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Sunday, January 21, 2007

Record Corporate Profits, Business Optimism Look Set To Drive Technology Investments Upwards

Surplus cash is building up on corporate balance sheets around the globe because of the tremendous profit boom of recent years. James Paulsen, chief investment strategist at Wells Capital Management believes that sooner than later this would find its way into investments and a significant part of this may go towards technology spending. Adjusting for inflation, capital expenditures have increased about 8 per cent in the past year. As noted here, Corporate profits are at their highest level since 1929 in the US. Medium to large privately held businesses around the world are considerably more optimistic about the prospects for their economies in 2007 - with an optimism/pessimism balance percentage of +45%, up from +39% last year, according to International Business Report (IBR) from Grant Thornton International published recently. Oil prices are well below 50$ level . Fund managers report that shareholders would like to have more dividend payouts & leverage more debt to fuel growth. In shore the possibility of higher capital expenses look bright(despite some warnings that adjusting for inflation, profits may be more or less stagnant).

As I wrote recently, almost four years after the publication of Nick Carr’s article, we find that IT investments continue to grow around the world. IDC finds that worldwide spending on Information Technology will reach $1.48 Trillion by 2010 from the current spending levels of $1.16 trillion on information technology in 2006 and this represents a compound annual growth rate (CAGR) of 6.3% to reach such projected levels in 2010. Dig deeper – we find that the investments are planned across the various segments. Lot more emphasis is definitely needed across enterprises in assessing returns on investments made in IT. As a major block of capital expenses, IT procurement indeed needs the application of modern management models. Erik keller warns of a tumultuous year ahead for technology vendors. Have no doubt, the world ishungry for technology and more and more investments and far better returns are sure to happen.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
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