The IT services market in Croatia continued growing in 2008 despite the slowing economy. According to a recent IDC study, the Croatian IT services market totaled $424.45 million in 2008, representing 16.3% year-on-year growth in U.S. dollars. Measured in local currency, the market expanded 7.0% year on year.

“During the first half of the year, IT services procurements still felt the adverse impact of the November 2007 elections, the Public Procurement Act introduced at the beginning of the year, and a freeze on EU tendering processes,” says Boris Zitnik, Managing Director, IDC Adriatics. “However, in the second half, the last quarter in particular saw buoyant spending, especially in the government segment, which was again able to take advantage of EU funds, contributing significantly to a positive year-on-year result.”

The fastest-growing verticals in terms of IT services spending in 2008 were retail, government, transportation, and banking. Conversely, other financial services and process manufacturing registered the steepest decline in spending, while telecommunications procurements grew at a rate slightly below the overall IT services market. Government was the biggest spender, accounting for 23.5% of the IT services market. The financial sector placed second, with 21.1% of total spending, followed by telecommunications and manufacturing.

On the supply side, Siemens SIS was the leading IT services provider in Croatia in 2008, followed by Combis, King ICT, IBM, and Apis IT. The combined market share of the top five vendors accounted for less than a third of the highly fragmented market, with none of the vendors exceeding an 8% share.

The systems integration category accounted for the largest share (16.1%) of IT services revenue in 2008, followed by applications consulting and customization (13.7%) and hardware support and installation (12.9%). The combined outsourcing category comprised 16.6% of the 2008 IT services market in Croatia.

IDC predicts that the IT services market in Croatia will fall in 2009 and stay flat in 2010, transforming the IT services providers landscape. Over the five-year forecast period, the market will grow at an average annual rate of 5.6%, to reach approximately $560 million in 2013.

“Economic crises will severely hit IT services spending in Croatia,” says Zitnik. “An economic recovery anticipated in the midterm will positively impact the market, however, underpinned by heightened competition faced by businesses, the need to improve transparency as part of EU accession processes, further privatization and restructuring, increasing foreign direct investment (FDI), and broadband and mobility proliferation.”

The study Croatia IT Services 2009–2013 Forecast and 2008 Vendor Shares (IDC #ES40R9) presents the Croatian IT services industry in 2008 and forecasts expenditures on IT services through 2013. The study provides market size information, vendor market shares, and revenues by IT services categories and vertical markets, and includes profiles of the top five IT services providers, including their IT services portfolios, their presence in individual vertical markets, and their largest contracts in 2008.