european it market outlook 2009 to 2010

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Making Leaders Successul Every Day

Agst 28, 2009

Eopean IT Maket Otook:2009 To 2010b Ane H. Bates an Pete O’Nei

o Veno Stateg Poessionas

http://www.forrester.com/



© 2009, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Inormation is based on best availableresources. Opinions refect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar,and Total Economic Impact are trademarks o Forrester Research, Inc. All other trademarks are the property o their respective companies. To purchase reprints o this document, please email [email protected]. For additional inormation, go to www.orrester.com.

Fo Veno Stateg Poessionas

Includes a market sizing orecast and data rom Business Data Services

ExEcuTIVE SuMMAry

Te European market or business-purchased technology goods and services (measured in euros) will

decline by 6.3% in 2009, and be slow to recover in 2010 with only 4% growth. In both regards, it will lag

behind the US tech market, which will have a smaller drop in 2009 and stronger growth in 2010. Te main

reason? Te European economic recession has turned out to be deeper than the US recession, with

Europe’s downturn starting later and probably lasting into 2010. All categories o I purchases will be down,

with computer equipment and communications equipment being especially weak. Te UK, Germany, and

France continue to be the largest European I markets, with a 55% share o the European market. Te UK,

Spain, Ireland, Iceland, and Central European countries will have worse perormance than Europe as a

whole, and no European country will avoid a down year. For I vendors, other markets — especially the

US, but also Asia/Pacic — will present better opportunities in 2009 through 2010 than Europe.

TABlE OF cONT ENTSEuropean IT Market Will Drop In 2009 And Lag

Behind US IT Market

Behind The Forecast: Weak Indicators For

2009 European IT Purchases

European IT Purchases B Countr: Economic

Growth Drives IT Market Growth

rEcOMMENdATIONS

Focus In 2009 on Specic Countr

Opportunities For Diferent Products

AlTErNATIVE VIEw

European IT Purchases In 2009 Turn Out to Be

Flat Or Just Down A Little

Supplemental Material

NOTES & rESOurcESFoeste eviee ont teh investment

ata om the Oganization o Eonomi

coopeation an deveopment as e as ata

om 46 venos, ining Aente, AcS,

Aate-lent, Atos Oigin, Avaa, BeaingPoint,

capgemini, ciso Sstems, compte Assoiates,cSc, de, EdS, EMc, Eisson, Fjits, Getonis,

Heett-Paka, Hitahi, IBM, Inoss

Tehnoogies, lenovo, Miosot, Motooa, NEc,

Nokia, Note Netoks, Oae, SAP, Siemens

SBS, Sn Miosstems, Smante, T-Sstems,

Tata constan Sevies, uniss, an wipo.

Related Research Documents

“uS An Goba IT Maket Otook: Q2 2009”

Jne 29, 2009

“Goba IT Maket Otook: 2009”Jana 12, 2009

“Eopean IT 2008 Maket Otook ”

Mah 6, 2008

Agst 28, 2009

Eopean IT Maket Otook: 2009 To 2010 The Eopean reession Hts IT Phases

b Andrew H. Bartels and Peter O’Neillith Een dae, Heii lo, an chétina Mteba

2

7

10

21

22

23

mailto:[email protected]


http://www.forrester.com/go?docid=48356&src=46672pdf











© 2009, Foeste reseah, In. repotion PohibiteAgst 28, 2009

Eopean IT Maket Otook: 2009 To 2010


2

EUROPEAN IT MARKET WILL DROP IN 2009 AND LAG BEHIND US IT MARKET

From 2005 through 2007, the European I market grew at about the same rate as the US I

market. However, in 2008, and especially in 2009, growth in purchases by European businesses

and governments o computer equipment, communications equipment, soware, I consulting

and integration, and outsourcing services has been and still is lagging behind the US tech market.

Measured in euros, I purchases in Western and Central European countries will shrink by 6.3% in

2009, ollowing a decline o 0.8% in 2008. While the US I market will also all in 2009, the decline

in US dollars will be less, -5.1%. Te US I market will also have a stronger recovery in 2010, with

projected growth o 8% (in US dollars) compared with 4.0% in Europe (in euros) (see Figure 1-1).

