SANTA CLARA, CA – More technology companies are looking outside the US, China and India for revenue growth in the next one to two years, says KPMG.

A recent survey by the company indicates technology executives are increasingly concerned about labor costs and low-cost producers.

Asked which geographic markets will have the highest percentage revenue growth for their companies during the next 12 to 24 months, executives continue to cite the US and China most often, but the numbers are down. For example, 68% chose the US, down from 75% in 2012 and 77% in 2011.

About half (53%) chose China, two percentage points above the 2012 figure, yet 5% below 2011, while 27% chose India, down for the second year in a row and slipping to fourth on the list.

Several countries are becoming more important for tech revenue growth rate. One-third cited Brazil for growth over the next two years, compared to 29% last year; 26% cited Canada, 15% Mexico, and 14% South Korea. The figures for the latter three countries are up five to six points over last year, the second consecutive year of increases, says KPMG.

"These results can be attributed to a mix of factors in countries outside the US, China, and India, such as improving economies, infrastructure investment, technology incentives, and increasing technology adoption," says Gary Matuszak, global chair, KPMG Technology, Media and Telecommunications practice. "As would be expected, anticipated revenue growth and employment growth rates are closely connected, so we are seeing increased employment expectations in a number of the countries that see revenue growth."

The majority of executives (61%) say the US will have the highest percentage employment growth rate for their company between now and 2015, but that's 16 points below last year. China (49%), India (48%), Brazil (26%), Canada (23%), Mexico (21%) and South Korea (12%) all are up at least four points over a year ago.

Pricing pressures (38%) remains the most significant growth barrier facing technology companies over the next year, and more execs see labor costs (24%) as an issue, compared to last year (20%) and 2011 (16%), says the firm. Staying on top of emerging technologies (24%) is also a significant barrier. Additionally, losing share to lower-cost producers (33%) is seen as the biggest threat to tech companies' business model.

"Tech execs continue to be optimistic about revenue growth, with nearly 80% forecasting another year of increased revenue for their companies," says Matuszak, "but they're increasingly worried about pricing and cost pressures." He adds, "Tech companies also are identifying regulatory and legislative pressures as growth barriers, which historically hasn't always been high on their list of concerns."

About a third of respondents (31%) say political/regulatory uncertainty is the biggest threat to a company's business model. Near term, one in five (22%) says regulatory and legislative pressures present the most significant growth barrier over the next year.

Tech executives say fiscal cliff spending cuts (46%), corporate tax reform (43%), the Euro crisis (36%) and failure to adopt immigration reform for engineering/tech workers (15%) pose the largest threat to growth.

Cloud and mobile (including mobile devices) are projected to be the biggest revenue drivers for companies in the next one to three years, say 38% of the respondents. Of these respondents, about 70% say cloud and mobile revenues met or exceeded 2012 forecasts.

Advanced data and analytics jumped up the list of revenue drivers with 33%, compared to 19% last year. Executives believe customer acquisition (37%), operational excellence (34%) and competitive intelligence (30%) represent the best use of data and analytics insights. Nearly half of the companies currently have become or are becoming data and analytics literate, according to respondents.

More than half (57%) of the executives say their organizations have adopted cloud and found little or no challenges integrating it into their business strategy and operations, and 12% say their organizations plan to adopt cloud and believe they will easily integrate it. Only 15% have found major challenges in integrating cloud.
On the other hand, a recent KPMG global survey of cloud users across all industries found that nearly 33% say cloud implementation costs have been higher than they expected, and a similar percentage say that integrating cloud services with their existing IT infrastructure has been particularly difficult.

In the tech industry outlook, executives most often cited security/privacy governance and corporate culture/change management as the biggest challenges for businesses in adopting social media, cloud, and mobile technologies in the next three years. Looking at cloud, almost half say security/privacy governance and 30% corporate culture/change management. For social media, nearly 40% say security/privacy governance and 30% say corporate culture/change management. Regarding mobile technologies, about one-third say security/privacy governance and 24% say corporate culture/change management and technology complexity.

Nearly two-thirds of the tech executives say their companies are somewhat likely or very likely to be involved in mergers and acquisitions as a buyer or seller over the next year. Most (56%) say access to new technology and products will again be the most important driver, followed by access to new geographic markets (39%), product synergies (37%), labor cost pressures (23%), access to employees with new skills and expertise (21%) and production cost pressures (19%).

The KPMG survey was conducted in the US in February and reflects the responses of 102 primarily C-level and senior executives in the technology industry. Of the 102 respondents, whose companies may be based in the US or other countries, 59% are in companies with revenues exceeding $1 billion, and 41% are companies with revenues in the $100 million to $1 billion range.