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TRANSCRIPT
IT Services in CEE
Eugen SCHWAB-CHESARUPartner and Managing Director, PAC Central and Eastern Europe
Madalin DOBRE Consultant, PAC Central and Eastern Europe
Content
• IT Services in CEE
• IT Services in Slovakia
• Main changes and trends
• Global IT market overview
• PAC Business Overview
• Contact PAC
PAC Business Overview
PAC Business Overview (1)
www.pac-online.com4
Who is PAC ?
PAC supports IT decision makers & suppliers in the development and implementation of a successful strategy by providing them with a better understanding of the market, the competition and end-user behavior.
Paris Office 1976
Years our Offices Opened:
Munich Office 1992
Bucharest Office 1999
New York Office 2000
London Office 2002
Sao Paulo Office 2009
Pierre Audoin Consultants (PAC) was establishedby our founder Pierre Audoin in 1976 (Paris).
The only European Group with Global coverage: Strong local competences and global response.
The specialist for the Software & IT Services Industry:IT Services and Software suppliers, IT users, influencers and public bodies.
An integrated approach covering the whole value chain of our customers: off-the-shelf reports, marketing & consulting services.
PAC Business Overview (2)
www.pac-online.com5
Our top-down methodology relies on macroeconomics and market models built on a large set of statistics and referrals (demographic, geopolitical, economic,
technological, industrial, etc)
Our Methodology
PAC Business Overview (3)
www.pac-online.com6
Our Market SegmentationEach research project we undertake including custom projects refers to our single
market model that contains a high level of granularity. We update our segmentation every year, based on market evolutions.
Global IT market overview
Global IT Spending
www.pac-online.com8
Worldwide IT Expenditure vs. GDP
Crisis impact by Country
www.pac-online.com9
Impact of the Crisis on the SITS Market
0.0
1.0
2.0
3.0
4.0
5.0
6.0Austria
BelgiumDenmark
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
SwitzerlandUK
Czech RepHungary
PolandRomania
Russia
Slovakia
Canada
USA
Brazil
Mexico
Australia
China
India
JapanSouth Korea
Taiwan
Legend: from 6 = very strong negative impact to 0 = no impact
Recovery Impact - by Country
www.pac-online.com10
Legend: from 0 = no recovery to 6 = very strong recovery
Impact of the Recovery on the SITS
0.0
1.0
2.0
3.0
4.0
5.0
6.0Austria
BelgiumDenmark
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
SwitzerlandUK
Czech RepHungary
PolandRomania
Russia
Slovakia
Canada
USA
Brazil
Mexico
Australia
China
India
JapanSouth Korea
Taiwan
Impact of the Recovery on the SITS Market
Crisis Impact by Industry
www.pac-online.com11
Impact of the Crisis on the Software and IT Services
0.0
1.0
2.0
3.0
4.0
5.0
6.0Manufacturing
Banking
Insurance
Public
TelecomUtilities
Retail & Wholesale
Services
Transport
Impact of the Crisis on the SITS Market
Legend: from 6 = very strong negative impact to 0 = no impact
Recovery Impact by Industry
.com12
Impact of the Recovery on the SITS
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0Manufacturing
Banking
Insurance
Public
TelecomUtilities
Retail & Wholesale
Services
Transport
Impact of the Recovery on the SITS Market
Legend: from 0 = no recovery to 6 = very strong recovery
Crisis Impact by Products and Services
www.pac-online.com13
Impact of the Crisis on the SITS Market
0.0
1.0
2.0
3.0
4.0
5.0
6.0Systems Infrastructure Software
Tools
Application Software Products
Hardware Maintenance
IT Consulting
Systems IntegrationIT Training
Application Management
BPO, Application Outsourcing, SaaS
Infrastructure Outsourcing
Complete Outsourcing
Impact of the Crisis on the SITS Market
Legend: from 6 = very strong negative impact to 0 = no impact
Recovery Impact by Products and Services
www.pac-online.com14
Recovery on the SITS Market by Products & Services
-1
0
1
2
3
4
5Systems Infrastructure Software
Tools
Application Software Products
Hardware Maintenance
IT Consulting
Systems IntegrationIT Training
Application Management
BPO, Application Outsourcing, SaaS
Infrastructure Outsourcing
Complete Outsourcing
Recovery on the SITS Market by Products & Services
Legend: from 0 = no recovery to 6 = very strong recovery
Crisis Impact by Solutions
www.pac-online.com15
Impact of the crisis on the SITS Market
-1.0
0.0
1.0
2.0
3.0
4.0
5.0F&A
ControllingRisk Mgt
Performance Mgt
HR
MRP
SCM
CRM
SRM/ purchase
BI
ECM
groupwarecollabor.