Te deeper decline in the European I market is mostly due to the deeper recession that Europe is

experiencing. Te Organization or Economic Co-operation and Development (OECD) projects

that the collective real GDP o the euro-zone countries o Europe (measured in euros) will decline

by 4.8% in 2009.1

Te US economy is also in recession, but the 2.8% decline in US real GDPprojected or 2009 is not as bad as the drop in the European economy. While the main cause o

the US downturn was the nancial crisis rom the collapse o the housing bubble and subprime

mortgages and a resulting downturn in consumer spending and business investment, Europe had

its own vulnerabilities. Te UK, Ireland, Spain, and other countries had their own housing bubbles

that burst; many European banks turned out to be exposed to toxic securities and Central European

debt; and export-oriented European economies like Germany and Scandinavia have suered as their

exports to the US, Middle East, and Asia dried up. Moreover, Europe will be slower to recover than

the US — according to OECD projections, the US real GDP will grow by 0.9% in 2010, while the

European economy will show no growth (see Figure 1-2).

Declines In European Economic Growth Mean Reduction In IT Purchases

We project that the countries o Western and Central Europe will purchase €297 billion (US$402

billion) o computer equipment, communications equipment, soware, and consulting and

outsourcing services in 2009.2 Te US I market will be about one-third bigger, at €390 billion

(US$526 billion), even though the European economy remains about 20% larger than the US

economy (see Figure 2).






4

Figure 2 Mease In doas O Eos, The Eopean IT Maket lags Behin The uS IT Maket

Source: Forrester Research, Inc.46672

Growth in European IT purchases in dollars is much stronger in 2007 and 20082-2

-15%

-10%

-5%

0%

5%

10%

15%

20%

2006 2007 2008 2009† 2010†

European IT purchases in euros is still smaller than US IT purchases2-1

United States Western and Central Europe*

United States Western and Central Europe*

IT purchases of goods and services

(euros billions)

% change from prior year

United States

Western and Central Europe*

6.6%

6.1%

-1.9%

7.0%

-4.8%

-0.8%

3.5%

-6.3%

11.7%

4.0%

Source: OECD and Forrester Research for GDP estimates and forecasts; Forrester Research for ITpurchases estimates and forecasts

*Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Spain,Slovakia, Slovenia, Switzerland, Sweden, and the UK.

†Forrester forecast

2006 2007 2008 2009† 2010†

Western and Central European GDP is greater than US GDP in euros2-3

Nominal GDP(euros billions)

IT purchases of goods and services(percentage change

from prior yearin US$ billions)

€403 €396 €377 €390 €435

€298 €319 €317 €296 €309

€10.5

€11.0

€10.1

€12.8

€9.7

€13.0

€10.4

€12.1

€10.8

€12.3

United States

Western and CentralEurope*

A spreadsheet with additional data is available online.



© 2009, Foeste reseah, In. repotion Pohibite Agst 28, 2009



5

All Categories O Tech Face Sharp Declines In 2009, With Sotware Leading A 2010 Upturn

Sad to say, there are no real bright spots in 2009 in the dierent categories o tech purchases in

Europe. Soware (-5.4%), I consulting and integration services (-4.2%), and I outsourcing

(-5.7%) will decline a bit less than computer equipment (-6.6%), or communications equipment

(-9.2%), but all will all by 4% or more in euros, and by 11% or more in US dollars. Te outlook

turns brighter or 2010, with soware purchases setting the pace with a 5.5% growth. By category,

we expect:

· Computer equipment purchases will be down in 2009 and lag in 2010. Purchases o computer

equipment will drop by 6.8% in 2009, and grow by only 1.4% in 2010, going rom €83 billion in

2008 to €78 billion in 2009 and €79 billion in 2010. Adoption o server virtualization soware,

lower-cost netbooks, and CIO tendencies to cut back these kinds o capital investments in a

downturn will combine to keep computer equipment on the slow track.

· Communications equipment purchases will drop in 2009 and creep back in 2010. Tis

category o I purchases has done relatively well in recent years compared with the growth in

other categories, due to higher rate o adoption o cell phones in Europe and 3G cellular systems.

However, the recession is hurting this category o capital investment in 2009, pulling levels o

investment down by 9.2% to €57 billion in 2009 rom €63 billion in 2008, beore rising by 4% to

€60 billion in 2010.

