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India and China on US's Heels for Job Creation

The United States market has rebounded to first place from third just a year ago, ahead of China and India, as a driver of future revenue growth for the technology industry, according to the results of the annual Technology Industry Business Climate survey by KPMG LLP, the audit, tax, and advisory firm.

Yet, while the senior technology executives surveyed see the US market driving revenue growth – and although they anticipate continued investment in mergers and acquisitions and emerging technologies – they are less optimistic about overall technology industry employment growth and the prospects of a national economic recovery than they were a year ago.

Survey respondents expect the US market to provide the highest percentage of revenue growth and employment growth over the next 12 months. China, Brazil, and India follow the US in revenue, while India and China are second and third in employment.

In the 2010 KPMG survey, the US market was ranked third in expected revenue growth and fourth in employment growth. In addition, tech leaders this year predict the US also will have the industry's greatest percentage of research and development investment growth, followed by India and China.

"Technology executives clearly see a sustained recovery and a strong appetite for technology related purchases by U.S. companies and consumers, which helped raise the position of the U.S. market. Coupled with demand from emerging market countries, this combined opportunity bodes well for the industry," said Gary Matuszak, partner, global chair and US leader for KPMG's Technology, Communications & Entertainment practice. "They also intend to take advantage of their strong liquidity and cash positions by investing in emerging technologies and new business models, like Cloud, and new products and services, as well as M&A to drive revenue."

The tech industry executives also may be buoyed by information technology spending in the banking and retail industries. Executives in KPMG business climate surveys in both of those sectors identified technology as the number one area for investment.

North Carolina Transitions to High-Tech Manufacturing

In its transition from traditional to high-tech manufacturing, biotechnology, and services, North Carolina has many opportunities to create high-skilled jobs, according to a new report from TD Economics.

"High-skilled jobs are less sensitive to economic contractions than middle-skilled jobs, and the creation of high-tech business clusters is enhancing efficiency, improving productivity, and bolstering the state's output," said TD Economist Christos Shiamptanis, who authored the report.

The TD Economics report cites several opportunities for North Carolina, including the development of technology clusters, the strength of its world-class research universities, and the shift toward high potential industries like electronics and pharmaceuticals.

"In North Carolina, between 1999 and 2009, computer and electronics manufacturing output went up by a massive 569 percent, surpassing the national increase. Likewise, chemical manufacturing output increased by just over 9 percent, while the national average declined by 3 percent," Shiamptanis said.

Textile and apparel output now amount to slightly less than 5 percent of North Carolina's manufacturing production, and with fierce competition from abroad, declines are likely to persist. According to the TD Economics report, this shift in output and resources away from traditional manufacturing sectors toward high-tech manufacturing is deepening a labor market divide already in play.

"North Carolina is seeing middle-skill jobs disappear and its workforce is becoming increasingly polarized between those that have high skills and those that have low skills," Shiamptanis said. "High-tech industries are creating a lot of new high-skilled jobs in engineering, software design, nano-manufacturing and bio-processing, which generate higher incomes as they require significant investment in education and training. However, the tragedy of the high-tech industries is that many medium-skilled workers are discovering that they do not have the skills to compete for the jobs that are in high demand, and may have to settle for low-skill jobs."

IT Execs See Improving Conditions

Unexpected shocks that roiled global markets also took their toll in the latest CompTIA IT Industry Business Confidence Index, but information technology (IT) industry executives still expect business conditions to improve and sales growth to resume in 2011.

The CompTIA IT Industry Business Confidence Index fell by 5.1 percentage points in Q2, to 54.9 on a 100-point scale. IT industry confidence was shaken by the same events that affected other segments of the economy – natural disasters in Japan, unrest in the Middle East and rising prices in a number of areas, especially oil prices.

Looking ahead, IT industry executives expect the recent bout of uncertainty to abate and sales growth to resume. The CompTIA IT Industry Business Confidence Index is projected to increase 5.2 percentage points over the next two quarters, making up the ground lost in the Q2 reading.

Despite the Q2 dip, IT industry sentiment is still on solid footing. The latest reading exceeds confidence levels for most of 2010.

