Director's report Market
Market description
According to the European Information Technology Observatory (EITO 2007), the ICT market in Europe amounted to EUR 680 billion in 2006. The market is broken down into various products and services as shown in the next diagram.
Market
ICT European market 2007
- Telecom services 44%
- IT services 21%
- Hardware 12%
- Software 11%
- Data communications & network hardware 6%
- Communications equipment for end users 4%
- Office equipment 1%
The IT services market looks like this:
- Professional services - consulting services and services within implementation and application management.
- Support services - maintenance and service for hardware, software, and network products.
Cybercom operates within the IT services market and predominantly provides professional services.
European IT services market
EITO 2007 estimates the size of the European IT services market at EUR 140 billion for 2006. Between 2006 and 2008, EITO 2007 expects 5.4% annual real growth, and the size of the market is expected to reach EUR 156 billion in 2008.
Swedish IT services market
EITO 2007 estimates the size of the Swedish IT services market at EUR 5.2 billion for 2006. Between 2006 and 2008, EITO 2007 expects 5.1% annual real growth, and the size of the market is expected to reach EUR 5.8 billion in 2008. The Swedish market for professional services amounted to EUR 3.8 billion in 2006 and is expected to have 5.5% real growth annually through 2008 to a value of EUR 4.2 billion.
Trends - historic development
The end of the 1940s brought the first generation of computers, developed in university laboratories around the world. Another leap forward was taken at the end of the 1950s with the advent of integrated circuits. As the computer became more common with companies and government agencies, demand for skilled computer programmers increased and soon a new type of company emerged - the IT consultancy.
Current trends
The market situation for consulting companies in the IT and telecom sectors has been favourable in recent years. The market has been very active and characterised by robust growth that generates strong demand for Cybercom's services. Cybercom's growth has been strongest in the expanding Öresund region, where the company has offices in Copenhagen, Lund, and Malmö. Cybercom also held its own in Stockholm in 2007, despite tough competition.
Following is a description of some trends that Cybercom management believes will affect the IT services market going forward.
Large investments in telecom
Telecom industry players continue to invest, aiming to expand and take market shares. This leads to favourable market conditions for telecom and IT consulting companies. International telecom operators invest in network expansion and development of services, along with expansion in new geographic markets. In the Nordics, telecom operators are more focused on optimising existing systems than on new construction.
A few large companies that have frame agreements with several selected consultancies dominate the telecom market. Size, niche propositions, and an international presence are increasingly key factors for consulting companies.
Telecom, Internet and media converge
The market for telecom, Internet, and media is changing. Reduced calling rates have forced operators to find alternative revenue streams. Together with more sophisticated technology, the result is the convergence of telephony, broadband, and TV with new types of content and services. For example, recently the market for music in mobile phones has expanded quickly. TV through mobile telephones is also advancing, assisted by development of the DVB-H technology that adapts digital TV for mobile phones.
Development of content and technology parallels an increase in the number of market players. Today the combination of telephony, broadband, and TV are delivered by traditional telecom operators, by content-producing media companies such as Alma Media, MTG, and Schibsted, and by network owners like Com Hem, Teracom, and Vattenfall.
Customers demand nearshore and offshore capacity
Today's customers require suppliers with global capacity and 24/7 availability. Customers want better service and efficiency, but, above all, competitive prices. The trend shows that companies primarily choose outsourcing for mature, standardised development and administration processes. This changes the role of Swedish and western European consultancies. They find it difficult to offer standard services at competitive prices. Instead, they focus on profitable specialist assignments and turnkey projects.
Available capabilities on the labour market
The IT and telecom labour market is highly mobile and highly competitive. It is widely believed that there is now a shortage of qualified labour on the Swedish market. Some companies are finding it difficult to recruit and retain qualified employees.
Cybercom's competitors
Cybercom has various competitors in various fields and geographic markets. The company's primary competitors are:
- Accenture - a global giant with 175,000 employees. Listed on the New York Stock Exchange.
- Capgemini - A leading consultancy in Europe with 83,000 employees. Listed on Euronext.
- HiQ - a local Scandinavian company with 1,000 employees. Listed on OMX Nordic Exchange.
- InCode - An American consultancy focused on telecom. Owned by the publicly traded VeriSign.
- Logica CMG - British consultancy that purchased WM-data. Has 40,000 employees, including 9,000 in Scandinavia. Listed on the London Stock Exchange.
- Sigma - a Scandinavian player with 1,400 employees. Listed on OMX Nordic Exchange.
- TietoEnator - largest in Scandinavia. A Swedish-Finnish consultancy with 16,000 employees. Listed on OMX Nordic Exchange.
Competitors also include many specialised consulting companies that operate on the international telecom market.
2008 and beyond
Technical paradigm shifts have driven changes in the IT sector in recent decades. The sector is now expected to enter a mature phase, and the service sector is expected to become more affected by economy-driven fluctuations.
Mobile communication represents the most growth in the industry and is expected to rise by more than 10% per year through year-end 2010. Growth will primarily come through large investments in the mobile networks of Asia, the Middle East, Africa, and Russia. The 3G network in Europe will also continue to expand gradually.
Operators' revenues will gradually move from voice traffic and SMS to other sources. This is due to several factors:
- Quickly reduced calling costs, causing operators to expand their offerings.
- More complex mobile phones with space for more services.
- Content providers, such as the music industry and news agencies, gain influence over operator's service offerings.
The ongoing merger of telephony, broadband, and TV, called triple play, will include mobile telephony. The combined proposition of communication, entertainment, and services will become wireless - i.e., quadplay or quadruple play. New media is creating a new market.
Demand for IT services is increasing in all parts of society and the positive market outlook, based on a good economic climate, is expected to continue during 2008.
With the auSystems and Plenware acquisitions, Cybercom forms a new leading consultancy within the telecom, Internet, and media (TIM) sector. The new company gains a stronger brand and delivery capacity that is attractive in large projects for local and global players.
Cybercom is making no forecasts.