· Sofware purchases will all by 5.4% in 2009, but bounce back in 2010 with 5.5% growth.

otal soware purchases will shrink rom €72 billion in 2008 to €68 billion in 2009. License

soware revenues will bear the brunt o decline, For example, Oracle’s European application

license revenues in US dollars were down 12% and 11%, respectively, in the rst two calendarquarters o 2009, and SAP’s application license revenues on a comparable basis were down 38%

(-29% in euros).3

· I consulting and systems integration services purchases will drop by 4.2% in 2009.

Tese categories o I services will decrease rom €57 billion in 2008 to €54 billion in 2009.

Consulting services or I strategy, business process change, security, and SOA systems design

will hold up relatively well, but systems integration and application integration project work will

decline in line with (but lagging) the decline in licensed application soware purchases. Project

work will revive in 2010 with the return to soware investment.

· I outsourcing services purchases will decline by 5.7% in 2009. As in the US, I outsourcing

is suering as much as — i not more than — I consulting and systems integration services.

Te weaknesses in European I outsourcing are due to shis to smaller-scale outsourcing

projects, lower price points as vendors cut rates, and a revival o insourcing as European

companies with ull-time sta commitments bring back in house I activities that had been

outsourced (see Figure 3).






6

Figure 3 A categoies O Eopean IT Phases wi Fa In 2009


Western and Central European IT purchases forecast in US$ billions3-2

Western and Central European IT purchases forecast in billions of euros3-1

2006 2007 2008 2009* 2010*

Computers and peripheral equipment

Communications equipment

Software

IT consulting and systemsintegration services

Computers and peripheral equip.


Software

IT outsourcing

Total

Total



(numbers have been rounded)

*Forrester forecast

6.7% 7.3% -2.2% -6.6% 1.4%

10.6% 6.8% 0.1% -9.2% 4.0%

9.5% 11.2% 0.5% -5.4% 5.5%

3.0% 4.0% -1.3% -5.7% 5.2%



SoftwareIT consulting and systems

integration services

6.8% 7.0% -0.8% -6.3% 4.0%

7.3% 17.1% 5.0% -14.0% 4.7%

11.2% 16.5% 7.5% -16.4% 7.5%

10.1% 21.3% 7.9% -12.9% 9.0%

3.6% 13.7% 6.1% -11.8% 8.4%

7.4% 16.8% 6.5% -13.7% 7.4%US$ per euro $1.26 $1.37 $1.47 $1.36 $1.40

€ 80€ 85 € 83

€ 78 € 79

€ 59 € 63 € 63 € 57 € 60

€ 64 € 71 € 72 € 68 € 72

€ 55 € 57 € 57 € 54 € 57

€ 298€ 319 € 317

€ 297 € 309

2006 2007 2008 2009* 2010*

$100$117 $123

$106 $111

$74$86 $93

$78 $83

$81$98 $106

$92 $100

$69 $79 $84 $74 $80

$375$438 $466

$402$432

IT outsourcing



Software


IT outsourcing


3.0% 4.1% -1.2% -4.2% 4.9%

€ 41 € 42 € 42 € 39 € 41

$51 $58 $61 $53 $58

IT outsourcing 3.6% 13.6% 6.0% -13.2% 8.7%






7

Measured in US dollars — which matters or US vendors — the European market picture is even

bleaker. With the US dollar despite recent weakness still well above its value against the euro in the

rst hal o 2008, we expect: 14% decline in dollar-denominated purchases o computer equipment

in 2009, 16% drops in purchases o communications equipment, a 13% decline in sowarepurchases, and a 12% all in I services and outsourcing.4

BEHIND THE FORECAST: WEAK INDICATORS FOR 2009 EUROPEAN IT PURCHASES

Our orecast o sharp declines in I purchases in Europe is made against a backdrop o planned I

budget cuts in Europe, as well as declines in vendor revenues rom the larger EMEA market coming

into 2009.

European CIOs Are Cutting Their 2009 IT Budgets B 3% Or More

Forrester surveyed I decision-makers in France, Germany, and the UK between February and May 2009 about their planned 2009 I budget increases. On average across these three countries, the I

decision-makers at the enterprises we surveyed reported that they planned to cut their I operating

budgets by 3.2% and their I capital budgets by 1.8%. UK enterprises were the most cautious,

planning to cut their 2009 I operating budgets by 6.5% and their I capital budgets by 2.9%.

