3.2.1.Analysis of potential Export Target Markets
The second part of the strategic analysis comprises the assessment of potential export markets for the Kosovo IT industry. The aim of this external analysis is to provide information on the size, structure and key trends of potential export markets and to identify customer requirements and key success factors. This information is essential for achieving the strategic fit between capabilities and customer demand which is one of the cornerstones of this strategy and the basis for generating sustainable competitive advantages for the Kosovo IT industry.
The external market analysis will focus on Germany, Norway, the Netherlands and the UK. The working group selected these countries as strategic export target markets, based on the following selection criteria:
-
Market size and market potential
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Demand structure (“skills shortage”) and requirements
-
Nearshoring aspects and geographical proximity
-
Relevant customer segments (e.g. SMEs)
-
Existing references and linkages
-
Language capabilities
-
Competitive pressure
-
Strategic fit
During the selection process, the working group also took into consideration the results of the Kosovo IT Industry Barometer (KITIB) 2014, which revealed that in 2013 the most important export markets for the Kosovo IT industry were the DACH countries, accounting for 29% of Kosovo’s IT exports, followed by Scandinavian countries with 22%, and Benelux.23
Also, in terms of export potential, participants in the KITIB placed DACH, the Scandinavian countries, UK and Benelux at the top of the ranking.
Figure : Potential of Export Markets
Source: STIKK & GIZ: Kosovo IT Industry Barometer 2014
On behalf of STIKK and the strategy working group, a thorough analysis of the IT markets in Germany, Norway, the Netherlands and the UK was conducted by Capgemini Consulting. In the following section, the results of the market analysis will be summarized by presenting the size, structure and key trends for each of the selected export target markets.
The focus of the presentation will be on the IT market segments having the highest relevance for Kosovo IT companies, i.e. software and IT services. The complete version of the market analysis can be obtained from STIKK or from the Kosovo IT Strategy SharePoint.24
3.2.1.1.IT Market Analysis Germany
Table : ICT Market Overview Germany
|
Total ICT market value by segment 2010-2014 (in € billion)
|
Segment
|
2010
|
2011
|
2012
|
2013
|
2014*
|
IT Equipment
|
14.3
|
14.2
|
15.1
|
15.1
|
15.0
|
Software
|
15.5
|
16.2
|
17.1
|
17.8
|
18.7
|
IT Services
|
33.1
|
34.2
|
34.9
|
35.8
|
37.0
|
Telecommunications Equipment
|
9.9
|
10.8
|
12.1
|
13.7
|
14.3
|
Telecom Services
|
47.4
|
46.7
|
46.4
|
45.4
|
44.7
|
Total ICT
|
120.2
|
122.1
|
125.6
|
127.8
|
129.7
|
|
Total ICT market growth rates by segment 2011-2014 (in %)
|
Segment
|
2011
|
2012
|
2013
|
2014*
|
IT Equipment
|
-1.2%
|
6.7%
|
-0.2%
|
-0.6%
|
Software
|
4.9%
|
5.1%
|
4.6%
|
5.0%
|
IT Services
|
3.4%
|
21.0%
|
2.5%
|
3.4%
|
Telecommunications Equipment
|
9.3%
|
11.7%
|
13.0%
|
4.7%
|
Telecom Services
|
-1.6%
|
-0.5%
|
-2.2%
|
-1.6%
|
Total ICT
|
1.6%
|
2.9%
|
1.8%
|
1.5%
|
*Estimated values
Source: EITO 2013
Figure : ICT market value by segment (in € billion)
Source: EITO 2013
Figure : ICT market shares by segment (2013, in %)
Source: EITO 2013
Germany: Software Market
Table : Software Market Germany
|
Total software market value by segment 2010-2014 (in € billion)
|
Segment
|
2010
|
2011
|
2012
|
2013
|
2014*
|
System Infrastructure Software
|
3.8
|
3.9
|
4.0
|
4.1
|
4.3
|
Applications D&D
|
3.8
|
4.0
|
4.2
|
4.4
|
4.7
|
Applications
|
7.9
|
8.4
|
8.9
|
9.3
|
9.7
|
Total software
|
15.5
|
16.2
|
17.1
|
17.8
|
18.7
|
|
Total software market growth rates by segment 2011-2014 (in %)
|
Segment
|
2011
|
2012
|
2013
|
2014*
|
System Infrastructure Software
|
2.1%
|
3.5%
|
3.2%
|
4.0%
|
Applications D&D
|
4.3%
|
6.0%
|
5.7%
|
6.0%
|
Applications
|
6.5%
|
5.5%
|
4.7%
|
5.0%
|
Total software
|
4.9%
|
5.1%
|
4.6%
|
5.0%
|
*Estimated values
Source: EITO 2013
Table : IT Services Market Germany
|
Total IT services market value by segment 2010-2014 (in € billion)
|
Segment
|
2010
|
2011
|
2012
|
2013
|
2014*
|
Projects
|
8.0
|
8.3
|
8.5
|
8.7
|
9.0
|
Outsourcing (excl. BPO)
|
12.5
|
13.0
|
13.3
|
13.8
|
14.3
|
Support & Deploy
|
6.4
|
6.5
|
6.5
|
6.5
|
6.6
|
BPO Services
|
6.1
|
6.4
|
