budgets and the uncertainty of the economic and
geopolitical climate are weighing heavily on business confidence, causing
key projects and the corresponding IT [spending] to be delayed. We saw no
significant change in the competitive environment during the quarter. We
don't know when IT spending growth will resume."
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"These are not the results you've come to expect from EDS; it's not the type
of news we're used to delivering, at all," CEO Dick Brown said during a
conference call. "We were more optimistic than we should have been
relative to our ability to fight our way through a tough economy. We
expected our clients' discretionary spending to tighten, not virtually
stop."
Business Investment in IT
Job Growth Nationally Stagnant
• “The current quarter is shaping up to be very weak - the
'soft spot' that we are in appears to be very soft indeed.
Real GDP is expected to grow only about 3/4 percent at
an annual rate in the fourth quarter. … employment and
capital spending have been stagnant, and the
manufacturing sector has been especially weak.”
• “Labor markets have also been anemic. The differing
signals from the establishment payroll survey and the
household employment survey have been reconciled on
the downside with both surveys now agreeing that there
has been essentially no job growth this year.”
-Federal Reserve Bank of San Francisco, December 2002
Job Growth in IT Abysmal
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The U.S. IT workforce has grown by a net 85,437 positions since January,
from 9,895,916 jobs to 9,981,353, in first 3 quarters of 2001 according to
Information Technology Association of America poll. This is a 1percent
annual growth rate.

Hiring by non-IT companies outpace IT companies by twelve-to-one
 If current hiring trends hold, the total U.S. IT workforce will reach just
over 10 million workers by the end of the year, 10% below
expectations earlier in 2002.
Even Hotspots Like Security Cool
Funding IT Security Projects
• A mere 15% of respondents said their
companies provided additional funds;
most took money away from other IT
work.
• Among the 2,620 survey respondents,
just under half said their companies have
“undertaken any IT projects to improve
disaster preparedness and recovery
operations” since Sept. 11.
- Survey for year between September 11th 2001 and
2002
This Recession: IT’s Perfect Storm
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The burst after the bubble in the late 90’s
H1B hiring in the 1990’s displaced US workers
Off shore outsourcing, a growing trend
Overcapacity of resources particularly in telecommunications
Need to demonstrate ROI in IT
Lack of business investment
General effect of the sluggish economy in general
Crystal Balls Cloudy
Past Predictions:
• The IT worker shortage is getting worse, hitting an all-time high this year as
more companies desperately look to fill technical positions within their
ranks. 400,000 IT jobs in the United States are presently unfilled, and the
number is increasing by about 25 percent per year. The figure is expected
to mushroom to 1.2 million vacant IT positions by 2005 if present trends
continue, according to a new report issued by the Meta Group
This Year’s Predictions:
• Looking forward to 2003, however, IDC said IT spending is expected to pick
up, driving a worldwide growth rate of 5.8% for the industry.
 IT managers predict they will need to hire an additional 1,183,000 workers
over the upcoming months, a prediction that is roughly on par with their
plans at the beginning of the year. While this number is flat compared to
January, it represents an improvement compared to July projections indicating improved optimism on behalf of hiring managers. -ITTA Survey
2002