Industry gears up for consolidation, specialization
But, while no revolution is likely in the coming years, the market is gearing up for a recovery in technology spending that membership is thought to bring about.
The most direct effect of accession is likely to be in the field of public-sector spending on IT. The European Commission has set an ambitious target of every public administration outlet across the continent gaining access to the Internet by the end of 2006.
Michał Kleiber, minister in charge of science and IT development admits that, in this respect, the country is not only lagging behind Western European nations, but is also trailing most of its neighbors. He points, however, to the example of the most recent EU entrants, Spain and Portugal, where the rate of absorption of structural funds into IT development and innovation was higher than in the case of other EU handouts.
If that scenario repeats itself here, allowing the country to approach the Brussels-set standard of IT infrastructure in public administration, it could mean expenditure of as much as zł.6 billion over the next three years. For a market estimated at around zł.3 billion a year, that would represent a huge boost.
No wonder then that Grzegorz Rogaliński, president of the domestic arm of German software-maker SAP, expects the public sector market to be one of the fastest-growing segments of the IT market over the coming years.
Another segment likely to benefit from Brussels handouts is in management support software for small and medium enterprises (SMEs). These companies have hitherto found ERP systems too expensive to implement, but may now find such investment affordable, since up to 60 percent of it may be refunded from EU coffers. Market insiders expect this will add 20 percent to the size of the IT market for SMEs.
Some firms can expect to benefit more than others. Dariusz Dąbski, president of Fujitsu Siemens Computers, says that EU-based firms will be particularly well placed to benefit from the handouts. Eugene Schwab-Chesaru, managing director at Pierre Audoin Consultants (PAC), concurs, saying that the experience of EU software developers will give them an upper hand, especially where the public sector for the central administration is concerned. He adds, however, that with the smaller contracts for local administration, experience on the ground, that domestic companies have, may prove more important.
Sławomir Siedlarski, president of Simple, a Warsaw-based integrator and software maker, is also skeptical about the European competition's claims to hold an advantage over local firms. He says that the claims by EU software companies to be better placed to offer all the functionalities required by the EU are false, as the laws differ in detail from country to country, and it is impossible to simply transfer a system from Spain to Poland or Belgium.
"Secondary legislation is not ready yet, so no one can claim to have a product ready for implementation," he adds.
Dariusz Fabiszewski, IBM president for Poland, expects corporate spending on technology to increase in anticipation of intensive mergers and acquisitions activity after accession. Although it is difficult to put an exact figure on this, Fabiszewski's opinion finds confirmation in the recent PricewaterhouseCoopers report, which predicts a wave of M&As in the coming years. Many companies are likely to upgrade their IT systems to make themselves attractive acquisition targets.
Acquisitions are also likely in the IT industry itself, although according to PAC, at least some of the largest companies will be able to hold their own on the larger European market. The most likely candidate to become a regional giant that is capable of competing with Western European companies is Prokom, a Gdynia-based integrator and the largest domestic IT company, whose market capitalization now stands at around zł.4 billion ($1 billion). Prokom has been expanding its group, buying a company in the Czech Republic last year and snapping up smaller integrators in this country. The firm, owned by the second-richest Pole, Ryszard Krauze, holds substantial stakes in, among other companies, Softbank and Ster-Projekt, which belong to the top tier of domestic integrators. This makes the Prokom capital group a medium-sized player on the pan-European market.
As for the smaller players, they are unlikely to maintain their independence when the big fish come to town. Although the largest global companies have been present on the market for a long time, it was only last year that, for example, both IBM and Hewlett-Packard announced that they would be launching acquisition drives in the CEE region and in this country in particular.
Aleksander Lesz, a former Softbank president who has recently sold most of his stake in the company to Prokom, says that if companies wish to preserve their independence from the global players, the only alternative to market consolidation is a narrow specialization in market niches. In the enlarged EU, there will be no room for companies that now occupy the middle tier (in terms of size) in this country. Expect a lot fewer, but richer, IT companies in the country several years after accession.