CAD/CAMPLMSTI/ process auto.
embedded syst.
Compliance
SOA
Green IT
Security
High Avail.
Consolidation
Virtualisation
IT/ telecom conv.
OffshoreOpen Sour.
Legend: from 6 = very strong negative impact to 0 = no impact
Impact of the Crisis on the SITS Market
Recovery Impact by Solutions
www.pac-online.com16
Impact of the recovery on the SITS
0.0
1.0
2.0
3.0
4.0
5.0
6.0F&A
ControllingRisk Mgt
Performance Mgt
HR
MRP
SCM
CRM
SRM/ purchase
BI
ECM
groupwarecollabor.
CAD/CAMPLMSTI/ process auto.
embedded syst.
Compliance
SOA
Green IT
Security
High Avail.
Consolidation
Virtualisation
IT/ telecom conv.
OffshoreOpen Sour.
Legend: from 0 = no recovery to 6 = very strong recovery
Impact of the recovery on the SITS Market
Software and IT Services Markets in Europe
www.pac-online.com17
3 816
5 673
1 636
4 7204 280
33 805
46 189
875
14 909
11 675
3 5042 649
2 064700
4 426
717
11 6047 014
7 184
44 496
5,6%
5,1%
6,8%
3,9%4,3%
4,5%
5,4%
5,7%
3,1%
4,3%
4,3%
8,3%
4,5%
11,8%
11,4%
6,8%
3,9%
4,7% 4,3%
3,7%
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
14,0%
0
5 000
10 000
15 000
20 000
25 000
30 000
35 000
40 000
45 000
50 000
Aus
tria
Bel
gium
Cze
ch R
ep
Den
mar
k
Fin
land
Fra
nce
Ger
man
y
Hun
gary
Italy
Net
herla
nds
Nor
way
Pol
and
Por
tuga
l
Rom
ania
Rus
sia
Slo
vaki
a
Spa
in
Sw
eden
Sw
itzer
land UK
Total SITS CAGR 10/14
IT Services in CEE
CEE IT Services (1)
www.pac-online.com19
General Overview
2009Czech
RepublicSlovakia Hungary Poland Romania
Population (in millions) 10.5 5.4 10.01 38.1 21.4
Area (thousands of km2) 78.9 49.03 93.03 312.7 238.4
GDP (Beuros) 140 63 93 308 116
GDP per capita (euros) 13,306 11,673 9,268 8,094 5,408
Total IT Expenditure (Meuros) 4,358 1,761 2,424 7,026 2,004
IT Services (Meuros) 1,099 476 572 1,651 394
Software Products (Meuros) 536 242 302 998 305
IT Exp. per Capita (euros) 415 325 242 184 94
ITS per Capita (euros) 105 88 57 43 18
SW per Capita (euros) 51 45 30 26 14
IT Exp. Per GDP 3.1% 2.8% 2.6% 2.3% 1.7%
SITS per GDP 1.17% 1.13% 0.94% 0.86% 0.60%
ITS per GDP 0.79% 0.75% 0.62% 0.54% 0.34%
SW per GDP 0.38% 0.38% 0.33% 0.32% 0.26%
CEE IT Services (2)
www.pac-online.com20
IT Services Spending
Poland27%
Czech Republic18%
Slovakia8%
Hungary9%
Romania5%
Rest of EE33%
IT Services Market 2009: Shares by Countries
CEE IT Services (3)
www.pac-online.com21
Verticals split
19% 17% 16% 18% 15%
18%19% 18% 16%
16%
7%5% 6%
2%3%
19%24%
30%
26% 28%
10% 9%
11%
10% 11%
7%10%
7%
8%9%
7%6%
3%
7%7%
7%7% 4%
8%6%
6% 4% 4% 6% 4%
0%
20%
40%
60%
80%
100%
Poland Czech Republic Slovakia Hungary Romania
Transport
Services & Consumers
Retail & Wholesale
Utilities
Telecom
Public Sector
Insurance
Banking
Manufacturing
IT Services in Slovakia
Services Market - Current Situation & Outlook (1)
www.pac-online.com23
IT services Overview (1)
Hardware Maintenance
20%
Project Services (PS)
68%
Outsourcing12%
Slovakia IT Services Market 2009: Shares by Segments
-5%
0%
5%
10%
15%
20%
08/09 09/10 10/11 11/12 12/13 13/14
Slovakia - IT Services Market 2008-2014: Growth Rates by Segment
Hardware Maintenance Project Services (PS) Outsourcing
Services Market - Current Situation & Outlook (2)
www.pac-online.com24
Market influenced by five key factors:
Strong dependency on the manufacturing sector (especially automotive) which is linked to foreign demand
Adoption of Euro, brought less liquidity problems for the banks but has also taken away a part of revenues
Fierce competition between players resulting in a significant price drop Companies made use as much as possible of services to consolidate infrastructure and of
outsourcing in order to bring down the costs. Public spending helped massively to fill in the gap left by private sector
Growth drivers Infrastructure optimisation and consolidation; Virtualization More and more SMBs asking for new ERP solutions or extensions of already implemented
systems Public and Financial sectors Expand business from a country’s major cities (“economic hotspots”) to other regions Business Continuity - Disaster Recovery
Risks and inhibitors Weak economic recovery outside the Slovak borders Very little decision power is in the country
IT services Overview (2)
Services Market - Current Situation & Outlook (3)
www.pac-online.com25
Project Services (1)
Process & Application-Related ITC
9%
Infrastructure-Related ITC
9%
Application-Related SI
39%
Infrastructure-Related SI
34%
IT Training9%
