New EU member states enjoy IT boom

IT markets set to continue to grow

The IT markets of the 10 countries that joined the EU in 2004 are set to stay hot for the foreseeable future according to a new report by IDC.

The study, entitled EU Enlargement: Understanding the Impact on ICT Markets in the New Member States, found that these states' EU membership is playing a critical role in their current IT boom.

The report found direct and indirect sources of funding will boost annual IT spending growth by more than 2.2 percentage points from 2004 to 2013. IDC said this amounts to an additional $27.6bn that would otherwise have been unavailable for upgrading infrastructure, investing in software, and employing service providers.

"The impact of the increase will vary country by country given the diversity of the business environments, the state of local IT development, and the level of entrepreneurialism and FDI," said Steven Frantzen, group vice-president of IDC Central Europe, Middle East and Africa (CEMA).

The report found that recent economic indicators provide strong evidence that EU membership has been good for the economic development of the 10 states that joined in 2004. According to Eurostat, with the exception of Malta, the new members had GDP growth rates well above the EU15 average of 1.5 per cent in 2005 and 2.6 per cent last year. Both Estonia and Latvia have seen their GDP growth go beyond 10 per cent, putting them among the fastest-growing economies in the world.

IDC said membership has been even better for the IT markets. While consumers use their increased spending power to buy or upgrade IT, businesses are under additional pressure to adopt the technology and transparency standards of international players to deal with the increasingly competitive environment. Furthermore, according to IDC, regulations represent a key IT market driver that is often underestimated in its impact.

"Talk to a chief executive officer or chief information officer at a bank, telco, or manufacturer in one of the new member states and you can easily spend hours discussing the best IT strategies for staying in compliance with payroll administration, client-record management, or a dozen other processes related to everything from accounting to recycling," said Frantzen.

"In most instances, the servers, software and outside professionals used to meet the compliance standards also help firms meet the requirements of international players," he said.

According to IDC's new study, IT spending among the 10 member states will grow by nearly 12 per cent annually on average for the 10 years following 2004. The cumulative effect of all the different EU components means that, in 2013, total IT spending will be more than 22 per cent higher than it would have otherwise been.

"EU membership has essentially created a large set of needs and niches that in turn create new opportunities for IT vendors looking to grow their business," said Scott Moore, senior consultant at IDC CEMA. "Like the EU itself, they can be daunting to study, but ultimately well worth the effort."

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