Slow But Steady Growth Projected For U.S. Tech Sector - InformationWeek

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Software // Enterprise Applications

Slow But Steady Growth Projected For U.S. Tech Sector

Forrester's index points to a rosy 2007 as overseas sales continue to drive a need for U.S. goods.

The U.S. tech sector is expected to grow slowly, but steadily, this year, driven by expanding overseas sales, a market research firm said Wednesday.

The projection is based on last year's trends, which are expected to continue in 2007, Forrester Research said. In the fourth quarter of 2006, the firm's U.S. Tech Sector Index rose two points from the third quarter and 5.6 points year to year to 128.8. That number reflected an increase in seven of the 11 indicators.

"CIOs still feel optimistic; the U.S. economy is projected to grow at a moderate rate; and foreign markets are looking healthy," Forrester said. "The stage is set for more slow but steady growth in the U.S. tech sector in 2007."

Of the four lagging indicators in the fourth quarter last year, three, including two leading indicators, fell and one held steady, tainting the otherwise upbeat performance. Among the drops was U.S. revenue from 40 global IT vendors, which saw a sales decline from the third quarter and year to year. That, however, was offset by higher overseas sales.

"Put another way, the U.S. tech sector is doing well in spite of the U.S. market," the report said.

Also dropping was venture capital investment, which plunged 20.8 points from the third quarter, representing a decline of $711 million in spending. Overall, however, the news wasn't nearly as bad as that number would indicate. VC investment in technology for 2006 topped $12.7 billion, its highest level since 2002.

Forrester's supply index, that part of the overall index designed to measure the health of IT services and product supply in the United States, fell 6.8 points from 3Q, while technology imports held steady. IT industry employment edged up slightly by 11,700 jobs, taking the workforce to the highest job level since the close of 2002.

U.S. vendors in the fourth quarter saw an overall rise in stock prices and net income. Profits for the 22 large U.S. tech vendors tracked by Forrester reached $13.2 billion, the highest quarterly level since the firm began tracking in 2000.

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