| The economic recession is responsible for an | | | | of 2009 with cautious optimism. Technology |
| estimated decrease in industry revenue by 3.2 | | | | valuations are above what they were in 2007 and |
| percent in 2009. Over 40 percent of IT consulting | | | | companies that are not distressed can attract |
| revenues comes from the banking, finance, and | | | | reasonable valuations with proven business |
| insurance market sectors, which makes the | | | | models. In addition, the eight largest technology |
| industry particularly vulnerable during depressed | | | | firms have a combined $107 billion cash on-hand. |
| economic times. | | | | As the revenues of IT consulting firms begin to |
| Despite the overall slide, we expect a strong | | | | increase, healthy firms will feel more comfortable |
| surge in information technology spending during | | | | digging into their cash reserves to execute their |
| the second and third quarters of 2009 and | | | | acquisition strategies. Several large IT firms have |
| estimate that overall IT consulting industry | | | | begun to realize the value of adding |
| revenue will grow by an average of 3.5 percent | | | | telecommunications units to their scope of |
| during this period. The surge, which will result from | | | | operations; therefore we expect more acquisitions |
| improving confidence in macro-economic | | | | of companies that have telecommunications |
| conditions, will allow companies to spend money | | | | competencies. There have been 27 mergers and |
| on postponed technology projects. | | | | acquisitions in the computer, software, and |
| However, we believe that the prosperity during | | | | supplies sector during the last two weeks of May, |
| the second and third quarters of 2009 will be a | | | | making it the most active sector in the economy. |
| result of pent-up demand, so we anticipate | | | | Deal volume should continue to increase until |
| revenue to drop by an average of 3.8 percent in | | | | industry revenue drops in the forth quarter. |
| the forth quarter of 2009 and the first quarter of | | | | Despite a recent surge from financial institutions, |
| 2010 before producing consistent growth in the | | | | the U.S. economy suffers from a high jobless rate |
| second quarter of 2010 and beyond. Some of the | | | | and a continued downfall of production. Output fell |
| growth in 2009 will come from the government | | | | in the first quarter of 2009, down 6.1% from the |
| sector, which is responsible for over 20 percent | | | | previous quarter. Unemployment, which plagues |
| of IT consulting revenue. The Obama | | | | 13.6 million Americans, tops a decade high |
| administration's new budget, which calls for | | | | unemployment rate of 8.9%. Unfortunately, the |
| dramatic changes in information technology | | | | worst is still to come for the job market; the Fed |
| spending throughout the federal government, | | | | expects the jobless rate to reach 9.6% and not |
| includes 1.3 billion in new broadband spending and | | | | return to a healthy a level until 2011. |
| additional funds for healthcare information | | | | Coming out of the recession, the U.S. normal rate |
| technology and systems that support smart | | | | of unemployment is predicted to hit a new |
| energy grids. This ought to spark a significant | | | | standard of 6.5%, according to Bloomberg |
| demand for government IT consulting and other | | | | analysts. However, there are signs the economy |
| government contracting businesses. | | | | has hit rock bottom and is set to move forward. |
| There was a 19 percent decrease in the number | | | | The first quarter GDP contraction of 5.7% is less |
| of mergers and acquisitions in the computer, | | | | severe than the 5.5% projection by many |
| software, supplies, and services sector in 2008 | | | | economists. Much of the progress is attributed to |
| from 2007. The economic slow-down has carried | | | | the 9.6% increase in durable goods purchases. |
| over into 2009. There has been a 70 percent | | | | Many economists also predict positive output |
| decrease in the total number of deals in the first | | | | growth in the third quarter of 2009. Consumer |
| quarter of 2009 compared to the first quarter in | | | | confidence is also at its highest since September |
| 2008. Despite the limited recent activity, there is | | | | of 2008, according to the Conference Board's |
| good reason to approach the final three quarters | | | | sentiment index. |