French and German enterprises said that they would cut their I operating and capital budgets by

between 1.2% and 1.8%. In practice, we expect that most European countries will spend even less

than their reduced I budgets, with the worse-than-expected European recession causing rms to

cut their actual I spending even urther (see Figure 4).

EMEA Revenues For IT Vendors Grew Weakl In 2007

Forrester tracks the quarterly revenues o 49 leading I vendors in Europe, the Middle East, and

Arica (EMEA). Tese revenues in euros ell each quarter in 2008 at -1% to -3%, slid urther to a 6%

decline in Q1 2009, and will probably drop by 5% in Q2 2009, when all earnings are announced. Te

outlook gets worse in the second hal, as CIOs start reecting the worse economic outlook o the

rst hal o the year in their second hal purchase plans. We expect that vendors’ European revenues

will all by 6% in Q3 2009 and by 2% in Q4 2009. Computer equipment vendor revenues have

already been in sharp decline since Q3 2008, with declines o -10% in Q3 2008, -11% in Q4 2008,

and -18% in Q1 2009, with similar rates o decline or the rest o 2009. Communications equipment

vendor revenues ell more moderately in late 2008 (-3% in Q3, -5% in Q4) and Q1 2009 (-7%), but

the declines will accelerate in the remainder o 2009, with -13% in Q3 2009 and -17% in Q4 2009.

Soware vendor revenues in Europe held up better, remaining slightly positive through Q1 2009 andprobably into Q2 2009, but will all by Q4 2009. Similarly, I consulting and outsourcing services,

while at to down slightly so ar, will deteriorate by Q4 2009 (see Figure 5-1).

Measured in US dollars, the pattern o deterioration in vendors’ European revenues is similar but

worse through Q3 2009. However, with the dollar expected to resume its decline against the euro in






8

the second hal o 2009, dollar-denominated declines in vendor European revenues will actually be

less in Q4 2009 than the euro-denominated declines (see Figure 5-2).

Most multinational I vendors or service providers have already segmented their EMEA territoriesinto “stable” or more mature geographic markets and “emerging” or growth markets. Tis enables

them to apply the most suitable sales approach and management expectations to each target market.

Western Europe is usually considered more mature while much more growth is budgeted or Eastern

Europe and the Middle East. Strategy proessionals may need to review these decisions, though,

based on the data provided in this report.

Figure 4 Eopean Entepises Pan To ct IT Bgets In 2009, with Ata cts Even deepe


Germany

-1.5%-1.2%

-6.5%

-2.9%

-1.8%-3.7%

UK

France

Average

Source: Enterprise And SMB Global IT Budgets And Spending Survey, Q2 2009Note: Germany and France in euros; UK in pounds sterling

*Responses to Forrester’s Enterprise And SMB Global IT Budgets And Spending Survey, Q2 2009†Forrester forecast for how much IT purchases (capital investment plus expensed purchases of computerequipment, communications equipment, software, and IT consulting and outsourcing services) will actuallygrow during the year.

Planned increase in ITcapital budgets in 2009*

Actual likely increasein IT purchases in 2009†

Three largest European IT markets

Planned increase in IToperating budgets in 2009*-2.9%

-5.4%

-1.8%-1.8%

-2.9%

-3.2%

“By what percentage do you estimate your IT operating budget andIT capital budget will change in 2009?”

Base: 487 German IT budget decision-makers, 365 UK IT budget decision-makers,and 467 French IT budget decision-makers






9

Figure 5 IT Venos’ EMEA revenes State 2009 In Negative Teito


IT vendor revenues from EMEA in euros fell by 6% in Q1 2009, with similar drops ahead in Q2 andQ3 2009

5-1

Total vendor revenues (€ billions)

Q3 2008 Q4 2008 Q1 2009 Q2 2009* Q3 2009* Q4 2009*


IT services and outsourcingSoftwareCommunications equipment

Computers and peripheral equip. -10% -11% -18% -11% -12% -15%

Communications equipment -3% -5% -7% -9% -13% -17%

Software 3% 5% 4% 3% 3% -8%

IT services and outsourcing -2% 0% -3% -4% -3% -9%

Total -3% -2% -6% -5% -6% -12%



€ 8.4

€ 8.9

€ 7.3 € 7.3 € 7.4€ 7.6

€ 9.8

€ 11.3

€ 8.5 € 8.8 € 8.5 € 9.4

€ 7.4€ 9.0

€ 7.4 € 8.3 € 7.6 € 8.3

€ 17.9 € 19.4 € 17.7 € 17.3 € 17.3 € 17.6

€ 43.5

€ 48.6

€ 41.0 € 41.6 € 40.8€ 42.8

(numbers have been rounded)

Base: 49 large, global IT vendors






10

Figure 5 IT Venos’ EMEA revenes State 2009 In Negative Teito (cont.)


