ICT Industry Taking a ‘Belt and Braces’ Approach To Growth

Whilst many sectors of the economy are struggling, the ICT industry in Scotland is cautiously optimistic about the future. According to this year’s annual Scottish Technology Industry Survey results, 61% of respondents expect their company will continue to grow in 2009. 72% of respondents reported that their sales increased in 2008 compared to the previous year.

The annual Scottish Technology Industry Survey, commissioned by the ICT body, ScotlandIS and 9-20recruitment, provides a virtual barometer of the health of the information and communication technology sectors.

The ICT industry currently employs around 100,000 people in total in Scotland and the contribution that the sector makes to productivity growth is the fifth highest in the UK.

Polly Purvis, Executive Director of ScotlandIS said: “While the Scottish market is clearly not immune to overall market conditions, the industry does seem relatively well positioned. If nurtured properly, this sector could have a massive impact on Scotland’s long-term economy.

“The continued adoption and exploitation of ICT could generate an additional £2.8 billion of GVA to Scotland’s economy over the next 5 -7 years. Fully exploiting technology is the single most powerful lever we can employ to achieve wholesale productivity gains right across the economy.”

Unsurprisingly the survey found that there has been a significant decline in ICT business within the Financial Sector but this is counterbalanced by increasing business in Energy and Utilities, Professional Services, the Public Sector, IT and Telecommunications.

The main players for growth amongst the ICT industry this year will be SMEs of less than 35 employees. Ecommerce and web businesses within this sector are the most optimistic.

Although the survey highlights a positive outlook overall for the Scottish industry, respondents are fully aware of the challenges that the current operating environment holds. Companies are exercising a ‘belt and braces’ approach by using stringent financial controls and closer scrutiny over overhead and direct costs. Whilst the majority of respondents (53%) reported little change in cash flow, a significant minority (42%) reported increasing difficulties, with main issues being delays in payments from customers and banks amending terms.

Polly Purvis continued: “The ICT sector has experienced tough times before, so is pretty lean and mean already. As you may expect in this sector, 50% said they were scrutinising travel costs. Perhaps as a result of this, they appear to be leading the field on the use of video and teleconferencing, as well as web based sales tools.”

ICT businesses are also exercising a cautious approach to recruitment. While last year 81% of respondents expected the increase staff numbers, this has almost halved this year to only 46%. The biggest area for skills demand now lies in sales and marketing and in software and web development positions.

Worryingly, the volume of senior positions has completely dropped off the radar and none of the respondents saw graduates as a major area for growth in 2009.

Wendy McDougall of 9-20 recruitment said: “Companies are increasingly cutting out senior managers and consultants which could be a risky strategy. This, coupled with the fact that hundreds of newly qualified graduates will be hitting the market in the summer, means the main challenge is how to retain this talent in Scotland. The current economic conditions have now reached Scotland’s technology companies but as is evident from this year’s report the effects are far less detrimental than first expected. With survey participants also keen to put forward their suggestions on how the market could be stabilised it’s clear that any difficulties will be dealt with head on.”