Information Technology market in the Czech Republic

Review of the market development from 1997 to 1999 Dagmar Ruščáková The Information Technology market has been through th...


Review of the market development from 1997
to 1999
Dagmar Ruščáková
The Information Technology market has been through the initial dramatic growth
only to suffer from an alarming slump and finally, in 1999 it again recorded
some indicators of the recovery. It will be useful to have a look on these
developments of the past three years with the benefit of hindsight and to
compare how the Czech Republic is faring in comparison with its neighbors
Hungary and Poland. To make such a comparison, we shall use the data presented
by the IDC Corporation.
1997 the Year of Crisis
The Czech Republic has been always one of the most important markets for the
Information Technologies in the Central and Eastern Europe except Russia.
During the period from 1989 to 1996, the Czech market registered a remarkable
boom represented by massive investments into the most up-to-date technologies.
However, by 1997 the golden era of uninterrupted growth was at the end the
devaluation of the Czech crown and general slackening of the rate of the
economic growth choked the outlays committed to the development of Information
Technology to such extent that the value of the total market dropped in 1997 by
1% to the total of 1.438 billion dollars in comparison with the value achieved
in 1996 represented by the figure of 1.443 billion dollars. The outlays on the
Information Technology were lower in almost all the key segments of customer
base and the most significant cuts were seen in the area of public services
where the Czech Cabinet sharply reduced the investments. Another customer base
segment hit quite heavily was the banking sector.
The unfavorable economic situation was augmented by the consequences of the
devastating floods that hit the country in July 1997 and that required
additional outlays from both the government and private budgets. The
instability of the banking sector together with the Ministry of Finance plan to
accelerate the privatization of large banks limited the rate of investments
into Information Technologies within the segment of financial institutions. The
outlays were also significantly lower in the sector of small businesses,
offices and household users.
The market slump was most conspicuous in the area of personal computers where
in 1997 the sales suffered the drop to the total of 230,200 units sold (drop to
the tune of 3% on year). In addition, the other hardware segments, including
servers, peripherals, workstations and hardware accessories registered either
the low growth rate or even the recession. On the other hand, the sales within
the IT services segment, the sales of software and of data communications
recorded quite satisfactory growth and thus, at least to a certain extent, the
amount of the red ink spilled by the hardware sector was kept in check.
1998 the Year of Stagnation
The economic and political uncertainties by no means vanished with the year
1997. The Information Technology market is very sensitive to the loss of
government orders and thus it remained quite stagnant during 1998. Only a
negligible growth was registered during the entire year and this growth was
mostly fed by the increased demand for software and services. The total outlays
committed to Information Technologies in 1998 reached 1.46 billion dollars and
this cannot be considered a very optimistic result.
However, if we neglect the overall figures and focus our attention on the
structure of the outlays we can conclude that by that time the Czech Republic
already belonged to the most highly developed IT markets in the Central and
Eastern Europe. This conclusion follows from the observation of the fact that
structure of the market manifests very similar features as those manifested by
the typical West European markets where the outlays on the Information
Technologies are gradually shifting towards implementation services, networking
hardware/software, application solutions and general support. The ratio of IT
outlays and GDP was in 1998 comparable to the analogous ratios in the most
highly developed countries of Western Europe. Unfortunately, it must be stated
that the value of GDP in the Czech Republic is, if compared to the analogous
figures recorded in the West European countries, rather hard to compare. Since
at the time this article goes to the printing press the detailed data on the IT
market in 1999 would not yet be available, we shall have to make good with just
the initial structure for that year as it was left over by the end of 1998.
Personal Computers and Systems
The PCs market in the Czech Republic has recorded a slight recovery during 1998
in terms of units sold and thus the gap of the previous year was compensated.
According to IDC estimate the total number of PC units delivered during 1998
was 243,165. While the number of PCs sold registered the growth of 4.3 % on the
previous years 233,200 units, their financial value dropped by 9.5 %. Despite
the recorded growth, the demand was still limited by the economic uncertainties
that continued to poison the year 1999 just the same way as they did during the
previous one.