IT vendors’ EMEA revenues falling more rapidly as dollar strengthened5-2


IT services and outsourcingSoftwareCommunications equipment



Software

IT services and outsourcing

Quarterly rates (US$ billions)

Q3 2008 Q4 2008 Q1 2009 Q2 2009* Q3 2009* Q4 2009*

Total


-1% -19% -28% -23% -21% 9%

6% -14% -19% -21% -22% -12%

13% -5% -9% -10% -7% 0%

8% -9% -15% -17% -12% -2%

6% -11% -18% -18% -15% -5%

Base: 49 large, global IT vendors(numbers have been rounded)

US$ per euro $1.51 $1.32 $1.31 $1.36 $1.35 $1.40

$12.7 $11.7

$9.6$9.9 $10.0

$10.6

$14.7 $14.9

$11.2$12.0 $11.6

$13.2

$11.1 $11.9$9.7 $11.4 $10.4

$11.8

$26.9 $25.6$23.2 $23.5 $23.7 $25.0

$65.5 $64.1

$53.6$56.7 $55.6

$60.7

Source: 49 large global IT vendors’ 2008 and 2009 quarterly financial reports

*Forrester forecast

EUROPEAN IT PURCHASES By COUNTRy: ECONOMIC GROWTH DRIVES IT MARKET GROWTH

While Western and Central Europe have some o the institutions and trappings o being a single

political and economic entity, this recession and divergent policy reactions to it have shown

that Europe is still a collection o 28 dierent countries.5 Te European Union itsel has had

no coordinated policy or ghting the recession, with each country pursuing its own economic

policies (within the limits set or the Euro-bloc countries by the European Central Bank’s monetary

policy). And each o the European countries have dierent degrees o dependence on exports, roles

or central governments in the economy, dierent experiences o housing bubbles and collapses,dierent labor policies, and dierent exposure to nancial market strains.

One result is a wide divergence among the countries o Western and Central Europe. While all

countries in Western and Central Europe will experience a decline in real GDP in 2009, some

countries like Greece, Norway, and Poland will have relatively mild downturns (based on OECD






11

orecasts). Other countries like Iceland, Ireland, and the Baltic states o Estonia, Latvia, and

Lithuania will see much more painul downturns o 7% or more. O the major European economies,

Germany, Italy, Sweden, and the Netherlands ace the biggest declines o 6.1%, 5.5%, 5.5%, and 4.9%,

respectively. Te UK and Spanish economies will drop by 4.3% and 4.2%. France and Switzerlandwill experience 3% and 2.7% declines in real GDP (see Figure 6-1).

Te economic environment matters to the tech market because economic growth is one o the three

actors that we use to orecast the growth rate in the tech markets o dierent European countries.

However, because I buyers and I vendors operate in a world o current or nominal values, not

the ination-adjusted world o real GDP, we use growth in nominal GDP as one o the key variables

in our orecast model or predicting I purchases at the country level. Te three key variables that

drive our orecasts or tech purchases in each o the European country markets are:

1. Nominal GDP growth is a key determinant. Extensive research that we have done in the US

and in other countries shows that the growth in nominal GDP is the best single predictor o

growth in business and government purchases o technology goods and services. In most

European countries, nominal GDP declines are slightly less than real GDP declines, thanks

to ination rates o 1% to 2%. However, Germany, Norway, and Ireland are experiencing

actual deation, making nominal GDP even lower than real GDP. On the other hand, Poland,

Hungary, and Iceland have more serious ination problems (mostly due to depreciation o their

currencies against the euro), so their nominal GDP growth is quite a bit better than their real

GDP growth rates (see Figure 6-2).

