Country becomes hub of computer commerce.
A combination of European Union investments and transformational uses for computers is making Poland one of the fastest growing information technology markets in the Central and Eastern European region. Although some Polish companies are deferring information systems purchases to cut expenditures, the country is still expected to experience a more than 30 percent jump in the size of this market between last year’s final figures and 2013. A great deal of this growth will be the result of new government programs; however, at least some of the economic boom can be attributed to how attractive Poland has become as a home for electronics companies headquartered in other countries.
Business Monitor International (BMI), London, conducted a quarterly assessment of information technology markets in Poland and surrounding regions. The report indicates that a number of factors are and will continue to contribute to the country’s progression into an economy supported by information technology. However, the primary reason for this boom is the European Union (EU), which sees Poland as a country on the brink of joining other EU countries as a major contributor to Europe’s overall economy.
Harvey Thomlinson, technology analyst and global head of technology research, BMI, says the company’s ongoing research shows that the correlation between information technology spending and growth in other markets is 85 percent. Poland is the second largest market in technology spending in the region with expected expenditures of $8.1 billion in 2010. Russia continues to hold first place at an estimated $16 billion in technology spending this year.
In addition to spending, Poland is the fastest growing country in production of electronics, and is likely to be one of the leaders in serving the European marketplace. “The big story here is of a growing market that is closing the gap between Poland and other EU countries. The more advanced ICT [information and communication technology] indicators show a continuing investment in the e-government and broadband infrastructure and a PC penetration rate of 50 percent. This is all driven by EU funding,” Thomlinson explains.
EU member nations contribute annually to the pot of money designated to help emerging markets grow for the good of all European countries. The funding is channeled to the countries in the form of subsidies. In general, this money is used to bring infrastructures within these nations up to the level of other EU countries across the socio-economic spectrum. Target areas are e-government programs such as those that provide services to citizens online; border security initiatives that contribute to the overall security of the continent; and medical-related areas, including converting patient health records into e-formats that can be shared easily. The funding also aims at assisting small businesses.
In Poland’s case, much of the EU money it is receiving has been and will continue to support new public sector information technology initiatives. In April 2007, the country’s Council of Ministers formally adopted its National IT Infrastructure Plan for 2007-2013. More than 35 billion Polish Złoty New (PLN) ($12.4 billion) will be spent on information technology during that six-year period; 75 percent of that funding is expected to come from the EU. “The sheer size of funds pouring into Poland from the EU is driving the market. The EU is a huge factor driving economic transformation,” Thomlinson states.
To increase citizens’ access through e-government, Poland’s Ministry of Finance launched a major tax project in 2007. Thomlinson points out that one major problem with e-government initiatives is the lack of computer access to citizens living in rural areas; Internet penetration in urban areas is twice that of rural environments.
To address this disparity, the Polish government is expected to reduce spectrum fees to the country’s telecommunications company, Telekomunikacja Polska SA (TPSA), in rural areas to persuade it to extend service to these regions and encourage residents to invest in personal computers.
In the long term, the development of broadband capability will be influenced largely by the Polish government’s ability to convince the TPSA to diversify into functional areas. This could happen as soon as this year, Thomlinson says.
This approach can have effects that extend far beyond the computer hardware market itself. “If you have a broadband connection, that affects computers and that then increases the market for devices like digital cameras, software and anything else that can be used in conjunction with a PC,” Thomlinson notes.
Following the EU’s lead, Poland is expected to spend at least €200 billion ($290 billion) on information technology to improve its health care system by automating patient records in hospitals and clinics. This is an ongoing project, he notes.
A second major information technology initiative in Poland is in the area of education. The goal is to place a laptop into the hands of every student in the country. The program began last year in the senior schools—the equivalent of high schools in the United States. This year, the focus will be at the junior and secondary levels—equivalent to middle or junior high schools—and elementary schools. More than 500 million PLN ($177 million) will be spent on this project.