Despite the growing pressure of the suppliers of the worldwide known brands,
the local assemblers were able to generate during 1998 a sufficient growth that
managed to uphold their dominating market share as far as the deliveries of PCs
were concerned. These companies, including AutoCont, ProCA or Comfor
corporations and others, supplied 53.8 % of all PC systems sold. Nevertheless,
the companies like Compaq, Dell and Hewlett-Packard substantially increased
their supplies and they captured the shares hitherto held by less known brands,
smaller local assemblers and imported no-name units. In terms of numbers, they
materialized the sales representing 41.6 % of all PCs sold in the Czech
Republic.
The deliveries of PCs units to government administration and household segments
of the market dropped during 1998. The segment of education was stagnant while
the business sector in general recorded a slight growth; the substantial growth
of deliveries was registered within the segment of small businesses. This
situation resembled closely that of 1997 when the higher deliveries to small
businesses offset the drop in sales to the other market segments.
The market of computing systems and servers in the Czech Republic recorded a
strong growth during 1998 in terms of the units sold. The sales grew by more
than 14.8 %. The demand of the end-users concentrated itself mainly to the
systems within the price bracket of less than 25,000 dollars this category
represented 91.9 % of all deliveries. In terms of units sold, the largest
supplier of computing systems and servers was the Compaq Company. The success
of this supplier owes much to their orientation on the segment of small and
medium sized companies. The Czech market with computing systems and servers is
still dominated by the Intel platform that during 1998 claimed practically 90 %
of all sales.
Printers
According to the estimate by IDC, the number of printers sold in the Czech
Republic in 1998 was more than 245,000 units of all technical and size
categories. The total sales grew by 12.6 % compared to the year before. The
most widely sold printers were those based on the ink-jet technology; in 1998
their deliveries grew in comparison to the same figures of the previous year by
40.7 % while the sales of pin printers dropped by 36.3 % during the same
period. The laser printer deliveries grew in 1998 by more than 16.0 %. The
largest share on the printer market in the Czech Republic during 1998 was held
by the Hewlett-Packard Company followed by Epson and Canon companies.
Software
Almost 97 % of all operating systems installed in the new computers are the
Microsoft products. These products dominated also on the market of desktop and
portable computers. It is interesting to note that there existed a significant
share of the computers sold without having any operating system installed. The
research of this phenomenon indicates that these instruments either carried the
pirate version of Windows 95 or they have been supplied to public sector, to
large companies and to schools where there are usually license agreements with
the Microsoft Corporation in force.
The market of integrated company applications expanded by more than 19 % in the
Czech Republic during 1998 and it reached the value of total revenues on
account of licensing and maintenance amounting to 37.52 million dollars. The
largest share of the outlays committed to ERP in the Czech Republic remained
within the manufacturing sector. The SAP Company strengthened its leading
position on the market even further by scoring 52.3 % share. The revenues from
licensing and maintenance of this company grew by the hefty 34 % and the
company outpaced both the average rate of market growth and most of its
competitors.
The Unix operating system remained in 1998 the most important operating system
around used for the installations of integrated company applications. Almost 57
% of all licensed company applications (measured by the revenue stemming from
licenses) were installed in the Unix operating system environment. The share of
the Windows NT environment representing in 1998 22.2 % of all licensed
application installations again represents the growth compared to the previous
year. The most popular hardware platform in 1998 were the IBM application
servers; their share reached 36.2 %, again measured by the licensing revenues.
Networking Technologies and the Internet
The LAN market in the Czech Republic that according to IDC includes network
cards, gateways, switches, routers and remote access servers reached in the
Czech Republic the revenues of 95.7 million dollars. This area undoubtedly has
by far the greatest potential for further growth.
IT Services
The market of IT professional services in the Czech Republic reached in 1998
the value of 542.56 million dollars. This represents about 37 % of the total
annual IT outlays in the year in question. In comparison with the 502.62
million dollars achieved in 1997, the result of 1998 represents the 7.9 %
growth of the outlays committed to IT services in the Czech Republic. The
largest share of this market was held by the segment of hardware support and
installations during 1998. Despite the complicated economic situation in 1997
that had the tendency to limit the rate of growth, the IT services market
continued in its expansion faster than the IT market as the whole. IBM
registered in 1998 the strengthening of its position on the Czech market of IT
services by recording the 10 % annual growth compared with the year before. The
company enjoyed strong demand for complex integrated services, networking
services and outsourcing. The PVT Company (the Czech computing technologies
company) being the local supplier occupied the second place followed by both
foreign and local companies like Compaq, Hewlett-Packard, APP Group, Andersen
Consulting, Unisys, SAP, Deloitte&Touche, Oracle and others.