Slovakia Project Services Market 2009: Shares by Subsegments
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
08/09 09/10 10/11 11/12 12/13 13/14
Slovakia - Project Services Market 2008-2014: Growth Rates by Subsegment
Process & Application-Related ITC Infrastructure-Related ITCApplication-Related SI Infrastructure-Related SIIT Training
Services Market - Current Situation & Outlook (4)
www.pac-online.com26
Today Public sector -> Local custom development often preferred since, theoretically it could provide
significant cost saving vs. best-in-class/best-of-breed packages Private sector -> is more and more heading towards best-in-class/best-of-breed packages ERP and automation of core operations in lethargy; few projects in execution Market negatively impacted by strong lobby power that influence buying decisions in
Government, local administration Competition-driven price pressure that pushes rates sometimes below a normal cost (dumping
effect)
Outlook Near term view:
o stabilization of consumption; the IT director will slightly regain some decisional power back, yet the CEO CFO remains the ultimate decider
o Demonstrable, short term ROI and “cost over quality” should prevail when buyingo Parametric/technical specs (infra-rel SI) more likely to win over application automation (apps-
rel SI) Mid-term view: Consolidation not likely to affect the LA arena (M&A more likely in the 2nd and 3rd
tier where players that serve the mid-market and below are present); pressure from global consultancies to gain market share increases
In the long run: Clients should return to their automation priorities: ERP, core operations. Yet all this will come only when the internal economy will show robust signs of growth
Project Services (2)
Services Market - Current Situation & Outlook (5)
www.pac-online.com27
Growth drivers International projects: alignment to and compliance with IT systems in international
companies Cost cutting triggers incremental automation projects in operational areas but also in
infrastructure Large projects in central and local administration Need for better visibility within operations for competitive advantages The rationalization of the existing systems and the integration with new functionalities having
direct results in the end users' bottom line The implementation of pre-packaged solutions with concrete ROI The consolidation of end-users within the sectors
Risks and inhibitors Budget deficit and the strong commitment to cut it would affect spending Economic recession maintains IT end users in a highly cautious spending mode: Minimal spending
in SME and no discretionary spending by large accounts Weak foreign direct investments and low public confidence No significant recovery outside Slovak borders
Project Services (3)
Services Market - Current Situation & Outlook (6)
www.pac-online.com28
Application Management
(AM)4%
Business Process
Outsourcing (BPO)11%
Application Outsourcing
7%
Hosting11%
Infrastructure Outsourcing
46%
Complete Outsourcing
21%
Slovakia Outsourcing Market 2009: Shares by Subsegments
Outsourcing (1)
0%
5%
10%
15%
20%
25%
30%
08/09 09/10 10/11 11/12 12/13 13/14
Slovakia - Outsourcing Market 2008-2014: Growth Rates by Subsegment
Application Management (AM) Business Process Outsourcing (BPO)Application Outsourcing HostingInfrastructure Outsourcing Complete Outsourcing
Services Market - Current Situation & Outlook (7)
www.pac-online.com29
Today Local companies started to get accustomed to the idea of outsourcing as the pressure of bringing
down costs was high. New implementation/integration projects are signed to be continued with agreements in the
outsourcing spectrum It has to be mentioned an increasing interest in infrastructure managed services, but not very often
together with assets or people Complete outsourcing contracts are more visible Local suppliers do not focus in a serious manner on the outsourcing service
Outlook Near term view:
o Increasing number of deals around infrastructure support for 2-3 yearso Hosting services increasingly demanded, but usually with not a lot of added-value on topo Older deals that were covering the infrastructure area are slowly being transformed into
complete outsourcing
Mid-term view: SAP AM increasingly requested, also by SMBs, Data centers and Business Process Outsourcing
In the long run: On demand models / ASP / SaaS (pushed by services suppliers as well as by software vendors).