Also in the public realm, the country intends to spend hundreds of millions in local currency to build computer networks, bringing Poland’s border security systems to a level where they can be integrated with EU standards and creating a national e-identification card system. “Quite a lot of spending is occurring in the integration and security sectors. Needless to say, there is a lot of competition for contracts in these areas that center around these government markets,” he relates.
Another phenomenon taking place in the country that has its roots in information technology is the relocation of several large companies’ manufacturing plants to Poland. The impetus for these moves is fourfold: the EU funds pouring into the country, lower labor costs, a less expensive way for non-European countries to sell their wares in the European market and Poland’s centralized location.
For example, during the first half of 2009, Dell announced that it would be moving its European manufacturing base from Ireland to Poland, cutting more than half of the jobs at the Irish plant. The EU has allocated Poland about €200 million ($290 million) to support the relocation. In addition, last year IBM signed a contract with the Polish Ministry of Science and Education to establish an IBM research center in Wrocław, Poland; the city also is competing for a new IBM service center, which would bring with it 3,000 new jobs.
Even Asian countries have decided to make the move, primarily to avoid a 14 percent duty on goods imported by Europeans from Asia. Among companies that have established a presence in Poland are Korea’s Samsung as well as Japan’s Toshiba, which moved its facilities from the United Kingdom to Poland.
An increase in information technology availability and use has had the same effect on the TPSA in Poland as it has in many parts of the world. As more connections can be made using Internet protocol and wireless technologies, the company has seen a decrease in interest in its landline and conventional offerings. As a result, the Polish government has encouraged the company to expand into other areas such as cell phone services. Growth in the mobile sector is expected to continue with penetration percentage numbers increasing from 115 percent in 2008 to more than 126 percent in 2013.
In addition, Thomlinson says, the telecommunications company has become important in the computer sales market, including sales of notebook computers. As the number of broadband technologies continues to swell, download speeds will increase so computer sales are likely to flourish, he adds. Hardware has been projected to be a $3.1 billion market for 2009; by 2013, this figure is likely to reach $4 billion.
Thomlinson finds it surprising that PC penetration in Poland was at 50 percent in 2008. However, this number could increase to 70 percent by 2013 as the prices of desktop and notebook computers fall and the global economy begins to recover, he says. In addition, BMI’s research revealed that Poles are beginning to purchase more high-end computers.
The growing number of computers in the hands of its companies and citizens will have a cascading effect on other information technology-related products. For example, BMI anticipates that the software market will increase from its 2009 level of $1.7 billion to $2.4 billion by 2013, a compound annual growth rate of 10 percent.
One area that already has seen significant growth is the business software market, Thomlinson notes. Many Polish companies have recognized the value of automating their processes, including enterprise resource planning. Interest also is high in specialized applications such as customer relationship management and business intelligence. As a result, many vendors have shifted their focus toward selling software upgrades to existing customers. “When a company has basic infrastructure, it wants to use it more effectively,” he says.
Despite this growth, Thomlinson observes that the Polish business sector still does not view information technology in the same way it is viewed in the United States or the United Kingdom. “There have been some cutbacks because companies don’t value IT like more developed countries,” he notes.
According to BMI’s research, information technology service spending is the fastest growing sector of the computer marketplace; it is expected to increase from $3 billion in 2009 to $4.3 billion by 2013. Interest in and purchase of information technology services crosses a number of markets in Poland, including universities, financial institutions, utilities and the government. And while systems integration as well as hardware and software support and installation together account for more than half of total information technology spending, outsourcing is now the fastest growing segment.
Consumers also are contributing to what can be considered a success in the global economic crisis. In 2009, Polish consumer spending held up fairly well, in fact, better than expected, Thomlinson states.
Business Monitor International: www.businessmonitor.com
Ministry of Economy, Poland: www.mg.gov.pl/English/News
European Union: http://europa.eu