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Home > Computers and Information Technology > IT Administration & Services > IT Spending & Administration
Slovenia Information Technology Report Q3 2007
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Market Overview
The Slovenian IT market will be supported by an economy which is maintaining its momentum in 2007, lifted by general recovery in the eurozone of which it is now a member. Strong domestic investment growth is encouraging spending on improving IT infrastructure and suggests a promising context for Slovenian IT market development over the next period. While Slovenia is one of the more mature ICT markets among the recent EU entrants, there is still plenty of room for growth. The IT market is expected to grow at a CAGR of 8% over the forecast period from 2006-2011, with euro adoption in 2007 also driving significant IT spending. Tax cuts should underpin further investment in IT to support future expansion for Slovenian companies within the EU market and beyond. Household expenditure is also quite robust currently and being reinforced by strong employment growth.
With Slovenia becoming a member of the eurozone on January 1 2007, the country’s state of information development completing a 10-year period of economic and structural reform, the direct and indirect effects of EU membership will continue to drive IT spending for some time. As discussed in this quarterly update, uneven development in areas from e-government to education and internet penetration represent potential opportunities for vendors going forward. Slovenia is behind the EU average in a number of areas such as computers in the workplace, but ahead in others. Increasing broadband and internet penetration should also drive sales going forward.
IT spending is expected by BMI to increase from US$906mn in 2005 to around US$1.3bn in 2010, with services (25% of spending) and software (18%) growing at a faster rate than hardware (57%). One area for growth is likely to be in the relatively underdeveloped north-eastern area of Podravje, which has previously been associated with heavy industry, but is now the focus of government redevelopment efforts, and also benefits from its proximity to Austria. From a sector perspective, manufacturing has been the key driver of growth, with particularly strong performance in the production of electrical and optical equipment and chemicals.
Industry Developments
In May 2007 Jure Zupan, the Science, Technology and Higher Education Minister, announced an extension of the EUR1.3mn project to bring iInternet access to all students. The first phase of the programme, launched in 2003, focused on providing access to all Slovenian university student dormitories. According to the government, this phase has already resulted in many thousands of additional students gaining internet access. The next phase of the programme is to target secondary school students. Meanwhile, as part of the government initiative to encourage the application of IT to the judicial process, the government has adopted a new act of civil procedure. In what should prove an important driver of this process the new act will allow people to file claims and examine the progress of their claims on the internet. Among other changes envisaged is authorisation of electronic signature as a means to validate claimant identity.
Slovenian PC penetration has reached 71% of households according to new data released by the Statistical Office of Slovenia. The data suggests that the market is approaching effective saturation, with 24% of households having ‘no need of a PC’. However, economic factors play a part with 15% of households in the bottom income quintile unable to afford a PC. The government statistics were in line with some research published last year showing that at least one working computer is present in 68% of households while 63.8% use a computer. The survey also found that the number of internet users was increasing but at a slower rate.
Competitive Landscape
Slovenia’s domestic IT giants are in optimistic mood following strong 2006 financial results and have outlined aggressive expansion plans for 2007 and beyond. Formerly troubled Hermes Softlab announced a 20% rise in sales revenues in 2006 from the previous year, up to EUR41.6mn. The figures surpassed the company’s own expectations and were further validation for the new strategy pioneered three years ago by the company which restructured three years ago to focus on marketing its own solutions.
Meanwhile, another Slovenian IT group Actual IT, which has IT Services at its core business, is targeting a 24% rise in revenues in 2007 to a total of around EUR16.7mn. However, due to expected higher investments in expansion and development of new products and services, the group does not expect to make a profit this year. The Group plans to triple sales to more than EUR50mn by 2012 from the current level with much of that growth coming from expansion abroad.
The recent success of Actual IT highlights the opportunities that the IT services market is bringing opportunities for vendors both domestically and regionally as Slovenian organisations upgrade IT systems to strengthen competitive advantages following EU accession. The latest opportunity was revealed with the news that Slovenia plans to offer for sale its sole oil refinery as the international tender is likely to spur further investment in IT. One of the company’s subsidiaries specialises in new information technology such as development of a gas information system
Computer Sales
A divergence is expected to become more pronounced, with corporate purchases mainly a replacement market, while new purchases, particularly of laptops, continue to dominate in other sectors. Household consumption remains relatively muted, but investment growth has been strong since 2001, with quarterly expansion at around 10% year-on-year (y-o-y) since the start of 2003. Sales of computers (including notebooks and accessories) were estimated at US$399mn in 2006, up from US$380mn in 2005, and within an overall 2006 hardware market of US$512mn. Prices are continuing to fall, but sales will be driven by growing DSL coverage and penetration, with overall internet penetration rising to more than 70% by the end of the forecast period. Based on industry data, household PC penetration rose from 47% in 2001 to 61% in 2005. Broadband services such as IPTV, now offered by both SiOL and T-2, are now available to 70% of the country. Sector drivers will include banking (see Industry Developments) and telecoms.
While desktops still account for a majority of unit sales, the trend is very much in favour of laptops. Services will become an increasingly important competitive differentiator here. Overall, international brands seem to be consolidating their position in the market, with HP still the leading brand, but with Dell now in second place, supplanting Lenovo which is now third. HP also leads in the server segment, followed by IBM.
Software
The release of the Windows Vista software in January 2007 should provide a boost to sales. However, most large enterprises have now deployed enterprise resource planning (ERP) applications, meaning that vendors will have to look to other areas, such as SMEs, for growth. The software market in Slovenia was estimated at US$165mn in 2006, up from US$147mn in 2005. Relatively strong progress is expected during the forecast period to 2010, with software growing more than twice as fast as hardware in revenue terms, at a CAGR of 12%. According to industry projections, between 75,000 and 80,000 computers are expected to be sold this year in Slovenia with Microsoft Windows Vista pre-installed.
However, near-saturation 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. Although large and very large enterprises still constitute around one-half of the spending on EAS in Slovenia, more than 64% of new installations are reported to come from small and medium-sized businesses.
Services
The Slovenian IT services market grew to around US$229mn in 2006 from US$209mn in the previous year. IT services represent around one-quarter of IT spending in Slovenia, reflecting a market at an earlier stage of maturity than, for example, that of the Czech Republic. However, boosted by local giant Hermes SoftLab, IT Services is the second largest ICT exports category by revenues. The growth rate of the IT services market is set to rise as Slovenian organisations upgrade IT systems to gain or maintain competitive advantage following EU accession. Spending CAGR for the 2006-2011 period is put at 11%. In addition, 2007 should see continued healthy economic growth, leading to investment in applications and solutions that make processes more efficient on behalf of both governments and businesses.
Special Focus: E-Government
Dr Ales Dobnikar of the Ministry of Public Administration has described public administration as one of the government’s priorities. In 2005 a series of initiatives were implemented. A Register of Civil Status is being created, through use of the permanent residents’ register (PSR), a vehicle registration system will support the total life cycle of a vehicle from registration to decommission, while a third programme gives attention to the protection of historical archives through electronic means.
E-Readiness
Internet penetration was put by BMI at 60% at the end of 2006, representing around 1.2mn subscribers, a number that is expected to rise to 1.4mn by 2011, representing a 71% rate of penetration. In a recent report, the Slovenian telecoms regulator claimed that Slovenia was the most developed country in the CEE region for fixed-line and broadband access coverage. According to BMI, broadband penetration will nearly double from 13% to 24% over the forecast period. While dial-up access still prevails, broadband technologies, particularly DSL, are gaining ground. Cable also has a modest share of the broadband market.
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