2. Financial market strain is a second key actor shaping the tech market. Tis recession is

unique among post-war downturns in the degree to which a collapse o unctioning nancialmarkets has direct business investment in technology. For example, both the US and Canada are

experiencing similar recessions, with commensurate growth rates in nominal GDP. However,

the US tech market has dropped ar more than the Canadian I market.6 Why? Because Canada

has a normally unctioning banking system, while the US nancial market is still under strain

rom collapses o Bear Stearns and Lehman Brothers and the orced rescues o others. Te result

is that US companies are hoarding cash and slashing capital investment — including tech capital

investment — while Canadian companies are simply cutting back on investment. In Europe, the

UK, Iceland, and Ireland have had similar nancial market collapses to that o the US, while

Belgium, Germany, Sweden, and the Baltics have rescued troubled nancial institutions. As

a result, tech investment is down more than their declines in nominal GDP would imply. Te

nancial institutions, even those that have had to be rescued by governments, are also hoarding

cash — or at least credit extensions — and this in an additional inhibitor to capital investments.

3. ech-intensiveness causes some countries to drop sharply and rebound equally. In our

January 2009 Global I Market Outlook, we identied 12 countries that used technology more

intensively relative to GDP than other countries. Six o the countries in this “tech 12” group






12

were European countries: Denmark, Finland, the Netherlands, Sweden, Switzerland, and the

UK. Te I markets in these countries will tend to behave similarly to that in the US, with big

cutbacks in the downturn but also bigger rebounds in the upswings (see Figure 7).

Figure 6 Man Eopean conties wi See deines In rea GdP O 4% O Moe In 2009


2010†


Real GDP Growth

Ireland, Iceland, and Baltics will have biggest declines6-1

-1.0%0.8%

-0.4%0.6%

-4.0%0.1%

-1.3%0.3%

-9.8%-1.5%

-4.7%0.8%

-4.5% -0.5%-4.2% 1.4%

-6.1%-2.2%

-5.0% 3.1%-2.7%

1.4%-4.0%

-0.4%-10.0%

-3.0%-12.0% -2.0%

-7.0%-0.8%

-10.0%-1.0%

-1.2% 3.2%

Norway*

Poland*

Denmark*

Greece

Ireland

Finland

PortugalCzech Republic*

Hungary*

Slovakia*

Slovenia*

Luxembourg

Lithuania*

Latvia*

Iceland*

Estonia*

Other Western andCentral Europe*

Germany

UK*

France

Italy

SpainNetherlands

Switzerland*

Belgium

Sweden*

Austria

-6.1% 0.2%

-4.3% 0.0%

-3.0% 0.2%

-5.5%0.4%

-4.2%-0.9%

-4.9%-0.4%

-2.7%-0.2%

-4.1%-0.5%

-5.5%0.2%

-4.3% -0.1%2009†

Total Western and CentralEurope in euros*

-4.0%-0.3%

*UK in pounds sterling; Switzerland in Swiss francs; Sweden in krone; Norway in krone; Poland in zlotys;Denmark in krone; Czech Republic in korunas; Hungary in Forints; Slovakia in korunas; Slovenia in tolars;Lithuania in litas; Latvia in lats; Iceland in krone; Estonia in kroons; and all others in euros.

†OECD Forecast, June 2009






14

Figure 7 Fo Ties O Eopean conties In Thei Teh-Intensiveness


The UK, Belgium, and Sweden come closest to US levels of tech investment relative to GDP7-1

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

1991 1995 2000 2005 2010*

Business and government investment in technology as a percentage of GDP

European countries ranked by their 2008 ratio of technology investment to GDP7-2

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

1991 1995 2000 2005 2010*

Business and government investment in technology as a percentage of GDP

Source: OECD, “Investment Data and Shares of ICT Investment in GDP and Total Non-residential GFCF,”January 8, 2008; Forrester estimates for 2005 to 2008 and forecasts for 2009 to 2010

*Forrester forecast

Tier 2: Average for Denmark, Finland,the Netherlands, and Switzerland

Tier 1: Average for Belgium, Sweden,and the UK

Tier 4B: Central Europe, Luxembourg,and Iceland

Tier 3: Average for Austria, France,Germany, Greece, Portugal, and Spain

Tier 4A: Average for Ireland and Italy

United States

United Kingdom

Belgium

Denmark

Netherlands

Switzerland

Sweden

Greece

Spain

France

Germany

Austria

Finland

Ireland

Italy

Portugal







15

The UK, German, And France Dominate, With The UK Market Down The Most

What does the breakout o I purchases look like by countries?

