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Tech sector set for upturn, say company heads
Tech sector set for upturn, say company heads

Rachel Konrad, CNET News.com

Despite massive unemployment, sluggish sales and bottom-feeding stock
prices, executives at technology start-ups are overwhelmingly optimistic
about the future of their sector.

According to a survey of chief executives whose companies were listed on
the 2001 Deloitte & Touche Technology Fast 500, an annual ranking of
fast-growing tech companies in North America, roughly two out of three
chief executives are "very" or "extremely" confident that the niche will
return to the healthy status it had in the late 1990s. Most dismiss the
downturn as a "healthy shakeout" that will lead to a more robust industry
within 12 to 18 months.

Although most will slash administrative and travel expenses, many say
they will soon expand employee ranks. Eighty-nine percent of the chief
executives say they plan to hire new employees, but most are being
conservative. Of those hiring, 49 percent anticipate adding less than 25
new employees; 20 percent plan to add 26-49 new employees; and 12 percent
expect to hire 49-100 new employees. Only 6 percent say they plan to add
101-200 new employees, and a paltry 2 percent plan to hire more than 200
employees.

"Despite a radically changed technology marketplace, the majority of
chief executives of North America's fastest-growing technology companies
are optimistic about the future of their companies and the technology
industry," said Mark Evans, managing director of Deloitte & Touche's
Technology, Media & Telecommunications group in San Jose, California.
"They're putting their money where their mouths are by investing in
marketing and sales activities, hiring new employees, and looking toward
strategies that will help contribute to their continued growth, while
shaving travel and administrative costs."

Skeptics might question the executives' unbridled optimism. Sixty-two
percent of the chief executives said they were confident that their
companies would maintain the high levels of growth they've experienced
over the past five years -- an average growth rate of 824 to 115,874
percent from 1996 to 2000, according to Deloitte & Touche.

But some executives were bracing for tougher times. Twenty-one percent of
chief executives surveyed said they are "somewhat" confident they could
maintain their five-year growth rates, while 10 percent indicated that
they are "not very confident" or "pessimistic". Eleven percent said they
were not hiring new employees or were in the process of downsizing.

And most chief executives are paring expenses. Travel budgets are the
easiest target, with 27 percent of the chief executives reporting they
are reducing or eliminating discretionary trips.

"Cutting general and administrative costs, like travel, is easy," said
Michael LeGoff, chief executive of semiconductor company Dynex Power.
"The difficult part is to be frugal. That means there has to be
intelligence in the cost cutting. Whether the cuts are in general and
administrative, R&D, or sales and marketing, there are trade-offs."

Chief executives also continue to skimp on benefits. Although the late
1990s saw a boom in recruitment lures such as free cars and signing
bonuses, as well as smaller perks such as free massages and discounts on
fitness club memberships, the relatively youthful, high-paced tech
industry has been notoriously stingy about pension plans and family
benefits such as on-site daycare.

Two out of five chief executives polled in the Deloitte & Touche survey
said they offered stock option plans for their employees, and 23 percent
offer complimentary snacks or meals. But only 1 percent offered on-site
daycare, and only 9 percent provided paid family leave.

One of the most striking differences that appeared in the third annual
survey was that "finding and hiring employees" was not the top challenge
that chief executives listed. It took second place to "developing strong
marketing strategies," which was the biggest challenge for 30 percent of
the chief executives.

The change likely reflects massive unemployment in the tech sector, which
has created an employer's market. Many computer programmers and engineers
are waiting out the downturn in blue-collar jobs, while others are
underemployed or are still collecting severances or unemployment
insurance.

"While today's fast-growth tech company chief executives are challenged
with marketing, it's a buyer's market for employees," Evans said. "With
the technology shakeout, tech chief executives are now finding they can
afford and hire more top-quality people than in the recent past."

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