Finally, a comprehensive gauge of tech industry health

Steve Hamm

For a numbers-based business, the tech industry has long suffered from a shortage of good metrics with which to gauge its overall health. There are a smattering of CIO surveys, which tend to be mood meters rather than accurate indicators of future spending. There are hard numbers from the government's durable goods and private investment reports that measure a few things well, but not many others. And, of course, there are stock indexes--but they measure the hopes and fears of investors rather than fundamental realities. One of the results of this data shortfall is that we at BW are forever having big debates about whether the tech industry is on the rise, declining, or just flat again. Since tech still is a major driver of productivity and economic growth, this stuff matters. Big bets are placed, and big risks taken.

Well, finally, a comprensive and well-balanced index of the tech economy seems to have arrived. Market researcher Forrester Research and the Information Technology Association of America announced the thing on Dec. 12. It's the Forrester/ITAA US Tech Economy Index. Not a catchy name, but at least you know exactly what you're looking at. Forrester and the ITAA gather and mash up 11 indicators of the health of the tech economy--everything from a CIO survey, to US tech exports, to venture capital investment in IT, to product prices, and, yes, those fickle stock prices, too. All 11 are weighted evenly to create an overall index score. An average of the indices in the four quarters of 2002--not such a great year--creates the baseline of 100.

And, hey, there's good news. The index rose strongly in the third quarter, up 3.9 points to 121.6. That almost matches its three-year high of 122.3 in the fourth quarter of 2004. Happy days are aparently here again. Though, somehow, with the exception of super-bright spots in iPods and cell phones and Google, the industry doesn't really feel that bouncy. Maybe I'm still hoping for the dot-com boom to come back again.

    Before it's here, it's on the Bloomberg Terminal.