Market Overview A quick look at Poland’s forecast growth trajectory reveals how quickly Poland could close the PC gap with Western Europe, as incomes – driven by the effects of EU membership – increase. Following stronger than expected growth in 2007, the Polish IT market is expected to be among the region’s fastest growing IT markets. The IT market is expected to grow at a CAGR of around 13% between 2007 and 2012. The PC market will remain buoyant, with falling prices of computers, particularly of notebooks, driving demand. There will be particular opportunities in key sectors such as banking, telecoms and manufacturing.

The total size of the IT market is now projected to increase from US$6bn in 2007 to around US$11.1bn in 2012. Falling prices of both desktops and notebooks are a major growth driver, along with EU funds and n overall attractive business environment. The price of a standard desktop computer has fallen two-thirds in real terms since 2002, and lower-priced notebooks are hardly any more. Increased purchasing power meant that consumer demand was the most important driver of economic growth in 2007, even though BMI does expect some cooling over 2008-2010.

With new EU funding coming online, some EUR35bn is expected to be available for public investment in ICT over the period through 2013. Government IT spending started to revive last year and some major projects are expected in 2008. Companies in many sectors have a greater focus on applying IT to streamline and optimise business processes. Spending by banks alone accounts for as much as 15% of the whole IT market and is expected to maintain double-digit growth.

Industry Developments Poland’s National IT Infrastructure Plan for 2007-2013, formally adopted last year, provides the current framework for IT development in the public sector, as well as society at large. According to the plan, some PLN35bn is available for IT investment over the relevant period. Government IT spending was slow in the previous couple of years, but, to the relief of vendors, now looks set to lift the market to a higher growth level.

Some 75% of funds spent on government IT projects over the next five years are expected to come from the EU. Poland has been awarded a prospective EUR9.7bn under the EU’s “Innovative Economy” 2007- 2013 programme, which is to support research and innovation. The new funding is likely to drive a series of tenders in 2008, with the information technology component to be worth nearly EUR1bn.

Company News As a direct result of rising local PC sales, vendors are ramping up their in-country production. Chinese giant Lenovo expects to open a new assembly plant in Poland in October 2008. The 31,000m2 plant, in the south western special economic zone of Legnica, will produce desktops and, eventually, assemble laptops. Dell also planned a new factory in Poland, at a cost of EUR200mn. Meanwhile, local giant NTT Systems has said that it wants to increase production of computers by 20% a year.

In March 2008 the long awaited merger of local IT giants Asseco Poland and Prokom Software finally took place and created one of the top ten IT companies in Europe by capitalisation. In 2008, Asseco Poland expects to reach PLN250mn net profits on revenues of PLN3bn. In the first quarter of the year, the company doubled earnings year-on-year (y-o-y) with profits of US$23mn on revenues of US$191mn.

Wroclaw, the capital of Lower Silesia, has emerged as a significant outsourcing and BPO regional hub, sometimes touted s the ‘Bangalore’ of Poland. HP has already created over 1000 jobs in the city and a new centre will broaden activities. Aside from HP, Wipro has also embarked on a major project in the city, in partnership with banking group Credit Suisse.

Computer Sales Hardware remains the dominant category of IT spending, with hardware sales amounting to about US$2.5bn in 2007, and with spending projected to reach US$4.4bn in 2012. PC sales are forecast to increase from US$2bn in 2007 to US$3.5bn in 2012. The share of IT spending accounted for by hardware is expected to fall to 40% of the total by 2012. However, hardware spending will continue to be higher in Poland than in more established markets because of the amount of older legacy technology still in place.

Software The software sector amounted to an estimated US$1.3bn in 2007, and is likely to grow to US$2.4bn by 2012, giving a CAGR of 13%. Despite persistently high levels of software piracy, growth has been strong over the past few years, with high computer penetration in the enterprise sector suggesting continued growth. One factor boosting sales in 2007 was the release of the new Microsoft Vista operating system.

Microsoft planned to sell more than 300,000 licences of Vista in Poland in 2007, but at least three times as many will sell bundled with new computers. SAP remains the leader in an enterprise segment where the top four players, which also include Oracle, Comarch and IFS, account for more than 60% of revenues.

Services IT services, worth an estimated US$2.2bn in 2007, is the fastest growing sector of the IT market, with spending expected to rise to US$4.2bn in 2012. With a larger installed IT base, acceptance of the need for IT services is spreading through many organisations. While banks and telecom companies are still the main spenders on IT solutions, apart from the public sector, the power sector is emerging as a fast growth sector. Privatisation and industry consolidation are the main drivers of the increased spending levels in the sector, which contains several large companies. Leading local player Comarch has estimated that 2007 spending by this sector on IT solutions could have been as high as US$667.8mn, double 2006 levels.

Special Focus: Outsourcing In the last 12 months outsourcing has emerged as the fastest-growing segment of the IT services sector, as highlighted by the recent US$52mn deal between Telekom Poland and EDS (see Competitive Landscape). Employment in outsourcing is estimated to have grown by 167% in the past 1-2 years, with local attractions for global companies including language and accounting skills and low wages. IBM is establishing a new service centre, the European technology consulting giant CapGemini recently announced plans to take on an additional 150 employees, and Volvo recently joined a growing list of companies choosing Poland for IT outsourcing. Many multinationals such as BMW, DaimlerChrysler and Deutsche Post are outsourcing IT work to companies operating in Poland. Meanwhile, others have established service centres and call centres, including Lufthansa, Hewlett-Packard (HP) and CapGemini.

E-Readiness The number of internet users, which reached around 14.2mn in 2007, is expected to rise to 18.8mn by 2012. The number of broadband subscribers in 2007 was estimated at around 3.2mn. The internet market continues to be constrained by high telephone charges and relatively low levels of computer penetration.

Moreover, there are wide regional disparities, with internet penetration about twice as high in urban as in rural areas.

A recent Forrester survey revealed that, while overall online banking uptake and PC availability remain low, Polish internet consumers already match Southern Europeans in buying online. Poland even outperforms Spain, with 30% of online consumers having previously purchased something online, compared with just 29% in Spain.