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German IT Market Overview

The German IT market is the largest in Europe and number 4 in the world (behind US, China and Japan).

Despite current economic uncertainties, the German IT market is projected to grow at a compound annual growth rate (CAGR) of 5% over the 2010-2014 period. The addressable domestic market for IT products and services is projected to reach US$59.2bn in 2010 and US$71.9bn by 2014. 

German IT spending is expected to have a number of drivers going forward. One distinctive feature of the market is the influence of medium-sized companies. In 2010, many German firms are expected to invest in innovation so as to be well equipped for an economic upturn. Despite Germany being a relatively mature market, there still remains plenty of potential for spending on data storage and security solutions. The overall outlook for 2010 is one of solid recovery after the market fell by around 2% in 2009 due to the economic crisis, which hit business spending in particular. In our core IT forecast scenario, IT market growth will be around 5% in 2010 and then advance at a CAGR of 5% over a five-year forecast period.

Industry Developments

Government funding for technology policy measures in the 2010 budget of the Federal Ministry of Economics and Technology amounted to a total of EUR2.3bn. If stimulus measures are included, then funding for technology totalled around EUR2.8bn. The funding is intended to support continued implementation of the High-Tech Strategy for Germany’s initiative, which was set up in 2006. Meanwhile, the German federal government elected in September 2009 has announced that it will provide an additional EUR12bn for education as well as research and development (R&D). Among other priorities, the government is determined to encourage German companies to innovate in order to cope in the economic upturn.

Competitive Landscape

By the third quarter of 2009, Acer had taken a commanding position in the German PC market, ahead of major rivals HP and Fujitsu-Siemens. Fujitsu-Siemens has a strong position in government and utility service sectors, but suffered as consumer notebooks emerged as the main global PC market driver during the economic downturn. The consumer segment has become a more significant focus for Dell and Lenovo, which were previously focused on enterprise as their mainstay.

The German software market is competitive, with smaller companies having a niche alongside major players such as German software giant SAP, Oracle and Microsoft. Around 300 software providers compete in the enterprise resource planning (ERP) market for the small and medium-sized enterprise (SME) segment alone. Other major players across all segments include Sage, SoftM and Infor Global Solutions.
SAP is the world’s largest business software company, but even in its home market faces stiff competition from Oracle and other competitors such as Sage. As a result of growing competition, business software vendors have increasingly looked to expand through strategic acquisitions. This process is also driven by demand for more targeted applications, which has driven vendors to acquire expertise in particular industry verticals.

Computer Sales

Germany’s addressable computer hardware market will be worth around US$16.6bn in 2010, up by an estimated 5% from US$15.8bn in 2009. In contrast to much of the rest of Europe, German PC shipments continued to grow last year. However, due to a sharp fall in average sale prices, value dropped by a low double-digit factor. PC shipments were expected to finish up by a single-digit factor year-on-year (y-o-y) compared with 2008, due to the strong demand for notebooks and particularly netbooks. PC volume sales were around 12mn units in 2009. Notebooks led the growth and, with nearly two-thirds of shipments, also represented the majority of sales.

Software

In 2010, German market software sales are projected at US$18.8bn and, despite the uncertain economic conditions, revenues are expected to rise to US$21.1bn in 2014. Software CAGR from 2010- 2014 should be in the region of 3%. Sales of Microsoft’s Windows 7 should provide a boost to the operating system market in 2010. Despite a relatively mature market, there still remains plenty of potential for ERP implementations in industries such as consumer products, telecommunications, energy, engineering transport and retail. ERP demand drivers include increasing boosting the efficiency of global supply chains and logistics processes.

Services

German IT services spending is forecast to reach around US$23.9bn in 2010, rising to US$29.9bn in 2014. The economic crisis and political uncertainty had an impact on services spending in 2009, with projects being put on hold. Sectoral CAGR is projected at 6% over the forecast period. Outsourcing is one of the main drivers of the IT services segment and the German market is a key target for Indian as well as US and European IT services firms. Demand for outsourcing has reached beyond traditional major IT spending verticals financial services to sectors like auto and chemical.

E-Readiness

Germany expects to auction off additional frequencies for delivering mobile broadband services in 2010, which is expected to be a high-growth area over the next few years. In the wireline sector, although the fixed-line market is forecast to decline, we expect the rate of decline to slow as better-value tariffs are offered and fixed lines are bundled with higher growth services such as broadband and pay-TV. 

SELLto.de: B2B Sales Outsourcing
2010-05-06
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