IT Market Trends in the Baltics and Central & Eastern Europe

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Torben Pedersen CEMA Research Analyst IDC Infobalt 2002 IT Conference Vilnius, Lithuania October 21, 2002. IT Market Trends in the Baltics and Central & Eastern Europe. Agenda. IT Market Trends in CEE Developments by Technology Area Comparative Country Developments in the CEE region - PowerPoint PPT Presentation

Transcript of IT Market Trends in the Baltics and Central & Eastern Europe

  • AgendaIT Market Trends in CEE Developments by Technology AreaComparative Country Developments in the CEE regionA Closer Look at the Baltic IT MarketsFuture IT Market DriversConclusions & Q/AIDC Research

    IDC Confidential

  • Total = ca. $1 trillionWorldwide IT Market Spending, 2001

  • CEE Region: What Crisis?Island of Stability and GrowthVariety Factors Driving IT Spending, not Just EconomicSlowdown in WE - Some Spillover in CE CountriesWE Woes May Be CEEs GainsOngoing Growth Projected(US$Bn) IT SpendingSource: IDC, 2002PreviousNew Scenario

    IDC Confidential

  • IT Market Growth Drivers in TransitionTechnologyWheres CEE Today?

  • Technology Comparison of IT Spending in CEE, 2002*Total = $15.5 billion - 10% Growth YoY*Preliminary estimates, August 2002

  • CEE Hardware Market Developments Moderate Slow Down in Business PC and Server Sales, but Reflects Two-tier MarketLarger CEE Countries Illustrate Signs of Maturity with Replacement Representing Key Demand ForceSmaller Countries Illustrate Double Digit Growth RatesExpectation that Strong Demand Will Persist in 2003Markets are Less Saturated than WE and USA - Consequently Demand for Initial Shipments and Upgrades PersistsUntapped Potential Demand in SME and Home SegmentsGlobal Companies (FDI) May Cut Back on InvestmentMore eGovernment and Education Sector Development

    IDC Confidential

  • Overview of IT Hardware Spending in Central & Eastern Europe, 2001-2006Regional IT Hardware Market to Exceed $12 billion by 2006Source: IDC Black Book, August 2002

    IDC Confidential

  • CEE Software Market DevelopmentsSoftware Spending Less Affected than Hardware - But LinkedFalling Piracy Rates Mean Greater Initial Spending on Packaged ApplicationsTransition from In-house Developed Applications to Packaged Continues Unabated, as Wage Rates Rise and Technology Becomes More SophisticatedMajor Move Towards Integrated Enterprise Applications Taking Place in Region - But Limited Spending on Extended Modules (Yet to Come)XP and W2K Adoption Will Facilitate Some Spending as CEE Stays on the Tech Curve

    IDC Confidential

  • Overview of Packaged Software Spending in Central and Eastern Europe, 2001-2006Software Market to Double in Size by 2006 = $4.1 BnSource: IDC Black Book, August 2002

    IDC Confidential

  • CEE IT Services Market Developments

    Least Affected IT Sector, as Long as Currencies Remain Stable - Higher Nominal Growth in Local CurrenciesAny Impact of Dollar on Exchange Rates May Mean Higher or Lower Dollar Denominated IT Services Spending Depending on Development (Devaluation/Appreciation)Services Companies Are Not Suffering from Over-Capacity - Local Companies and Int. Vendors Continue to Move into Regional Services SpaceShort Term Contracts and Discrete Consulting Reflect Timing and Rollout of Large Infrastructure Projects in Govt. and the Corporate SectorDemand Continues to Expand in Isolated Local SME SegmentOngoing Demand for Basic Network Comms Development, Packaged Software Implementation and Outsourcing Continue to Drive Spending on Services

    IDC Confidential

  • IT Services Market Spending (US$M) in Central and Eastern Europe, 2001-2006$7.6 Bn Regional Opportunity by 2006 Business Solutions are Hot!Source: IDC Black Book, August 2002

  • Country Market Comparison of IT Spending in Central & Eastern Europe, 2002*Total = $15.5 billion - 10% Growth YoY*Preliminary estimates, August 2002

  • Development in CEE IT markets, 2001Baltic States still Playing Catch-upCzech RepublicSloveniaHungarySlovakiaCroatiaPolandBalticsRomaniaRussiaBulgaria

    Chart1

    0.015

    0.019

    0.034

    0.028

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    0.009

    0.013

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    0.019

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    IT/GDP

    IT/Capita US$

    IT$/GDP

    Sheet1

    2001 numbers

    BalticRomaniaRussiaHungaryCzechPolandBulgariaCroatiaSloveniaSlovakia

    IT market value (Million$)458.13724058.51436.31952.32919.7201.3392.6361.1520.7

    GDP (million$)24.339.731051.956.7176.313.5620.218.7920

    population (million)7.522.514610.110.338.78.24.525.4

    IT/GDP0.0190.0090.0130.0280.0340.0170.0150.0190.0190.026

    IT/capita61.116.527.8142.2189.575.424.587.2180.696.4

    IT/CapitaIT/GDPCountry

    24.51.5%Bulgaria

    87.21.9%Croatia

    189.53.4%Czech Republic

    142.22.8%Hungary

    75.41.7%Poland

    16.50.9%Romania

    27.81.3%Russia

    96.42.6%Slovakia

    180.61.9%Slovenia

    61.11.9%Baltic states

    700.024world average

    Sheet1

    0.015

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    IT/GDP

    IT/Capita US$

    IT$/GDP

    Sheet2

    Sheet3

  • Country Market Comparison of IT Spending in the Baltic States, 2001Total = $458 million - 10% Growth YoY