· Germany, the UK, and France represent 55% o the European I market. As a result o the

cutbacks in UK tech purchases due to the UK recession and nancial crisis, the UK I market

will slip into second place behind Germany in 2009, beore reclaiming its lead position in 2010.

Te UK market or I goods and services measured in euros will drop by 12% in 2009 to €57.4

billion. Te German I market at €57.5 billion will all by a more modest 3% in 2009. France

remains the third largest I market in Europe at €49.4 billion in 2009, down 3% rom 2008.

· Spain, Italy, and the Netherlands constitute about 22% o the European I market . Tese

three countries will have between €27 billion and €18 billion o I purchases in 2009. Te

Netherlands and Italy will drop by 4% measured in euros while Spain’s I market will shrink by

6%, all in line with the drops in their nominal GDP.

· Sweden, Switzerland, Denmark, and Belgium make up about 12% o the European I market.

Each will have about €7 to €12 billion o I purchases in 2009. Measured in euros, Sweden will

drop by 16% to €9.7 billion, while Belgium will all by 6% to €8.8 billion. In both cases, nancial

market strains add to weak economies. Switzerland at €11.7 billion will see a 1% decline, while

Denmark at €7.2 billion will see a small decrease o 2%.

· Te other 18 countries make up 10% o the European I market. Te I markets in Poland

and Iceland when measured in euros will drop by 26% and 30%, respectively, with the Czech

Republic alling by 20%; Hungary by 21%; Latvia by 19%; Lithuania by 17%; and Norway,

Ireland, Slovakia, Slovenia, and Estonia by 10% to 13%. I markets in Austria, Finland, Greece,Portugal, and Luxembourg will decline by lesser amounts (see Figure 8).

· Te dollar’s strength causes dollar-denominated declines to be much greater. With the US

dollar so ar in 2009 remaining well above its exchange rates with all European currencies in

most o 2008, the US values or I purchases in almost all European markets will be at least 7%

lower in 2009 than in 2008, with some markets down by as much as 32% to 35%.

· Measured in their own currencies, the UK, Sweden, Switzerland, and others do better. In

their own currencies, the UK market will be down 5% in 2009, the Swedish market down 6%,

and the Swiss market down 5%. Denmark and Norway will all by 3%, but the central European

I markets will slip by 8% to 10%.






16

Figure 8 The uK, Geman, An Fane Ae lagest Eopean IT Makets


*Forrester forecast


Total IT purchases(billions of euros, 2009 forecast)


€ 49.8

€ 44.3

€ 43.0

€ 24.2

€ 18.8

€ 15.5

€ 10.2

€ 8.4

€ 8.5

€ 5.2

€ 4.4

€ 1.9

€ 6.5

€ 4.4

€ 1.5

€ 4.9

€ 2.5

€ 1.2

€ 0.7

€ 0.5

UK

Italy

Germany

France

Spain

Switzerland

Belgium

Sweden

Austria

Norway

Poland

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

Slovakia

Netherlands

2009*

-2.9%

-13.1%

-2.9%

-4.3%

-6.1%

-4.8%

-1.1%

-6.2%

-16.8%

-4.3%

-11.8%

-26.3%

-1.9%

-2.7%

-10.5%

1.0%

-7.2%

-20.3%

-20.9%

-12.2%

2010*

2%

4%

5%

2%

3%

7%

2%

6%

7%

3%

5%

2%

3%

6%

0%

5%

3%

4%

8%

5%

European Computer Equipment Purchases Will Shrink B 7% In 2009

Te ranking o the country markets or computer equipment in Western and Central Europe ollows

that o overall I purchases, though Norway makes it into the top 10 markets instead o Austria.

Most countries will have rates o decline in purchases o this category that are between 2% and 5%

measured in euros. Te UK, Sweden, Norway, Poland, and the other central European countries

make double-digit rates o decline measured in euros because o the strength o the euro against

their currencies. Among the euro-zone countries, Belgium and Ireland will have the biggest declines,while Denmark, Greece, and Finland will have small declines, no declines, or actual increases (see

Figure 9).