The most direct effect of accession is likely to be in the field of public-sector spending on IT. The European Commission has set an ambitious target of every public administration outlet across the continent gaining access to the Internet by the end of 2006.
Michał Kleiber, minister in charge of science and IT development admits that, in this respect, the country is not only lagging behind Western European nations, but is also trailing most of its neighbors. He points, however, to the example of the most recent EU entrants, Spain and Portugal, where the rate of absorption of structural funds into IT development and innovation was higher than in the case of other EU handouts.
If that scenario repeats itself here, allowing the country to approach the Brussels-set standard of IT infrastructure in public administration, it could mean expenditure of as much as zł.6 billion over the next three years. For a market estimated at around zł.3 billion a year, that would represent a huge boost.
No wonder then that Grzegorz Rogaliński, president of the domestic arm of German software-maker SAP, expects the public sector market to be one of the fastest-growing segments of the IT market over the coming years.
Another segment likely to benefit from Brussels handouts is in management support software for small and medium enterprises (SMEs). These companies have hitherto found ERP systems too expensive to implement, but may now find such investment affordable, since up to 60 percent of it may be refunded from EU coffers. Market insiders expect this will add 20 percent to the size of the IT market for SMEs.
Some firms can expect to benefit more than others. Dariusz Dąbski, president of Fujitsu Siemens Computers, says that EU-based firms will be particularly well placed to benefit from the handouts. Eugene Schwab-Chesaru, managing director at Pierre Audoin Consultants (PAC), concurs, saying that the experience of EU software developers will give them an upper hand, especially where the public sector for the central administration is concerned. He adds, however, that with the smaller contracts for local administration, experience on the ground, that domestic companies have, may prove more important.
Sławomir Siedlarski, president of Simple, a Warsaw-based integrator and software maker, is also skeptical about the European competition's claims to hold an advantage over local firms. He says that the claims by EU software companies to be better placed to offer all the functionalities required by the EU are false, as the laws differ in detail from country to country, and it is impossible to simply transfer a system from Spain to Poland or Belgium.
"Secondary legislation is not ready yet, so no one can claim to have a product ready for implementation," he adds.
Dariusz Fabiszewski, IBM president for Poland, expects corporate spending on technology to increase in anticipation of intensive mergers and acquisitions activity after accession. Although it is difficult to put an exact figure on this, Fabiszewski's opinion finds confirmation in the recent PricewaterhouseCoopers report, which predicts a wave of M&As in the coming years. Many companies are likely to upgrade their IT systems to make themselves attractive acquisition targets.
Acquisitions are also likely in the IT industry itself, although according to PAC, at least some of the largest companies will be able to hold their own on the larger European market. The most likely candidate to become a regional giant that is capable of competing with Western European companies is Prokom, a Gdynia-based integrator and the largest domestic IT company, whose market capitalization now stands at around zł.4 billion ($1 billion). Prokom has been expanding its group, buying a company in the Czech Republic last year and snapping up smaller integrators in this country. The firm, owned by the second-richest Pole, Ryszard Krauze, holds substantial stakes in, among other companies, Softbank and Ster-Projekt, which belong to the top tier of domestic integrators. This makes the Prokom capital group a medium-sized player on the pan-European market.
As for the smaller players, they are unlikely to maintain their independence when the big fish come to town. Although the largest global companies have been present on the market for a long time, it was only last year that, for example, both IBM and Hewlett-Packard announced that they would be launching acquisition drives in the CEE region and in this country in particular.
Aleksander Lesz, a former Softbank president who has recently sold most of his stake in the company to Prokom, says that if companies wish to preserve their independence from the global players, the only alternative to market consolidation is a narrow specialization in market niches. In the enlarged EU, there will be no room for companies that now occupy the middle tier (in terms of size) in this country. Expect a lot fewer, but richer, IT companies in the country several years after accession.