  • IT Market in the Baltic States: On the Path of Growth10% Growth in 2001, after ca. 7% in 2000Moved to Next Stage of Market DevelopmentHardware Illustrates Maturity - ReplacementSoftware Most Dynamic SegmentSoftware & Services Illustrate Highest Growth RatesCurrency Stability Key for IT Services Market Development2001 Revenue = $458 million

    IDC Confidential

  • Shipments of Personal Computers in the Baltic States, 2001-2006The BS PC Market is Expected to Reach 267K Units in 2006

    IDC Confidential

    Chart1

    129795116833878

    145873152984694

    161119186885424

    180991217016204

    204109252446948

    230276295637746

    Desktops

    Notebook

    Servers

    Sheet1

    200120022003200420052006

    EstoniaDesktops45,29147,96252,39657,84162,35966,361

    Notebook3,6204,3185,1285,9716,7387,571

    servers1,0151,0631,1511,2761,3921,508

    Total49,92653,34358,67565,08870,48975,440

    LatviaDesktops42,12847,80053,60060,70068,40076,500

    Notebook3,3943,8704,4505,1505,9056,740

    servers1,3751,5751,6401,7501,8601,980

    Total46,89753,24559,69067,60076,16585,220

    LithuaniaDesktops42,37650,11155,12362,45073,35087,415

    Notebooks4,6697,1109,11010,58012,60115,252

    servers1,4882,0562,6333,1783,6964,258

    Total48,53359,27766,86676,20889,647106,925

    200120022003200420052006

    TotalDesktops129,795145,873161,119180,991204,109230,276

    Notebook11,68315,29818,68821,70125,24429,563

    Servers3,8784,6945,4246,2046,9487,746

    Total145,356165,865185,231208,896236,301267,585

    200120022003200420052006

    Estonia49,92653,34358,67565,08870,48975,440

    Latvia46,89753,24559,69067,60076,16585,220

    Lithuania48,53359,27766,86676,20889,647106,925

    Sheet1

    129795116833878

    145873152984694

    161119186885424

    180991217016204

    204109252446948

    230276295637746

    Desktops

    Notebook

    Servers

    Sheet2

    Sheet3

  • Computer Server Market Spending (US$M) in the Baltic States, 2000-2003Annual Market of ca. $38 million - NT/Unix Dichotomy

  • Overview of EAS Software Spending in the Baltic States, 2001-2006

    IDC Confidential

  • On the Horizon.

    IDC Confidential

  • Why IT and the Internet are Important for the Baltic StatesGovernment Says...Economic DevelopmentReduce CostsImprove Public Service DeliveryCreate EmploymentReduce Red TapeROIBusiness Says...Improve Market ReachReduce CostsIncrease ProductivityImprove Customer SatisfactionEssential to Corporate StrategyExpand Geographic ScopeROIOpportunity for Greater Investment in Information Technology

  • Information Society Growth Helps Governments . .Key Challenge - Public Sector Reform: enhance level and breadth of public services, while capping burgeoning expenditures, particularly for personnel, in an effort to support monetary stability and increase productivity...

  • Key Role of the State in CEE IT MarketsState DecisionsGovernment Accounts from 25% to 50% of IT Spending in Most CEE Countries

    IDC Confidential

  • Storage & Storage Management: Watch Out!Storage Related Spending Reaches $1.2 billion in CEE region in 2001Keen Interest of Global Players in CEE Markets (Veritas, EMC, Fujitsu Softek, etc.)Hot area of investment by key verticals: banking, insurance, telco, utilities and the governmentIn Longer Term, Significant Revenue Stream from Storage ServicesCurrently Under-developed Area - IDC Outlook Quite Optimistic

    IDC Confidential

  • Stepping Up IT SecurityPredictionCorporations will reset their IT security plans in 2002 RationaleThroughout the world, September 11 has corporations rethinking security in all aspects. Call it the Bin Laden Effect. The focus of IT security will shift from the Three As (authentication, authorization, administration) to business continuity. Physical and IT security will become part of the same whole. This will provide opportunity for suppliers of IT services and products but create challenges for CIOs and IT managers

    IDC Confidential

  • Opportunity: All Things Mobile63,000 Portable PCs Shipped in 2001 - 56% Unit Growth YoY20% Growth Forecast for 2002Mobile Telephony Penetration: 66% (includes multiple SIM)SHD Shipments on the RiseSmart Phone Sales BoomGrowth in Sales of Devices for Specific VerticalsEnterprises will have to Wake up to Wireless This Year Creating Pent-up Demand for Technology and Services

  • Fixed and Mobile Telephony ComparisonBaltic fixed line networks will continue to develop, but slowly.ISDN will be main driver of fixed-line connection growthMobile subscriber base expanding rapidly-- passing the fixed subscriber base in 2002.

    IDC Confidential

  • Telephony RevenuesMobile revenues to climb from $389M in 2001 to over $1bn in 2005 due to expanding subscriber baseSMS and other mobile data services will also