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Germany Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 55
Market Overview
The German IT market, with leading indicators of business investment continuing to head higher, is forecast to grow at a CAGR of 4% over 2011-2015. The addressable domestic market for IT products and services is projected by BMI to reach US$60.8bn in 2011 and US$71.8bn by 2015.
In H111, the PC market contracted sharply as a result of excess inventories and consumer and business caution. However, IT vendors reported a pick-up in growth in areas such as managed services and systems integration as German organisations were more willing to consider spending on IT services. There is now increasing interest from government organisations as well as the private sector in cloud computing models such as Software-as-a-Service (SaaS) and Infrastructure-as-a-Service (IaaS). Demand from the public sector should be steady, despite fiscal tightening, as government organisations look to control costs, while healthier bank profits should support a revival in financial sector IT spending.
Industry Developments
Government funding for technology policy measures in the 2010 budget of the Federal Ministry of Economics and Technology amounted to EUR2.3bn, or EUR2.8bn including stimulus measures. 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 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, to cope in the economic upturn.
Competitive Landscape
International vendors dominate the Germany PC market. In H111, HP took first place in overall PC shipments, ahead of Acer, which had seen a sharp loss of share compared with the same period of the previous year. HP reported impressive double-digit annualised growth in a contracting market. Other leading vendors include Asus, Dell and Samsung, with the top five vendors accounting for more than 50% of total shipments.
However, HP's global PC market leadership position has been placed in doubt by the company's announcement that it plans to sell part of its Personal Systems Group (PSG), which includes its tablet PCs and laptops. Meanwhile, the European Union recently approved Chinese vendor Lenovo's acquisition of German electronics firm Medion AG, with the transaction valued at US$900mn.
In 2011, software vendors in the German market will focus increasingly on cloud computing. In October 2010, Microsoft launched a cloud computing alliance with German-based Datapoint, a provider of ICT services to the public sector. Meanwhile, SAP launched a new version of its hosted customer relationship management (CRM) software product SalesOnDemand, after the first version, released five years before, had failed to really take off.
Computer Sales
BMI forecasts Germany's addressable computer hardware market will be worth around US$16.8bn in 2011, up by an estimated 4% from US$16.1bn in 2010. The German PC market contracted sharply in the first half of 2011 after a smaller annualised decline in the final quarter of 2010. The downturn affected all major segments of PC sales, including notebooks, netbooks and desktops.
In H211, PC sales are forecast to record modest growth, thanks to an improved inventory situation and base effects. However, government sector demand was sluggish, and will likely remain subject to fiscal austerity constraints.
Software
In 2011, German market software sales are projected by BMI at US$19.1bn and, despite the continued economic headwinds, revenues are expected to rise to US$21.5bn in 2015. Despite a relatively mature market, there is plenty of potential for enterprise resource planning (ERP) implementation in industries such as consumer products, telecommunications, energy, engineering transport and retail. ERP demand drivers include boosting the efficiency of global supply chains and logistics processes. Meanwhile, business intelligence will continue to be one of the fastest-growing product areas in 2011.
Services
German IT services spending is forecast to reach US$24.9bn in 2011 and rise to US$29.9bn in 2015. Demand drivers will include emerging technologies, such as projects to enable SaaS use, and reducing costs through datacentre infrastructure outsourcing.
In 2010 vendors reported stable or rising revenues in the German market, with a pick-up in new contract signings and renewals. Demand for outsourcing has reached beyond traditional major IT spending verticals such as financial services to sectors such as auto and chemical.
E-Readiness
Germany announced plans 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, BMI expects 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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