Technology company CEOs cautiously optimistic about growth


CEOs at some of the world's fastest-growing technology companies are very confident in their ability to grow sales, as well as prospects for the global economy, over the next twelve months, according to a new survey by Deloitte.

Yet, while technology CEOs are actively positioning their companies to grow, and focusing on revenue and market share instead of cost reduction and cash flow management, they remain cautious and deliberate, with modest hiring plans and a firm commitment to growth that is profitable and sustainable.

The study, 'Cautious Optimism,' finds almost 75% of more than 400 CEOs at U.S., European and Asia-Pacific technology companies in the Deloitte Technology Fast 500 are 'very confident' or 'extremely confident' their companies will achieve a high rate of growth over the next twelve months. Fewer than 15% cite the economy as their biggest challenge to sustained revenue growth - less than half the number from last year's survey.

'This survey shows fast-growing technology companies are deeply committed to controlled and sustainable growth,' comments Igal Brightman, Global Managing Partner for the Technology, Media and Telecommunications Group at Deloitte. 'CEOs cited sustained profitability as their top personal challenge, with most expecting the lion's share of growth to come from existing businesses as opposed to mergers and acquisitions. That's a big shift from the mentality of the late 1990s.'

Customer loyalty is a surprisingly low priority. Fewer than 10% of CEOs cited building customer loyalty as their biggest marketing challenge. This is almost half as many as last year. In Europe, the number fell from 23% to 12% - with other regions experiencing a similar decline. This suggests that when the economy was slow, loyal customers were worth their weight in gold. But with business starting to pick up, fast growth companies are shifting their focus to attracting new customers.

Despite aggressive growth plans, most companies expect only moderate increases in headcount. 55% of respondents plan to add fewer than 25 jobs, while another 25% plan to add no more than 50 positions. While encouraging, these forecasts do not approach the hiring frenzy of the 1990s technology boom.

Fast-growing technology CEOs are also focused on local and regional markets. Despite endless talk about globalisation, more and more companies are looking to capitalise on market opportunities closer to home, with two-thirds citing their own region as the most significant source of new growth. In Europe, many companies are preparing to take advantage of the European Union's expansion from 15 members to 25. In Asia Pacific, technology companies are eyeing opportunities in China and India.

The Internet, a high-profile trend from the 1990s, seems to be getting a second wind in the new millennium. CEOs in all regions consistently rated the Internet, along with wireless & wireline communications, among the top three growth technologies over a one to three year period.

Companies are increasingly positioning and exploiting the Internet as an extremely powerful tool that can streamline business processes, promote collaboration between business partners, and inspire new markets and businesses. More than 14% of companies in the targeted survey group are directly involved in Internet-related industries, while countless others are using the Internet to improve the products and services they offer in the marketplace.

'Technology executives learned some tough lessons from the last boom-and-bust cycle and have vowed not to make those same mistakes,' comments Richard Knights, Head of TMT at Deloitte in Cambridge. 'They're focusing on profitability, hiring quality over quantity, and trying to steer clear of technology hype. Of course, the real test is yet to come. We'll see if CEOs can maintain their composure when the global economy takes off and investor capital starts flying.'

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The Deloitte Cambridge office comprises 8 Partners and over 250 staff who deliver a full range of professional services to the East Anglian region. As well as focussing on the life sciences and technology sectors for which the region has become so renowned, the office has long standing specialisms in other sectors including the professions, consumer business, food and agribusiness.

Deloitte LLP