“Confidence levels about the industry as a whole and about individual companies continue to reflect optimism in a strengthening economy,” said Tim Herbert, vice president, research, CompTIA. “The net positive for the industry now stands at 62 percent, and for individual companies at 64 percent. Not long ago both figures were closer to 50 percent.”

Another positive sign – hiring intent continues to move upward, increasing 2 percentage points to a Q2 rating of 42 percent.

“Hiring is a good indicator of confidence and positive economic momentum,” Herbert said. “Only firms with solid business prospects are willing and able to expand their headcount.”

The CompTIA IT Industry Business Confidence Index is comprised of three metrics: opinions of the US economy, opinions of the IT industry and opinions of one’s company. While the economy component of the Index continues to drag on the overall reading, that trend may be turning around, according to Herbert.

“The gap between the performance of the overall economy and IT industry appears to be closing slightly, which should be viewed positively by IT industry executives,” he said.

Another gap in index results that’s narrowing is the confidence level of small IT businesses compared to their larger counterparts. Throughout the history of the Index, the smallest IT firms (under $1 million in annual revenue) lagged behind medium-sized and larger firms in business confidence.

“This difference has narrowed, however, a sign that the recovery has boosted prospects for businesses of all sizes,” Herbert said.

Among all firms surveyed, the average revenue growth rate expectation for 2011 is 13 percent. The majority of companies will stay in their comfort zone to achieve that goal. Roughly three-fourths will turn to existing customers or new customers within the same vertical market for growth. A minority of firms (20 percent) plan to seek out growth in new vertical markets.

Expenditures by IT firms in many categories will increase or hold steady. Compared to the Q1 Index, some firms will slow the rate of increases in investments in new technology, new business lines and marketing/advertising initiatives.

“This may be a situation where firms committed to the expenditures during Q1 and are now at the point of execution or waiting to see the return on investment,” said Herbert.

On the challenges to growth front, IT industry executives voiced concern over the impact of new, unexpected shocks to the economy. This rating increased 9 percentage points from Q1, rising to a concern rate of 41 percent. Offsetting this negative, a number of other concerns subsided, including weak consumer demand, government regulation, competition from international firms and labor prices and availability.

The CompTIA IT Industry Business Confidence Index is based on an online survey fielded to IT industry executives and professionals in late March 2011. A total of 395 IT companies participated.

Smart Grids Have Power to Create Jobs

Turning the electric power system into a smart grid, or so-called "energy Internet," has already created thousands of US jobs and has the potential to create many more, according to a new report by a Duke University research team.

The team's report, "US Smart Grid: Finding New Ways to Cut Carbon and Create Jobs," identifies 334 US locations in 39 states that are already developing or manufacturing products for a smart grid. The region with the largest number of sites is the Southeast, with California having the most sites of any one state.

Nationwide, utilities now have more than 200 smart grid projects underway. Using two-way digital communication, a fully developed smart grid in the future will allow utilities and customers to share information in real time -- often automatically -- so both sides can more effectively manage electricity use. Smart grid promises to reduce carbon emissions, stimulate technology innovation and create jobs, and represents a huge technological advance over today's centralized, one-way US electric system, according to the Duke study.

"To make the most of job opportunities, the United States must continue pursuing the cutting edge of smart grid technologies, especially those needed for integrating renewable energy sources and electric vehicles into the grid," said Marcy Lowe, the study's lead author and a senior research analyst at Duke's Center for Globalization, Governance & Competitiveness (CGGC).

The Duke team studied 125 leading US smart grid firms to assess their potential role in creating jobs in areas that include information technology, core communications, smart hardware, energy services, energy management, telecom service, and system integration. They estimate that US suppliers for smart grid technologies have already created more than 17,000 US jobs.

The study notes valuable export opportunities to be tapped by US firms, large and small. It further highlights well-established manufacturers that not only provide new devices to the smart grid market, but have also found new niches in software and services.

"Additional policy support is needed to tap the smart grid's potential to save energy, reduce carbon and create jobs," Lowe said. "This includes regulatory reform and fundamental changes in the electricity sector's business model, which currently provides incentives for utilities to sell more, not less, energy."

