CAMBRIDGE, Mass.--(BUSINESS WIRE)--Dec. 12, 2005--The health of
the US tech sector continues to rebound from the recession of
2001-2003, according to the inaugural Forrester/ITAA US Tech Sector
Index announced today. Developed by Forrester Research, Inc. (Nasdaq:
FORR) and the Information Technology Association of America (ITAA),
the Index reveals that IT employment, US IT spending, and US IT vendor
profits and revenues are generally healthy and growing. The new
quarterly benchmark is the most comprehensive measure of the tech
economy available and is based on 11 measures of IT demand, supply,
and the strength of US-based IT providers.
"Until now, no one has been able to definitively answer the
question, 'how is the tech industry doing?'" said Harris N. Miller,
president of ITAA. "Although IT is one of the major drivers of the US
economy, no single comprehensive measure of the health of the sector
existed in the same way that the US Consumer Confidence report tracks
consumer spending. In order to provide vendors, customers, economists,
and end users with a barometer of the IT industry, we joined forces
with Forrester Research. The result is an intuitive graphical index
and brief that presents an industry that's economically healthy, based
on a variety of factors. The Forrester/ITAA Index indicates a stable
industry that should be attractive to IT customers and career planners
"The Forrester/ITAA US Tech Sector Index provides not only a
detailed look at the current health of the tech economy, but also a
look at what's ahead," said George F. Colony, chairman and CEO of
Forrester Research. "The Index reveals 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, the new data points to both moderate increases and declines over
the coming year. Don't weep for the US tech sector, but don't break
out the champagne either. Save it for 2008."
Q3 2005 Results
While Q3 2005 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 Q4 2004.
Strong gains in CIO confidence about the health of their budgets and
future spending prospects largely bolstered the overall index.
Increases in both US tech vendor revenues and the Dow Jones US
Technology Sector Index Fund, which broadly measures the stock price
performance of the US tech sector, also contributed. Highlights of the
indices' performance follows:
Demand Indices Rise With Growing CIO Confidence
Demand forces including CIO spending outlooks, US technology
exports and US 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,
due to expectations that IT spending in Q4 will be less than what was
reported in Q3.
Supply Indices Recede But Come In Ahead Of Expectations
Supply indices, including the health of venture capital (VC)
funding, IT employment and US technology exports, dropped 0.6 points.
However, the group's decline this quarter was much smaller than those
in recent memory, which may point to an overall strengthening in new
-- IT industry employment continued to rise, reaching its highest
level since Q1 2003 with the addition of 15,500 new jobs.
-- Although VC investment was down, similar drops have occurred
in each third quarter of the last three years.
-- The supply index has hovered around 100 since late 2003,
indicating that demand for IT goods and services in the US is
stronger than supply. Technology imports and offshore services
make up much of the gap.
Revenues And Valuations Bolster Firm Strength Indices
These indices measure the overall strength of US IT companies
based on the profits and global revenues of the 22 large US-based
vendors, IT prices and stock prices. Although they rose 2.6 points
together, the individual numbers were mixed in Q3.
-- Revenues rose with North American revenues continuing to be
strongest, European revenue growth slowing, and Asia Pacific
revenue picking up.
-- Prices declined in Q3 and will continue to decline due in part
to the constantly improving hardware price/performance ratios.
While these numbers are generally strong, Forrester expects the
Index to fluctuate in 2006, bringing a mild downturn in 2007. The
lower-than-projected business IT spending numbers in Q3, coupled with
Forrester's Business Technographics(R) November 2005 North American
And European Enterprise IT Budgets And Spending Survey, point to a
softening of the tech sector ahead. In addition, early readouts of CIO
confidence suggest a slight drop in Q4. However, 2008 will bring with
it the next wave of tech innovation and heavy IT investment.
The complete analysis and more information about the methodology
behind the Index can be found in the report, "Forrester/ITAA US Tech
Sector Index: Q3 2005." This report is available to Forrester
WholeView 2(TM) clients at www.forrester.com. The quarterly Index
graphic is complimentary and can be accessed at www.itaa.org.
Forrester Research (Nasdaq: FORR) is an independent technology and
market research company that provides pragmatic and forward-thinking
advice about technology's impact on business and consumers. For 22
years, Forrester has been a thought leader and trusted advisor,
helping global clients lead in their markets through its research,
consulting, events, and peer-to-peer executive programs. For more
information, visit www.forrester.com.
The Information Technology Association of America (ITAA) provides
global public policy, business networking, and national leadership to
promote the continued rapid growth of the IT industry. ITAA consists
of over 350 corporate members throughout the US, and a global network
of 67 countries' IT associations. The Association plays the leading
role in issues of IT industry concern including information security,
taxes and finance policy, digital intellectual property protection,
telecommunications competition, workforce and education, immigration,
online privacy and consumer protection, government IT procurement,
human resources and e-commerce policy. ITAA members range from the
smallest IT start-ups to industry leaders in the Internet, software,
IT services, ASP, digital content, systems integration,
telecommunications, and enterprise solution fields. For more
information visit www.itaa.org.
CONTACT: Kristen Wilson
Manager, Public Relations
Forrester Research, Inc.
+ 1 617/613-6205
Senior Vice President, Communications
SOURCE: Forrester Research