Technology industry leaders are most bullish on revenue growth in the US, China and the UK, according to the results of the annual Technology Business Outlook survey of US-based technology executives conducted by KPMG.
The firm said that the UK ranking is one of the biggest surprises in this year’s survey, with 42 per cent of the technology leaders projecting that market as their first, second or third highest revenue growth rate for their companies in the next 12 to 24 months, compared with only 18 per cent in last year’s survey.
The US remains the number-one market, selected among the top three by 81 per cent of the respondents — higher than results in the prior three annual surveys — followed by China at 47 per cent. The executives were each asked to select their top three markets.
‘The high expectation for the US market speaks to technology executives’ belief in the growing demand for cloud, mobile and D&A technologies that are enabling new business models and increasing operational efficiencies,’ said Gary Matuszak, global chair of KPMG’s technology, media and telecommunications practice.
‘The jump by the UK is the result of strong economic recovery in the country combined with the effects of tax incentives that have encouraged investment in the tech sector,’ said Tudor Aw, head of KPMG Technology Europe. ‘The findings reflect KPMG’s most recent local UK technology report showing UK tech sector business activity growth at its highest for almost 10 years supported by steep rises in incoming new work and the lowest rate of cost inflation for more than four years.’
Unlike a year ago when Brazil, Mexico and South Korea appeared on the rise, fewer survey respondents see these three countries as their biggest revenue and employment growth markets.
Brazil’s position as a revenue growth market declined 10 percentage points to 23 per cent and as an employment growth market five percentage points to 21 per cent. Tech executives’ expectations for their companies’ revenue growth in South Korea declined from 14 per cent in 2013 to seven per cent in this year’s survey, and for employment growth it slipped two percentage points to 10 per cent. The outlook for Mexico dipped six percentage points to nine per cent for revenue growth and fell six percentage points to 15 per cent for employment growth.
‘In Brazil, while there remains room for tech sector growth, macroeconomic trends, such as higher interest rates, are affecting growth,’ said Matuszak. ‘Despite South Korea’s competitive technology sector, a maturing smartphone market is contributing to slower tech sector growth in that country, yet their employment outlook is more positive than revenue since South Korea relies on outside markets.’
Technology executives believe the US, India and China will be the leading markets for tech employment growth between now and 2016. Other countries with higher tech company expectations for employment growth are Canada, at 30 per cent up from 23 per cent, the UK 28 per cent up from 21 per cent and Germany 15 per cent up from seven per cent.
Looking at where tech companies plan to increase investment and jobs in the US over the next two years, California led the list (28 per cent), followed by Texas at 17 per cent, the Southeast at 14 per cent and the Midwest at 10 per cent. Additional locations included Washington DC (nine per cent), Other West (nine per cent), New York (eight per cent), Massachusetts (seven per cent) and Other Southwest (seven per cent).
While the majority (58 per cent) do not plan to make any changes in how they deploy their manufacturing in the next two years, 24 per cent are either moving more manufacturing off shore or incrementally adding new offshore manufacturing. Eleven per cent are either moving manufacturing back or adding new manufacturing operations in the US.
At the same time, 61 per cent of the technology executives say their companies are not planning to re-shore non-manufacturing functions. Sixteen per cent say they will and 23 per cent say maybe.
The KPMG survey was conducted in the US in March 2014 and reflects the responses of 100 primarily C-level and senior executives in the technology industry. Of the 100 respondents, whose companies may be based in the US or other countries, 74 per cent represent companies with revenues of $1bn (£590m) or more and 26 per cent represent companies with revenues in the $100m to less than $1bn range.