Jackie Roberts, director of sustainable technologies for Environmental Defense Fund, which sponsored the study, said that as energy prices climb, "we need energy efficiency strategies more than ever. Smart grid applications help save businesses money, but the benefits go far beyond that. The firms involved in delivering these new products and services cover 39 states, which shows the widespread market opportunities and job creation potential for America."

Tech Job Cuts Decline to Lowest Level Since 2000

While the pace of downsizing declined significantly for most industries in 2010, the technology sector fared particularly well, with employers announcing plans to cut 46,825 during the year. That was 73 percent lower than the 174,629 technology job cuts in 2009 and the lowest annual total for the sector in records going back to 2000.

The latest report on technology sector job cuts released Monday by global outplacement firm Challenger, Gray & Christmas reveals that planned layoffs plummeted in the second half of 2010. Employers in the sector, which includes computer, electronics, and telecommunications firms,
announced 35,375 job cuts between January and the end of June 2010. From July through the end of the year, job cuts totaled 11,450; a 68 percent drop.

The 73 percent decline in year-over-year job cuts achieved by the sector exceeds the 59 percent decrease in overall job cuts across all industries, which fell from 1,288,033 in 2009 to 529,973 in 2010.

The 46,825 tech-sector job cuts accounted for 8.8 percent of all job cuts in 2010. That is the lowest percentage of technology cuts on record. It is down from 13.6 percent in 2009. In 2001, at the height of the collapse, technology sector job cuts reached a record high of 695,581, representing 36 percent of all job cuts announced that year (1,956,876).

The most significant drop in technology-sector job cuts was experienced by firms in the electronics industry, which saw job cuts plunge 92 percent from 65,300 in 2009 to 5,072 last year. Job cuts by computer firms dropped 66 percent, while telecommunications companies saw job cuts decrease by 55 percent.

“Many industries are still struggling, even as the economy recovers. The technology sector does not appear to be in this camp, however. These firms are definitely on the leading edge of the recovery, as companies across the country and around the globe begin to upgrade and reinvest in their technology. The surge in smart phones and tablets alone is helping to drive growth in electronics, telecom and computers,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

Industry analysts expect the tech sector to continue its recovery in 2011. According to a survey by the trade publication InformationWeek, 55 percent of information technology professionals said their companies will increase IT spending in 2011, while only 19 percent expect IT spending to fall and 26 percent expect it to remain unchanged. Meanwhile, Forrester Research forecast that 2011 IT spending will increase 7.5 percent in the US and 7.1 percent globally.

Technology jobs will not only see gains in the coming the coming year, but they are among the occupations that will realize the fastest growth over the next decade. The number of network systems and data communications analysts is expected to increase by 53 percent by 2018, while the number of computer software engineers expands by 34 percent, according to projections recently released by the Bureau of Labor Statistics.

“None of this means that finding a job will be easy for technology workers in 2011. Finding a job is never easy, even in the best economy. Despite the potential for improved hiring in the new year, there are still a lot people competing for every opening and many employers are very particular about what skills and experience they want new workers to have,” said Challenger.

“It is critical that technology workers continually update their skills in order to remain competitive. It is necessary to maintain a balance between having specialized skills and having the flexibility of a generalist. It may also be necessary to expand one’s search to more industries or geographically,” he advised.

EMEA: More Money Needed for Innovation

Organizations across Europe, the Middle East, and Africa (EMEA) agree on the need to refocus IT budgets toward IT innovation in order to improve business performance, productivity, and profitability, according to a new study conducted by SAP. The study looked into IT spending priorities of nearly 500 senior IT decision-makers in eight countries across EMEA, and concluded that a key issue was the division of IT spend among three areas: operations, maintenance, and innovation.

One-third of companies said that their current IT strategy is too focused on "simply keeping the lights on" in the day-to-day running of existing IT systems. Overall, an alarming 60 percent of companies said that this IT strategy has held them back from investing in innovation. Respondents indicated that they face a wide range of issues that currently prevent them from investing in IT innovation.