1999 the Year of Recovery
In view of the circumstance that the official results of the year 1999 will be
available only during the fall this year, we shall limit ourselves to a review
of some forecasts so far published relative to the year 1999 and to the data on
the market of personal computers that are already available by courtesy of the
IDC Company. These sources should be good enough to present the reasonably
realistic image of the IT market in the Czech Republic during the year 1999.
There are some indicators heralding that the year 1999 should witness the
market recovery. Data like the 14 % growth of outlays committed to purchases of
personal computers seem to be reassuring, indeed. According to the IDC Company,
the total value of the IT market should reach approximately 1.6 billion dollars
in 1999.
The Structure of Outlays
The structure of outlays in 1999 should tend to favour the outlays for software
and services and there should be a significant growth in the area of
telecommunications and networking. In 1999 approximately 57 % of all computers
should have been connected to local networks and according to the opinion aired
by the IDC Company, by 2003 altogether 86 % of all computers will have been
connected to local networks of some kind or the other. Therefore, it is assumed
that the Czech market with LAN hardware grew in 1999 by about 8 %. Another
story is the task to determine how many Internet users are there in the Czech
Republic. In view of the circumstance that this indicator represents one of the
key data for a realistic estimate of the future development of electronic
business in the Czech Republic the methods used and the results obtained are
subjects to critical evaluation by all interested parties and in particular by
the Czech operators of Internet servers and ISPs. According to the IDC
estimate, there were about 292,000 Internet users by July 1, 1999 in the Czech
Republic. It should be emphasized at this point that this figure has been
criticized as being grossly underestimated and some sources quote numbers as
much as twice as large.
The value of the electronic trading of the business-to-consumer type was
estimated to had been by the end of 1999 approximately 1.2 million dollars. At
the monitored companies, the access to the Internet was available on average to
less than 35 % of employees working with the computers by July 1999.
Approximately 61 % of the monitored companies had their own Internet
presentation and other 21 % companies were planning to create some by the end
of 1999.
The telecommunication services market expects the dynamic growth during the
next five years. Based on the forecast by the IDC Company, the market of
services rendered via fixed lines will grow during the period from 1998 to 2003
from the original 1.07 billion dollars to 1.85 billion dollars. The services
rendered by the mobile operators will grow during the same period from 636
million dollars to 1.4 billion dollars. The revenues from the fixed lines
services will grow at the annual rate of about 12 % while the corresponding
rate for the mobile communications will be about 17 % per annum.
PCs and Servers
The rejuvenated projects in the areas of government administration, education
and large companies helped to disperse the specter of stagnation of the Czech
market with personal computers during 1999. According to the estimates by IDC
Company, the total number of units sold in the Czech Republic during 1999 was
277,900, which represents an annual growth of 14.3 %. This dramatic development
is mainly owing to increased demand from the side of large companies and
government organizations and there was some contribution from the side of small
and medium-sized businesses as well. The number of sold PCs grew very fast last
year despite the fact that the economic situation was by no means rosy one. The
largest supplier on the Czech market was, just as in the last year, the Compaq
Computer Company, which sold by 12.2 % more units compared to the figures of
the year before. In whole, the Compaq Computer Company captured 13.7 % market
share. The AutoCont, being the largest local assembler has remained the
principal Compaq competitor with their 10.8 % market share. Dell Computer
Company, the third largest supplier, was successful in making deals only with
the large local companies and they have not yet included into their sphere of
influence the end-users in this country. The list of Top 5 largest suppliers is
terminated by the ProCA and Comfor companies, which gained the market shares of
7.3 % and 5.7 % respectively in 1999. In view of the circumstance that most PC
purchases taking place here in this country were from within the "low-end"
category, the local assemblers managed to gain 55.6 % of the market in terms of
the units sold. The world brands suppliers were in control of about 40.3 % of
the market in 1999. According to IDC Company, the greatest boom was seen in
sales of desktops and PC servers that grew at annual rates of 16.7 % and 16.6 %
respectively. On the other hand, the sales of portables dropped by 3.3 %, in
part because the ever-growing difference between the price of desktop PCs and
notebooks, because there was the lack of components during the fourth quarter
and because of growing demand for attractively priced renovated portables.
0 1455 / darn









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