Predictions split over IT recovery

Forecasts for Poland's tech sector in 2002 ran the gamut from cautiously optimistic to gloomy among local IT analysts who gave their predictions about likely developments in the industry this year.

Among the most pertinent of questions was whether Poland's IT sector, in which overall hardware and software sales dropped last year in reaction to the overall slump in the tech sector worldwide and the general economic malaise, would recover in 2002. Analysts were divided.

Przemyslaw Sawala-Uryasz, an IT analyst at BZ WBK brokerage, said that the second half of 2002 would be better than the first half of last year as most Polish companies would now start to spend money on upgrading their IT systems before Poland's expected entry into the European Union (EU) in 2004. Sectors slated for tech upgrades include government administration, telecoms and banking, which all need IT overhauls so their computer systems can be more effective and compete with those of their EU counterparts, he said.

Last year, most companies reduced their IT expenditures due to the economic slowdown and decreased corporate revenues. Most major economic sectors have not invested in IT systems upgrades since 1999 when they feared that computer systems would crash as a result of Y2K.

Yet, this year, Polish systems integration companies providing hardware and software systems to the public administration sector must remain wary of foreign multinational companies such as U.S. IT giant Hewlett-Packard, which participates in bids for system integration services for Polish government contracts, Sawala-Uryasz said. As a result of the competition from foreign IT companies, more Polish companies will team up with foreign ones in 2002 to retain their slice of contracts for government bodies.

Benita Mikołajewicz, an analyst at ING Barings, said that although an outright recovery of Poland's IT sector was difficult to forecast, she agreed that "more or less it will be all right because certain investments in the public sector have to be done. Especially the public administration, telecom and banking sectors have to spend money on IT infrastructures."

Sobiesław Pajak, an IT analyst at CDM Pekao Securities, said Poland's IT sector would not bounce back in 2002 and that overall sales of hardware and software products would be similar to 2001 due to the continuation of the economic slowdown. He added that the IT companies that sell products and services to the financial and communications sectors would fare better than their competitors since these two sectors generate the greatest demand for such services.

The analysts all agreed, however, that portal mania is a thing of the past in Poland following last year's death march of several dotcom start-ups, and that new Internet start-ups will not surface in 2002. Poland's Internet landscape has been reduced to three or four major portals, which command the most users.

"The excitement about the Internet development is definitely over," Mikołajewicz said.

Analysts were also skeptical about new technology firm start-ups hitting the market this year given the continuing difficult climate for obtaining funding from venture capital firms or from capital markets.

"Any new IT venture or project launch expected this year will be from established players with deep pockets rather than by high-brain entrepreneurs," Pajak said.

In addition, the analysts said that any major merger or acquisitions deals in 2001 would likely come from Gdynia-based systems integrator and software house Prokom, which recently issued zł. 200 million ($51 million) in bonds, zł. 140 million ($35 million) of which the company has earmarked for acquisitions of smaller IT companies.

Roseanne Gerin