The most commonly cited reason was uncertainty about the economy, with 48 percent of respondents believing this was a barrier. In addition, 39 percent stated that too much money is spent on operations at the moment, therefore leaving a deficit in the budget that could otherwise be directed toward IT innovation. The detrimental effect was also viewed as impacting competitiveness, with 38 percent of respondents stating the current spend priorities harmed their competitive position.

Lack of spend on IT innovation is having a negative business impact, with 44 percent of respondents saying it has directly resulted in lack of productivity. Forty-three percent also claim to have lost potential cost savings because of the spend deficit. Additionally, over half of the companies surveyed believe that they would get greater business value if more was spent on IT innovation.

When asked how this lack of IT innovation investment would impact their company over the next three years, one-third of respondents claimed that this would result in lower revenue growth than their business needed, and 38 percent also said it would result in a failure to meet regulation and compliance demands.

"Our research has confirmed that companies continue to spend more of their IT budgets on operations than on IT innovation," said Chris McClain, senior vice president of EMEA and India, SAP Premier Customer Network. "SAP is working with many customers around the world to help them lower their TCO to apply resources toward the innovation that will give them the advantages to grow their businesses and achieve their strategic goals."

The survey was comprised of 487 interviews with senior IT decision-makers including CIOs, IT budget decision-makers, and IT budget holders, conducted across eight countries (UK, Russia, Germany, UAE, France, Saudi, Italy, and Qatar). SAP is the world's leading provider of business software, offering applications and services that enable companies of all sizes and in more than 25 industries to become best-run businesses.

Rebound in Wages for Skilled Temporary Employees

Wages for skilled temporary employees have finally bottomed out in the US and are inching up, according to the Yoh Index of Technology Wages, which since 2001 has been benchmarking technical wages in information technology, life sciences, engineering, health care, aerospace and defense. The 4.31 percent increase in hourly wages between November and December was welcomed after declines in all three months in the third quarter of 2010.

Even hard-hit employment markets, such as California, are showing increased wage pressure. Wages for technically trained workers in New York, the Pacific Northwest, and Texas were higher during the fourth quarter. Certain sectors demonstrated similar new life.
Corporate infrastructure projects, application development, and telecom led the way in demand for skilled programmers, network engineers, and IT professionals.

While year-over-year numbers still showed decline, the uptick, which was strongest in December, was particularly encouraging due to its timing. December is typically a time of slackened demand for highly skilled workers due to seasonal lulls in the hiring of highly trained and paid technicians. According to Yoh, the momentum bodes well for the New Year, and the job prospects of millions of skilled workers, who have suffered from unemployment or settled for reduced wages during the recent recession.

“Real wage increases for skilled temporary employees serve as harbingers for the direction of the economy, especially early in the recovery cycle when businesses are still unwilling to hire full-time employees for highly paid, skilled positions,” stated Lori Schultz, president of Yoh. “Temporary workers blunt the risk of a still uncertain economy by providing just-in-time employees that can be more easily managed to balance indefinite customer demand.”

Wage capitulation, a phenomenon whereby employees accept lower-paying jobs today because of poorer future earnings prospects, continues to linger in the psyche of highly skilled workers. “Many technically skilled workers had never faced a labor market like that of the Great Recession, and will long remember its psychological impact,” she said. “These are workers who came of age when technical skills and education served as moats protecting jobs, income and lifestyle aspirations.”

“It’s not a revolution, rather an evolution of technology that is lifting demand and wages for technical workers,” remarks Schultz. “New bandwidth demands from cloud computing, mobile computing, and the advent of resource rich software, content and websites are forcing companies to invest in order for their employees to maintain competitiveness.”

At the same time, the mainstreaming of e-commerce at a time of returning consumer confidence is generating an array of IT infrastructure projects, the kind that can be delineated and ascribed to highly skilled temporary workers.
On the medical and life science side of the equation, new healthcare regulation continues to dampen activity due to uncertainty in the marketplace. “The focus is still unclear and long-term decision making is up in the air,” said Schultz.

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