Slovenia Information Technology Report Q4 2009

Market Overview

Slovenian IT spending is projected to sharply decelerate in 2009, as consumers and businesses retrench due to tighter credit conditions and the unfavourable external economic environment. Some projects have been put on hold due to the economic uncertainty. The current economic crisis has led some companies to review IT budgets or look to defer systems updates, but others see IT as a means of achieving greater efficiencies in difficult times. The trading environment will remain challenging in H209. Tight credit conditions will continue to impact on credit available to households for IT purchases. Meanwhile, household saturation is also being approached, with PC penetration at around 71% of households according to a recent survey. Despite these negative trends, there will continue to be opportunities in various sectors, and BMI expects that retail sales will pick up again towards the end of the year. Slovenian IT spending is projected by BMI to advance from US$1.1bn in 2009 to nearly US$1.4bn in 2013. Rising GDP/capita over the next few years should ensure continued growth, along with government and EU funded information and communication technology (ICT) initiatives. Slovenia became a member of the eurozone on January 1 2007, and the direct and indirect effects of EU membership will continue to drive IT development.

Industry Developments

Across the public sector, tenders continued to be issued in 2009, despite the bad economy. Among recent tenders was one for sales, marketing and business intelligence software from Radiotelevizija Slovenia. Another was for software programming and consultancy services from the Ministry of Labour, Family and Social Affairs. Health is one priority area. In 2009 the Health Insurance Institute of Slovenia announced that it would roll out a new electronic health insurance card system across the country. The new system will use an electronic health insurance that will eventually be carried by every Slovenian citizen and presented at the point of healthcare delivery. In 2008 Slovenia implemented a number of IT projects, making use of both local and EU funds. Slovenia is determined to consolidate its status as one of the most advanced of the 2005 EU intake. EU funding for its Competitiveness and Innovations programme for the period 2007-2013 includes substantial sums to support ICT policies. There are also additional sums for entrepreneurship and innovation, which can have IT applications.

Competitive Landscape

IBM won a major local contract in 2009 when the Health Insurance Institute of Slovenia announced that it would roll out a new nationwide electronic health insurance card system based on IBM technology. IBM will provide hardware, software and services for the project, which was commissioned following the successful completion of a pilot project. Overall, international brands appear to have consolidated their position in the PC market, with HP the leading brand overall, followed by Dell, Lenovo, and Fujitsu-Siemens. HP leads in the server segment, followed by IBM. As the hard-copy peripherals segment approaches saturation, the top three vendors HP, Samsung and Canon have nearly three-quarters of the market.

Computer Sales

Slovenian sales of computers (including notebooks and accessories) are projected at US$473mn in 2009, down from US$486mn in 2008. Growth is now expected to dip into negative growth territory this year due to a weak private consumption outlook, tighter credit conditions and the impact of the recession on Slovenian businesses. In Q109, the market achieved single-digit shipments growth, in contrast to the sharp declines in regional neighbours such as Serbia and Croatia. However, there was downward pressure on prices because of the economic downturn and the popularity of lower priced notebooks and netbooks, which drove volume sales. BMI expects that spending in the run-up to the Christmas period will help to drive sales higher in Q409.

Software

The software market in Slovenia is projected at US$222mn in 2009, with a marked deceleration compared with 2008. The current economic crisis has led some companies to review IT budgets or look to defer systems updates, but others see IT as a means of achieving greater efficiencies in difficult times. Business software vendors will look to pitch efficiency gains, as margins pressure encourages companies to focus on reducing costs. Slovenia is a relatively mature software market for the region and the relative saturation (79%) of the large-enterprise market in terms of basic enterprise resource planning (ERP) applications should encourage vendors to look to other products to maintain growth, or else to focus more on vertical specialisms. Although large and very large enterprises still constitute around half of the spending on enterprise application solutions (EAS) in Slovenia, more than 64% of new installations are reported to come from small and medium-sized businesses.

IT Services

The Slovenian IT services market is projected to grow to around US$306mn in 2009, with only low single-digit growth compared with the previous year. However, the market is expected to revive, and a 7% 2009-2013 compound annual growth rate (CAGR) is projected, with support and maintenance accounting for more than 25% of these revenues. In 2009, despite the economic downturn, IT services companies are expected to continue to benefit from IT projects tendered across various sectors ranging from the public sector to banks, education, retail and financial institutions. In the long term, the IT services market is set to expand, however, as Slovenian organisations upgrade IT systems to gain or maintain competitive advantage following EU accession.

E-Readiness

The Slovenian government statistics body (SORS) recently released new data about ICT adoption by enterprises. The statistics, from Q108, comprise a fascinating picture of the utilisation of ICT by enterprises of various sizes, and of attitudes towards IT spending. The overall picture suggests room for further market development, particularly among smaller and medium companies, but also a need for continuing education by vendors. Internet access is now nearly ubiquitous, at 97% among companies with 10 employees or more, up 1% from the same period of the previous year. Broadband access has reached 80% among the same group. The large majority of companies still use the internet mainly for email and information, rather than ecommerce. Nearly 30% of enterprises with 10 or more people do not even have a website. Only 18% of large companies enable online ordering on their website, and only 5% enable online payment. The corresponding figures for small and medium companies are even lower. In the case of having an intranet, there is a clear gap between larger companies and smaller ones. 75% of larger companies had an intranet, compared with just 40% of medium companies (50-250 employees) and 26% of small companies. Intranet usage was highest in computer-related business and lowest in the construction and hotel sectors. In the financial sector, access to internet was 100%, as was e-government usage. 35% of enterprises in the financial sector believed that the implementation of ICT projects in the past year had significantly improved work routine and the development of new products and services, considerably higher than the average for all sectors.