Outsourcing (2)
Services Market - Current Situation & Outlook (8)
www.pac-online.com30
Growth drivers Increasing awareness of Outsourcing as a concept Local delivery within global deals (as part of international agreements executed locally) Desktop outsourcing - grows both in a difficult economic situation and in a growing economy. Focus for IT suppliers to increase the share of recurrent business with the total revenue,
based on bad experience with project-dependency during 2009-2010 Recovery in IT salaries’ growth starting 2011 and shortage in quality, skilled people Adoption of software solutions in SaaS mode or, at least, hosted by IT partners
Risks and inhibitors Local mentality of full physical control of any IT asset Lack of appropriate legislation for long-term IT outsourcing deals in public sector A young IT market with social sensitivity and conservative IT departments that lack IT culture,
visionary spirit Lack of strong references/examples of local end users adopting the concept Re-insourcing of IT subsidiaries as well as the implementation of internal shared services centers
are a serious competition for complete outsourcing as well as for the outsourcing market as a whole.
Fierce competition and declining prices due to the commoditization of various services.
Outsourcing (3)
Main Changes and Trends
Main Changes and Trends (1)
www.pac-online.com32
For the IT services suppliers, a strategic partnership with their customers becomes more and more important.
CONSOLIDATION !Increasing M&A in CEE due to the need for critical mass, vertical coverage, accelerated revenue and team growth, and visibility.
Main Changes and Trends (2)
www.pac-online.com33
The SOA approach gets more and more relevance in the market, but the average deal size of these SOA projects is still relatively small.
CIOs’ role changed: for a few years they have been more involved in business problems and their function gains in strategic importance.
Main Changes and Trends (3)
www.pac-online.com34
Nearshoring in Eastern Europe -still a good opportunity, due to a greater openness of the German customers towards nearshoring in Eastern Europe, compared to India or China.
Main Changes and Trends (4)
www.pac-online.com35
Selected Hot Topics in Central and Eastern Europe
Public Sector Financial Services (especially Banking) Energy Sector ERP for medium-sized companies “Extensions” of already implemented large ERP systems by
adding BI, CRM, vertical modules, … CRM - both for large and medium enterprises BI - for large enterprises Infrastructure services for high-end servers Outsourcing - especially infrastructure-related, but also some
AM (mainly for SAP) Business Continuity/ Business Recovery solutions and
services
About Pierre Audoin Consultants (PAC):
www.pac-online.com36
PAC is a global market research and strategic consulting firm for the Software and IT Services Industry (SITSI). PAC helps IT vendors, CIOs, consultancies and investment firms by delivering analysis and advice to address a range of growth, technology, financial and operational issues.
Our 30+-year heritage in Europe – combined with our US presence and worldwide resources – forms the foundation of our ability to deliver in-depth knowledge of local IT markets, anywhere. We employ structured methodologies – undertaking thousands of annual face-to-face interviews on both the buy and sell side of the market, as well as a bottom-up, top-down approach – to leverage our research effectively.PAC publishes a wide range of off-the-shelf and customized market reports –including our best-selling SITSI® program – in addition to our suite of strategic consulting and market planning services. Over 160 professionals in 16 offices – across all continents – are delivering the insight that can make a difference to your business.
For more information, please visit our website at www.pac-online.com
Your Contacts:Eugen Schwab-ChesaruPartner & Managing DirectorCentral Eastern Europe
[email protected]: +40 (0) 21 410 10 33Mob: +40 (0) 722 630 248
Madalin DobreConsultantCentral Eastern Europe
[email protected]: +40 (0) 21 410 75 91Mob: +40 (0) 722 612 363
Thank you for your attention
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