Competition poses greatest challenge for the US Tech Companies.

According to more than one third (35 percent) of CFOs polled in a recent survey by BDO USA, LLP, competition and consolidation in the U.S. technology industry continues to pose the greatest challenge for companies. This is the second consecutive year that tech CFOs have cited competition as their greatest hurdle, a nod to the rapidly changing and increasingly global technology landscape, as well as ongoing concerns over retaining a talented workforce. In addition, the ability to manage risk is a rising concern for technology CFOs, with 65 percent more respondents citing it as a challenge in 2012 (33 percent versus 20 percent in 2011).

Still, when asked about their expected compensation in light of these challenges, tech CFOs are optimistic. With 75 percent of respondents citing company profitability as the primary performance metric impacting compensation, nearly all (94 percent) CFOs expect to see their pay increase or remain the same. Combined, these factors indicate a high-level of confidence that tech companies will either meet or surpass profitability targets this year, in spite of a competitive market.

“Tech companies are competing like never before,” said Hank Galligan, leader in the Technology and Life Sciences Practice at BDO USA, LLP. “Last year the industry entered into growth mode, and while that is largely positive, it also fueled rivalry. In 2012, the battle is on for talent, intellectual property and market share as companies look to emerge as leaders in the industry.”

These findings are from the fifth-annual BDO Technology Outlook Survey, which examined the opinions of 100 chief financial officers at leading technology companies throughout the U.S. The survey was conducted from December 2011 to January 2012.

Other major findings from the 2012 Technology Outlook Survey include:

Economy and consumer demand drive overall industry growth. The continued economic rebound in the U.S. will be the most significant factor driving industry growth this year, according to 50 percent of CFOs. Consumer demand for innovative personal technology was also cited as one of the greatest drivers of industry growth (18 percent). These were followed by international growth (13 percent), demand for green technologies (10 percent) and increased corporate IT budgets (9 percent).

Taxes hinder ability to compete, pending changes cause concern. The increasingly complex U.S. tax system is continuing to burden technology companies and 43 percent of CFOs believe it hinders their ability to compete in the global marketplace. Furthermore, 31 percent of respondents cited corporate tax rates as the area of greatest concern when it comes to tax reform, followed by aggressive state tax laws (23 percent) and taxation of overseas activities (19 percent). Fewer CFOs cited the expiration of incentives as a primary concern (16 percent) and only 11 percent cited transfer pricing. With this in mind, it is not surprising that the majority (68 percent) of CFOs also said the R&D tax credit had hardly any impact on their R&D activities.

New accounting rules result in more consistent pricing. More than half (55 percent) of technology CFOs feel that new accounting rules governing revenue recognition have resulted in more consistent pricing. Additionally, while the majority CFOs polled in the survey (88 percent) noted that the new rules did not have a major impact on selling practices, an additional 42 percent believe that the new rules allowed streamlined business processes. When asked about the ongoing debate between IFRS vs. GAAP, CFOs were split, with 55 percent preferring to stay with GAAP and 45 percent favoring either a full or gradual adoption of IFRS.

Demand for SaaS on the rise, but tech companies not leading the effort internally. While the overall marketplace demand for cloud computing and software-as-a-service is on the rise, tech companies have been slow to adopt the cloud internally. Nearly half (49 percent) of respondents are still not using cloud computing within their organization, a sign that while management understands the benefits of the cloud, integrating a system internally is not a high-priority. When asked about factors driving the skyrocketing marketplace demand for SaaS, CFOs cited increased efficiency (46 percent), reduced IT costs (35 percent), the ability to serve a larger customer base (13 percent) and offer more reliability (6 percent), an indication that corporate America is embracing SaaS and its related capabilities.

The 2012 BDO Technology Outlook Survey is a national telephone survey conducted by Market Measurement, Inc., an independent market research consulting firm, whose executive interviewers spoke directly to chief financial officers. Market Measurement used a telephone survey performed within a scientifically-developed, pure random sample of U.S. technology companies in the software, hardware, telecommunications, internet and information technology services sub-sectors.

For more information at http://www.bdo.com