Economic and political instability, including the impact of a strong US dollar and weak oil prices, have tempered optimism, according to the report.
While 84 percent of tech executives see a stable or modestly improving economy, there has been a 38-point drop in those projecting strong improvement only six months ago, according to an Ernst & Young (EY) survey of 1,700 executives in 45 countries across industry sectors.Economic and political instability, including the impact of the strong US dollar and weak oil prices, have all tempered optimism, according to the report.Tech sector confidence has also receded in corporate earnings and capital markets, with 57 percent of tech executives seeing corporate earnings as stable, but far fewer said they now have the positive growth outlook of six months ago (38 percent, down from 75 percent).The survey recorded similar drops in confidence in equity valuations--42 percent are now positive, versus 56 percent in October 2015, the short-term market (47 percent versus 74 percent) and credit availability (47 percent versus 78 percent). Just 52 percent of executives project mergers and acquisitions (M&A) growth, down from 80 percent six months ago, and 40 percent of executives are planning alliances to create value from underutilized assets. Cost concerns have also reduced hiring intentions in the tech sector, from 56 percent in October 2015 to 23 percent in the current report.Even so, attracting and retaining talent was identified as the second-highest priority for driving growth (44 percent).The top tech sector priority was making better use of digital technology and analytics (53 percent), which topped the list across all sectors.Cost reduction and regulatory oversight tie for the top boardroom concern in the report (at 41 percent), given low economic growth and recent antitrust scrutiny of proposed megamergers.Both concerns also support a growing trend toward alliances, as companies look for less costly corporate growth strategies with fewer structural complications than M&A.The tech sector is seeing more sharing economy business models and what EY calls industrial mash-ups, a new form of dynamic and increasingly automated alliance-building that brings sharing economy benefits to the business-to-business (B2B) market.Uneven global economic growth is driving companies to look for deals across the board, with 73 percent likely to pursue a cross-border acquisition within the next 12 months.At the same time, more potential buyers are walking away from deals (84 percent versus 71 percent in E&Y’s last report), especially because of issues uncovered during due diligence.The report revealed many actual buyers have been disappointed with deals not delivering the intended synergies (20 percent) or strategic value (15 percent).
- eWeek