Report Summary

Market Overview Slovenian IT market growth slowed somewhat in 2008, due partly to the tighter credit conditions and the unfavourable external economic environment. This led BMI to downwardly revise its market projections.

However, the fundamentals of rising incomes and below EU-average PC penetration mean that this small IT market should advance at a compound annual growth rate (CAGR) of 7% over the forecast period of 2008–2013.

Slovenian IT spending is projected by BMI to increase fromUS$1.1bn in 2008 to nearly US$1.6bn in 2013. IT consumption patterns are beginning to resemble more closely those of Western European countries. Vendors may see particular potential in verticals such as financial services, or in less developed regions, such as Podravje, which is the focus of government redevelopment efforts.

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. Slovenia plans a number of new economic initiatives, supported by EU funding, to consolidate its position as a leader among the 2004 EU accession countries.

The government’s ‘e-Slovenia' programme is part of an agenda to raise economic development levels to EU-15 levels by 2013.

Industry Developments 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.

There are various priority areas. While the number of connected schools is now fairly high, the actual number of computers in schools and usage by students and teachers lags behind. IT Skills levels in the workforce are also only slightly above average and so there is need for more investment in this area. In egovernment, despite a few notable areas such as virtual tax assistance and remote access to civil court proceedings and processes, there is still a long way to go, particularly in training officials of an older generation.

Competitive Landscape Slovenia’s domestic IT majors were in aggressive mode in 2008 following strong 2007 results. Slovenian IT services and software giant Hermes Softlab (HSL) entered a partnership with Serbian Comtrade Group, one of the biggest IT companies in South East Europe. The merger brought an end to an approximately one year search process by HSL for an appropriate strategic partner.

Meanwhile Actual IT, whose core business is IT services, plans to triple sales to more than EUR50mn by 2012 from the current level. Much of that growth will come from expansion abroad. Actual has also been involved in merger activity in Slovenia in 2008, acquiring Smt, a computer hardware company for EUR19.6mn.

Software market leader Microsoft Slovenia said that it increased its Slovenia incomes by 20% in 2007, saying that the increase was across all verticals from big companies and government to small- to mediumsized enterprises (SMEs). Microsoft recently launched a joint initiative with telecoms company Iskratel offering unified corporate communications services.

Computer Sales Sales of computers (including notebooks and accessories) are estimated at US$490mn in 2008, up from US$457mn in 2007, and within an overall 2007 hardware market of US$578mn. The Slovenian IT market is still dominated by investment in IT hardware, making the nature of the IT sector rather different from other relatively mature CEE markets like those of the Czech Republic and Hungary. However, the share of the hardware sector in overall IT market spend is expected to decline.

In the first half of 2008, unit sales of computers were down year on year, due in part to the tighter credit conditions and eurozone slowdown. Total computer sales were on course for about 180,000 units in 2008.

However, over the forecast period, surging demand for laptops should ensure overall solid revenues growth. Sales will also be supported growing DSL coverage and penetration.

Software The software market in Slovenia was estimated at US$226mn in 2008, up from US$200mn in 2007. Solid progress is expected during the forecast period through 2013, with software growing faster than hardware at a CAGR of 10%. Future progress will depend partly on results in tackling illegal software. The illegal use of software was put at 48% in 2007 by the Business Software Association (BSA), a rate which was unchanged from the year before.

Most large enterprises (79%) have now deployed enterprise resource planning (ERP) applications, meaning that vendors will have to look to other areas, such as SMEs, for growth. However, nearsaturation of the large-enterprise market in terms of essential applications should encourage vendors to look to other segments to maintain growth, or else focus more on vertical specialisms.

IT Services The Slovenian IT services market grew to around US$306mn in 2008, up from US$273mn the previous year. Spending CAGR for the 2007–2012 period is projected at 10%, with support and maintenance accounting for more than 25% of these revenues. 2008 should see continued investment in applications and solutions that make processes more efficient on behalf of both governments and businesses.

IT Services represents around 26% of IT spending in Slovenia, reflecting a market at an earlier stage of maturity than, for example, that of the Czech Republic. The growth rate is set to rise as Slovenian organisations upgrade IT systems to gain or maintain competitive advantage following EU accession. As speculation rises that the Southern and Eastern Europe (SEE) region could become a new off-shoring frontier, Slovenia has stepped up its preparedness to exploit the opportunity.

E-Readiness The Slovenia 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.