6.5
|
6.8
|
7.1
|
Total IT services
|
33.1
|
34.2
|
34.9
|
35.8
|
37.0
|
|
Total IT services market growth rates by segment 2011-2014 (in %)
|
Segment
|
2011
|
2012
|
2013
|
2014*
|
Projects
|
3.6%
|
2.5%
|
2.2%
|
3.0%
|
Outsourcing (excl. BPO)
|
3.7%
|
2.7%
|
3.2%
|
4.0%
|
Support & Deploy
|
1.4%
|
0.6%
|
0.2%
|
1.0%
|
BPO Services
|
4.5%
|
1.6%
|
3.9%
|
4.8%
|
Total IT services
|
3.4%
|
2.1%
|
2.5%
|
3.4%
|
*Estimated values
Source: EITO 2013
Germany: Key IT Market Trends
Based on the results of the analysis of the German IT market, the following key market trends were identified for the relevant market segments of software and IT services:25
-
Software is the main growth driver in the German ICT market: 4.6% (2013).
-
There are approximately 33,000 companies in Germany active in the area of software development.
-
Perennial hot topic IT security: increasing spending on security applications, in order to cope with security challenges such as malware, identity theft, data loss, and cyber crime.
-
Usage of OSS is clearly on the increase and is playing an important role within the German IT market.
-
Mobile computing/mobile applications play an increasingly important role in the German software market; Use of enterprise mobile apps will expand, and HTML5 is likely to have a substantial impact on the market.
-
Social media have become a hot topic within the German software market: integration, social media analytics, social CRM applications, etc.
-
Vertical drivers of the German software market: automotive, financial services, machinery, health.
-
Distinctive market feature: importance of SMEs (demand & supply side).
-
The German IT services market is the EU’s second largest, with 36 EUR billion market volume in 2013 and projected growth of 3.4% for 2014.
-
German companies continue to invest in projects and third-party services to implement virtualization, automation and cloud technologies.
-
Outsourcing continues to be the major growth driver of the IT services market.
-
Standardization of technologies & processes will lead to stronger specialization and modularization within the IT services value chain. Consequence: Big IT service providers “outsource outsourcing” creating market opportunities for Kosovo IT companies by positioning themselves as specialist partners.
-
Introduction of more offshore and nearshore resources into the IT services value chain in order to reduce costs.
-
Vertical drivers of the IT services market: manufacturing industry, banks, insurances, retail, public sector.
-
New requirement: agility: faster development of new applications and faster customization and modification of existing applications.
-
Total market value of the outsourcing segment accounted for € 15.6 billion (2013) representing 44.8% of the overall IT services market.
-
Outsourcing likely to remain the most dynamic and fastest growing market segment within IT services.
-
Overall: interest in outsourcing is increasing among German companies and the market segment is becoming more mature.
-
Heavy users of outsourcing services: financial services, telecommunication, insurance, retail, manufacturing.
-
Drivers of the outsourcing market: cost reduction, standardization, and increasing flexibility; changes in the motivation for outsourcing from pure cost-cutting to increasing flexibility (resources) and focus on core business.
-
In general, German companies show a preference for nearshoring to nearby countries (Eastern Europe), while language, cultural issues, distance and rising wages limit offshoring to India.
-
Cloud computing will have a substantial impact on the outsourcing market: technology, delivery, governance, contracts, pricing, controlling.
-
Managed testing services: German outsourcing customers are increasingly interested in testing services from Eastern Europe, especially energy & utilities and financial services industry.
-
In general: greater emphasis on formal IT education (university degree) and certification.
-
Growing demand for big data management, analytics, BI: competences in data-mining, statistical methods and data structures.
-
Most sought-after skills in terms of programming languages: Java, C/C++, C#, .Net, PHP, ABAP4; demand for Java will further increase due to Android.
-
Overall: demand for offshoring/nearshoring will further increase due to the digital transformation of the German economy and skills shortages.
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