Industry Insights
This collection of the latest updates and data from the systems integration industry explores leading indicators including the CEO Confidence Index, Purchasing Managers Index, and CSIA updates. We offer our own insights based on the information referenced and interactions with Exotek clients and the SI community.
Plummets Amid Tariff Uncertainty 5 (-1.9)
- Lowest Level Since November 2012
- Fear of Recession Rises
- Revenue = 56% (-28)
- Profits = 44% (-22)
- CapEx = 36% (-20)
49.0% (-1.3), Moving Back into Contraction
- New Orders and Backlogs Contracting
- Production and Employment Contracting
- Supplier Deliveries Slowing
- Raw Materials Inventories Growing
- Customers’ Inventories Too Low
- Prices Increasing
- Exports Contracting and Imports Growing
CEO and PMI Indices
Following the initial optimism sparked by the US election outcome, both the CEO and PMI indices have declined. The significant drops of over 20 percentage points in revenue, profits, and capital expenditures are stark.
Manufacturers are urgently trying to mitigate the effects of tariffs, while consumers are understandably worried about how these tariffs will affect their purchasing power. This atmosphere of fear, uncertainty, and doubt is already having an impact on some SI projects.
Exotek Insights – USCGNO ROC Analysis
Exotek Insights – CSIA ROC Analysis
Our Key Takeaways
ROC Analysis
The USCGNO has been in retraction mode since late last summer. February’s numbers gave us some hope that capital spending might start to increase again. However, recent announcements have only added to the confusion, making it unlikely that we’ll see an uptick or even a halt in the contraction anytime soon.
System integrators experienced a significant slowdown last year, even entering the contraction zone. The second half showed promise with the 3/12 crossing above the 12/12, but the year ended with the 3/12 crossing back down over the 12/12 significantly. This indicates that we can expect very low growth to contraction in the near future.
Our Key Takeaways
After a slow end to the year for our SI community, the new year has started with mixed results. Larger SIs (in the top quartile) are outperforming their 2024 benchmarks in the first two months, while mid-size and smaller integrators are slightly lagging behind last year’s performance. Revenue recognition in Q1 is often challenging as new projects are just getting underway. We’ll keep a close eye on the progress of these new projects.
As the new year projects kick off, capacity is trending positively, with more SIs reporting they are at full capacity and unable to take on additional work. However, the overall outlook from our SI community has dropped 14 points to a long-time low, with only 62% having a positive outlook. The ongoing tariff situation seems to be a significant concern.
Our Key Takeaways
The last three years have been increasingly difficult for professional services firms, with revenue and utilization trending downward. Interestingly, firms that focus on improving their maturity level to institutionalized or optimized tend to perform better across almost every measure. This highlights the importance of implementing CSIA Best Practices.
