Business Trends

 

10 23 2013

10 23 2013

IT Industry Hit By U. S. Government Shutdown

CompTIA, a non-profit association for the information technology industry, released the results of its Q4 survey. Despite concern about the partial government shutdown being widespread, it was revealed that small IT businesses are the most concerned about staying in business.

Concern in the industry

While growth in the industry remained about the same from Q3 to Q4, sentiment about the overall economy decreased for the first time in over a year. Elizabeth Hyman, vice president of CompTIA, explained the significance.

“Up until this point, IT industry executives viewed the economy as progressing steadily towards stability and modest growth,” she said. “A portion of the concern can certainly be attributed to the impasse in Washington and the shutdown of the federal government.”

Forty-two percent of IT companies expressed concern about government activity and its impact on the economy. This number is up from 31 percent in Q3. The industry is particularly affected by federal activity because, as Hyman notes, one in four companies does regular business with the government. This means many IT projects are on hold, putting some workers in idle positions. But the consequences, Hyman explains, could get worse.

“There’s also the potential for a longer-term impact if federal departments and agencies are unable to plan for and allocate current and future IT resources,” she added. “The technology companies and workers they’re doing business with will be in limbo, too. There will be hesitancy to hire people.”

Losing revenue

Beyond government contracts, about half of IT companies are concerned about consumer reluctance to spend money on new equipment and services.

“Realistically, after a prolonged period of economic sluggishness, it will take a period of sustained economic strength for customers to fully regain their confidence in longer-term capital or operational investments,” said Tim Herbert, vice president, research and market intelligence, CompTIA. A dip in consumer spending, however, could slow recovery further.

Small businesses appear to be those most affected by low spending and halted contracts. Thirty-one percent of firms with fewer than 10 employees placed themselves in the “lagging” category, meaning they are projected to fall behind revenue targets.

With federal lending and the Small Business Association halted, many companies are missing out on resources that help them through slow phases. However, National Funding, a small business lender, continues to offer financing services. Businesses can obtain a loan or IT equipment financing no matter what happens on Capitol Hill.

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