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Czech Republic Information Technology Report Q2 2010
Business Monitor International, April 2010, Pages: 54
Czech Republic Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on the Czech Republic's information technology industry.
Market Overview
The Czech Republic’s IT market is forecast to achieve a compound annual growth rate (CAGR) of 6% from US$4.5bn in 2010 to around US$5.7bn in 2014, thanks largely to EU funding for information society initiatives. In 2009, the local currency’s depreciation against the US dollar added to pressure on retailer and vendor margins, as average prices of notebook computers declined. Many firms put investment in new technology on hold because of a deterioration in external demand. BMI expects to see a gradual improvement in 2010 in enterprise and consumer IT spending, but an uncertain economic and political climate will weigh on investments. Enterprise spending should pick up in the second half of the year, with an improvement in the external trading environment, triggering upgrade cycles postponed from 2009.
Industry Developments
The Czech Ministry for Local Development, which supervises the allocation of EU subsidies for investment in IT and other areas, has launched a campaign to make access to the funds easier for smaller organisations. According to the ministry’s plans, subsidies should go into areas with strong potential to drive growth. Since the beginning of the 2007-2013 budget period, the total sum of money approved by the EU for Czech projects has reached CZK150.6bn.
In H109, the government faced pressure to cut state spending in all key areas due to falling tax revenues. However, IT spending retained some momentum from the second half of 2008, when the government rolled out a number of IT initiatives, including a central accounting system to interconnect and provide visibility about the finances of a number of state organisations. The project was due to be completed in late 2009 or early 2010.
Meanwhile, the health sector is another area of growing public sector spending. The Czech National Health Insurance Agency has implemented a new anti-fraud software plan to be implemented in the next couple of years. As part of the modernisation of the sector, 14 medical institutes run by the Ministry of Health are also rolling out unified software, supplied by Aquasoft.
Competitive Landscape
In 2010, Microsoft hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its local sales. In summer 2009, Microsoft continued to lay the groundwork for the new operating system launch and released the enterprise version of the software in August. Microsoft has said that it aims to sell about 800,000 licences for the new operating system in the Czech Republic by end-2010. The growing popularity of mobile and fixed broadband services acted as a driver of the PC market in 2009, with network operators an increasingly significant channel for PC sales. In H109, a number of network operators launched notebook and netbook bundling deals in cooperation with vendors. Vodafone Czech Republic offered a Dell mini-notebook through all its sales channels, while Telefónica O2 was offering a Samsung model to its 3G subscribers.
Telecoms operators are increasingly making a play for a share of the Czech managed services opportunity. Leading Czech telecoms company Telefónica O2 has started offering IT services ranging from computer networks and computers through to consulting and hosting. The initial emphasis was in managed hosting, but the company offers a growing range of information and communication technology (ICT) solutions. Recently, the telecoms company has also been aggressively targeting the small and medium-sized enterprise (SME) segment with consulting services.
Computer Sales
The Czech computer hardware market is forecast to grow in 2010, following a contraction in spending last year. Sales of desktops, notebooks and accessories are projected at US$2.0bn in 2010, with notebooks accounting for around two-thirds of PC sales. The country still lags behind the EU average for computer ownership, which BMI sees as rising from around 48% in 2008 to 71% by 2013. For 2010-2014, the median expectation is probably one of moderate growth, driven mainly by notebooks. Over the past few years, higher real wages and a strong local currency have led to an expansion of electronics and computer equipment sales through retail channels and online stores; however, due in part to the global credit crunch and economic slowdown, expansion seems likely to be slower going forward.
Software
BMI projects a software market value of US$944mn in 2010, up 5% on the previous year. Growth is expected to remain below the trend of previous years as political and economic uncertainty weighs on investments. BMI projects a market value of US$1.3bn by 2014, growing at a CAGR of 7%. The launch of the Windows 7 operating system has the potential to impact positively in 2010, although much will depend on success in bringing down the piracy rate, which still remains above the EU average. BMI expects growth to pick up again as the focus of software market growth shifts from basic enterprise resource planning (ERP) implementations for large accounts and central government to new markets and product areas. Many larger organisations in the manufacturing and utilities sector in particular have already completed ERP implementations. Therefore, vendors are now looking to other areas such as customer relationship management (CRM) and business intelligence, where faster growth is possible.
Services
The Czech market was ahead of many other Central and Eastern European (CEE) countries in moving to a relatively high level of spending on IT services and the market is expected to grow at a CAGR of 6% to above US$1.9bn by 2014. BMI estimates that sales revenue of IT services dipped slightly in 2009 as a result of the eurozone slowdown. Headline trends obscure some patterns of change in the composition of spending. The relatively sophisticated market means that there is more demand for applications tailored to specific verticals, as well as systems consolidation and platform integration.
E-Readiness
The Czech Republic still lags behind Western Europe in high-speed internet connections. In one survey, the Czech Republic ranked third for PCs per household among new EU member states at accession; overall PC penetration is around 48% currently and is expected to rise to around 67% by 2013. A recent EU report revealed uneven advances in ICT indicators in the Czech Republic. The EU i2010 report suggested that much current growth in internet connectivity in the Czech Republic now comes from conversion from narrowband to broadband. Furthermore, rapid growth in overall connectivity is balanced by a slowing of broadband penetration of enterprises.
Alternative broadband technologies such as wireless technologies Wi-Fi and WiMAX are expected to play an increasingly important role in the development of the broadband industry. Ceske Radiokomunikace (CRa) launched a commercial WiMAX service in Prague in January 2009. The availability of internet and broadband services is continually being expanded, driven by Telefónica O2’s reduction in wholesale access prices and the regulator’s enforcement of local loop unbundling. Availability and competition is helped by other operators with their own networks such as Broadnet and UPC, which are able to offer an alternative to Telefónica O2’s network infrastructure and encourage the incumbent to invest in developing its own network.
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