The IT services market in Croatia slowed in 2007 compared to the two years prior. According to a recent study from IDC, the market grew 15.2% year on year to $365 million, down from nearly 40% annual growth in 2006. Expressed in local currency, the IT services market grew by 5.9% in 2007 as compared to 35.8% in 2006. IDC attributes the slower growth to parliamentary elections held in November 2007 and to a number of postponed IT services deals. In 2008, the Croatian IT services market is expected to decelerate even further, to a 7.6% year-on-year growth rate, with total IT services spending reaching $393 million for the year.

“The Croatia IT services market has been growing rapidly, in line with the country’s preparations for EU membership. However, heightened competition, an economic slowdown, and rising inflation predicted for the immediate future could slow this growth considerably,” said Boris Zitnik, Managing Director, and IDC Adriatics.

The top three vendors on the Croatian IT services market in 2007 were Siemens IT Solutions and Services, Combis, and Apis IT. Together, they controlled a quarter of the total market. While Combis and Apis IT maintained their positions from 2006, Siemens IT Solutions and Services made a leap from the fourth position to replace IBM at first place.

The combined customization category (applications consulting, customization, and custom application development), at 25.3%, accounted for the largest share of the IT services market in 2007. Systems integration services were second in demand, with a 24% market share, followed by hardware and software support and installation, with 23.7%. IT outsourcing, which skyrocketed 63% in 2006, grew a meager 2.6% year on year in 2007, to account for 16.4% of the total IT services revenue.

The combined finance sector was the largest vertical market in Croatia in 2007, with a 22.0% market share. The government sector, which placed first the prior year, placed second with 21.5% in 2007. The telecommunications sector ranked as the third-largest vertical sector with a 20.3% market share. The fastest-growing market segment was transportation, surging 53.3% year on year, although from a relatively small base.

IDC expects the IT services market in Croatia, due to its progressing maturity, to slow its growth to an average annual rate of around 11% over the next five years.

IDC’s Croatia IT Services 2008-2012 Forecast and 2007 Vendor Shares (IDC #ES04Q) presents the Croatian IT services industry in 2006 and forecasts expenditures on IT services through 2012. The study provides market size information, vendor market shares, and revenues detailed by IT services categories and vertical markets. The study presents profiles of the top ten IT services providers, including their IT services portfolios, their presence in individual vertical markets, and their largest contracts in 2007.