Showing signs of maturity, the Slovenian IT services market is expected to surpass $290 million in 2007, a jump of just over 10% from 2006. The increasingly technology-dependent economy will fuel IT services uptake at the same time privatization forces organizations to modernize both their IT infrastructure and business processes. Coupled with the ongoing impact of EU accession on IT development, the market should stay steady, expanding at a healthy annual average of around 10% through 2011.

Despite the maturity of the Slovenian IT environment, the IT services market remains largely focused on basic support services. By the end of 2007, IDC estimates that hardware and software support will together account for more than 28% of IT services spending. Along these lines, systems integration is the sweet spot for many IT services providers and will represent over 23% of spending for the year. By contrast, the market for IT outsourcing has remained relatively small, at a little less than 12%, although it is the fastest-growing area.

“As in many other CEE countries, the concept of outsourcing a company’s entire IT system to an outside provider has yet to take hold in Slovenia,” says Bostjan Klajnscak, Country Manager Slovenia, IDC Adriatics. “The only companies to have outsourced their entire information systems to date are either big firms with daughter companies that provide IT services, or those that have a longstanding relationship with and a lot of trust in their services provider. Winning the acceptance of outsourcing by large enterprises is proving to be quite a challenge, even for the biggest services providers.”

The mature nature of the Slovenian IT services market is most evident in the competition for market share. Although there were more than 50 providers competing for market share in 2006, the top three vendors (HERMES Softlab, SRC.SI, and S&T Slovenija) retained their positions from the previous year. Moreover, only two new vendors managed to break into the top 10. Given the limited client base in the country, IDC believes that a wave of consolidation will take place over the next few years, with many smaller players merging or being acquired by larger firms.

“The competitive landscape in the Slovenian IT services market will change to the point where each customer – big or small – will be fought for,” says Klajnscak. “During this transition, we will witness a change in the perception of the importance of small customers’ needs; the vendors able to meet these needs efficiently and quickly will have much less difficulty maintaining their market share than those that ignore them, as the future lies in down-market and streamlined service.”

In terms of demand, telecommunications, banking, and discrete manufacturing invest the most in IT services in Slovenia. Together, these three sectors represented nearly a third of IT services spending in 2006 and will likely do so again in 2007. The government also represents an important source of IT services revenue, with combined spending by local and central governments exceeding spending in any other single vertical.

IDC’s Slovenia IT Services 2007-2011 Forecast and 2006 Vendor Shares (IDC #ES12P) report presents the IT services industry in Slovenia in 2006 and forecasts expenditure on IT services through 2011. The study provides market size information, vendor market shares, and revenues broken down by IT services categories and vertical markets. The study profiles the top IT services providers, including their IT services portfolios, presence in individual vertical markets, and largest contracts in 2006.