85% of Tech Leaders Optimistic on Economic Recovery, but Companies Project Employment to Remain Flat

On the heels of one of the most severe economic downturns of the last century, and amid a continued sluggish global economy, the DLA Piper Technology Leaders Forecast Survey found that industry leaders are confident of continued economic recovery and project moderately increased sales revenues for tech companies over the next six- to 12 months.

The survey, measuring the attitudes and perspectives of top executives within the technology industry, reveals that close to 85 percent of technology and venture capital executives believe the global economy is on a sustained path of economic recovery. This is a notable increase in confidence over the survey DLA Piper commissioned just six months ago, when 69 percent of technology leaders projected that an economic recovery was at hand.

Tech Companies Expect Sales Growth, But No Increases in Employment and R&D

Survey respondents indicated high levels of confidence for their own respective business plans and financial forecasts during the next six- to 12 months. Nearly 72 percent of respondents expect their firms to experience sales growth during that time period; more than 82 percent forecasted business demand will rise. Start-ups and mid-sized technology companies were slightly more optimistic about their sales growth prospects than were larger technology companies.

Still, in a clear illustration of the caution with which companies are proceeding in the current economic environment, 43 percent of companies reported they expect to keep staffing levels flat. The outlook is gloomier among large tech companies. For those companies with over $1 billion in annual revenue, nearly 60 percent expect flat or decreasing employment over the next six- to 12 months.

Weak IPO Market Permanently Altering Model for Tech Start-Ups

Respondents also widely agreed that the weakness in the IPO market will continue notwithstanding some improvement in 2010, with nearly 72 percent of respondents indicating that they no longer view an IPO as an optimal exit strategy. As a result, more than 59 percent of these executives believe the traditional venture capital model has been “permanently altered” – and expect both fewer venture capital firms and fewer funded technology companies in the future.

Government Impact on Tech Sector

There was a mixed reaction to the expected debate and vote on the Bush-era tax cuts that are set to expire at the end of the year. A majority of the business executives responding to the survey (56 percent) believe that an expiration of the tax cuts would result in reduced investments in start-up tech companies and venture capital funds. However, 30 percent of tech executives believe the increased government revenues generated with the resulting tax increase would help reduce deficits and improve general economic confidence.

Tech leaders were more bullish on government investment and involvement in the CleanTech sector, with nearly 84 percent of respondents favoring tax incentives and other active involvement in that sector. CleanTech and Cloud Computing were seen as the tech industry’s two most promising growth opportunities according to a ranking that appears in the survey.

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