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Germany Information Technology Report Q3 2010
Business Monitor International, July 2010, Pages: 48
The German IT market is projected, despite current economic uncertainties, to grow at a compound annual growth rate (CAGR) of 5% over the 2010-2014 period. The addressable domestic market for IT products and services is projected to reach US$58.0bn in 2010 and US$66.6bn by 2014. The overall outlook for 2010 is one of solid recovery, after the market fell by around 2% in 2009 due to the economic crisis, which hit business spending in particular. In early 2010, IT vendors reported healthier sales pipelines as German organisations were more willing to consider spending on IT products and services.
A number of surveys have suggested that around 40% of German companies expect to increase spending on IT services this year. German IT spending is expected to have a number of drivers going forward. One distinctive feature of the market is the influence of medium-sized companies. Despite Germany being a relatively mature market, there still remains plenty of potential for spending on data storage and security solutions.
Industry Developments
Government funding for technology policy measures in the 2010 budget of the Federal Ministry of Economics and Technology amounted to a total of EUR2.3bn. If stimulus measures are included, then funding for technology totalled around EUR2.8bn. The funding is intended to support continued implementation of the ‘High-Tech Strategy for Germany’ initiative, which was set up in 2006. Meanwhile, the German government (elected in September 2009) has announced that it will provide an additional EUR12bn for education as well as research and development (R&D). Among other priorities, the government is determined to encourage German companies to innovate in order to cope in the economic upturn.
Competitive Landscape
By the third quarter of 2009, Acer had taken a commanding position in the German PC market, ahead of major rivals HP and Fujitsu-Siemens. Fujitsu-Siemens has a strong position in government and utility service sectors, but suffered as consumer notebooks emerged as the main global PC market driver during the economic downturn. The consumer segment has become a more significant focus for Dell and Lenovo, which were previously focused on enterprise as their mainstay.
The German software market is competitive, with smaller companies having a niche alongside major players such as German software giant SAP, Oracle and Microsoft. Around 300 software providers compete in the enterprise resource planning (ERP) market for the small and medium-sized enterprise (SME) segment alone. Other major players across all segments include Sage, SoftM and Infor Global Solutions.
SAP is the world’s largest business software company but, even in its home market, faces stiff competition from Oracle and other competitors such as Sage. In Q110, SAP reported a 10% year-on-year (y-o-y) rise in software and software-related services revenues in constant currency. The company claimed a number of wins during the quarter, including Gazprom and HLL Lifecare Limited. Computer Sales
The authors forecast that Germany’s addressable computer hardware market will be worth around US$16.3bn in 2010, up by an estimated 4% from US$15.8bn in 2009. In contrast to much of the rest of Europe, German PC shipments continued to grow last year. However, due to a sharp fall in average sale prices, value dropped by a low double-digit factor.
PC shipments in 2010 are expected to finish up by a single-digit factor y-o-y, due to strong demand for notebooks and particularly netbooks. PC volume sales were around 12mn units in 2009. Notebooks led the growth and, with nearly two-thirds of shipments, also represented the majority of sales.
Software
In 2010, German market software sales are projected at US$18.3bn and, despite the uncertain economic conditions, revenues are expected to rise to US$19.6bn in 2014. Software CAGR for 2010- 2014 should be in the region of 3%. Sales of Microsoft’s Windows 7 should provide a boost to the operating system market in 2010. Despite a relatively mature market, there still remains plenty of potential for ERP implementations in industries such as consumer products, telecommunications, energy, engineering transport and retail. ERP demand drivers include increasing boosting the efficiency of global supply chains and logistics processes.
Services
German IT services spending is forecast to reach around US$23.4bn in 2010 and rising to US$27.7bn in 2014. The economic crisis and political uncertainty had an impact on services spending in 2009, with projects being put on hold. Sectoral CAGR is projected at 4% over the forecast period. Outsourcing is one of the main drivers of the IT services segment and the German market is a key target for Indian as well as US and European IT services firms. Demand for outsourcing has reached beyond traditional major IT spending verticals like financial services to sectors such as auto and chemical.
E-Readiness
Germany expects to auction off additional frequencies for delivering mobile broadband services in 2010, which is expected to be a high-growth area over the next few years. In the wireline sector, although the fixed-line market is forecast to decline, we expect the rate of decline to slow as better-value tariffs are offered and fixed lines are bundled with higher growth services such as broadband and pay-TV.
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