17

Figure 9 lagest Eopean Makets Fo compte Eqipment Ae Geman An The uK


*Forrester forecast


Computer equipment purchases(billions of euros, 2009 forecast)

€ 14.8

€ 15.7

€ 8.4

€ 6.5

€ 5.3

€ 4.9

€ 2.2

€ 4.5

€ 2.6

€ 2.1


UK

Italy

Germany

France

Spain

Netherlands

Switzerland

Belgium

Sweden

Austria

Norway

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

Slovakia

€ 0.3

€ 3.2

€ 1.8

€ 0.6

€ 0.4

€ 1.0

€ 0.3

€ 0.1

€ 0.1

2009*

-4%

-11%

-2%

-5%

-4%

-3%

-4%

-7%

-22%

-3%

-11%

-32%

-1%

0%

-9%

8%

-4%

-25%

-26%

-18%

2010*

-1%

-1%

1%

-1%

0%

11%

2%

6%

12%

2%

4%

2%

1%

5%

-4%

-5%

1%

4%

9%

5%

Poland

€ 2.9

European Purchases O Communications Equipment Will Shrink B 9% In 2009

In the rankings o the top country markets or European purchases o communications equipment

in 2009, Germany, Italy, Spain, and France have the our largest markets, with the UK in h place,

and Germany and Italy having the top two positions. Greece and Finland make it into the top 10

European markets or communications equipment. Greece has been investing in communications

equipment to support both broadband Internet service and expanding wireless services, and in

Finland thanks to the inuence o Nokia on Finnish I habits, businesses spend much less on

computer equipment than they do on communications equipment. Spain, the Netherlands, Belgium,

Austria, and Ireland among the euro countries will see declines in purchases o 8% or more in 2009,

while Germany, France, Italy, and Greece will see lesser drops. Te UK, Sweden, and many o the

Central European countries will have declines measured in euros o 20% or more, but the decreases

will be more moderate in their own currencies (see Figure 10).






18

Figure 10 lagest Eopean Makets Fo commniations Eqipment Ae Geman An Ita


*Forrester forecast


Communications equipment purchases(billions of euros, 2009 forecast)


UK

Italy

Germany

France

Spain

Netherlands

Switzerland

Belgium

SwedenAustria

Norway

Poland

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

2009*

€ 9.8

€ 6.7

€ 6.9

€ 8.6

€ 7.6

€ 3.1

€ 2.8

€ 1.8

€ 1.1€ 1.0

€ 0.2

€ 0.5

€ 0.3

€ 2.1

€ 0.3

€ 1.6

€ 1.4

€ 0.5

€ 0.3

€ 0.2Slovakia

-4%

-21%

-7%

-5%

-10%

-9%

-2%

-8%

-20%

-10%

-15%

-27%

-1%

-6%

-9%

-7%

-10%

-20%

-21%

-11%

2010*

2%

4%

6%

3%

4%

6%

1%

5%

10%

6%

7%

1%

1%

8%

-4%

6%

4%

2%

7%

3%

European Purchases O Sotware Will Shrink B 5% In 2009

For Europe as a whole, purchases o soware products and spending on maintenance and

subscription ees will decline by 5% in 2009, with license revenues or new soware down by 10%

or so. For soware, the UK and France are tied as the largest country markets in Europe, with

projected 2008 revenues o €15 billion, a 12% drop in euros or the UK (-5% in pounds sterling),

and a 2% decrease or France rom 2008 levels. Germany, despite being the home country or

soware giant SAP, comes in third with €10.4 billion in revenues, a 1% decline rom 2008. Italy and Spain, while coming in ourth and h in the European soware market, have a smaller share

(13%) o that market than they do o the total I purchases market (16%). Te Nordic countries o

Denmark, Finland, Norway, and Sweden will have €7.3 billion in soware purchases in 2009, which

would make them collectively almost as big a market or soware as Italy and Spain combined, or o

Germany alone. Te Netherlands and Switzerland make up the rest o the top 10 (see Figure 11).






19

Figure 11 lagest Eopean Makets Fo Sotae, with The uK An Fane Ahea O Geman


*Forrester forecast


Software purchases(billions of euros, 2009 forecast)


UK

Italy

Germany

France

Spain

Netherlands

Switzerland

Belgium

SwedenAustria

Norway

Poland

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

Slovakia

€ 10.4

€ 15.2

€ 15.2

€ 4.5

€ 4.1

€ 3.8

€ 2.7

€ 1.3

€ 3.0

€ 1.1

€ 0.4

€ 0.5

€ 2.0

€ 0.4

€ 0.3

€ 1.9

€ 0.1

€ 0.3

€ 0.2

€ 0.1

2009*

-1%

-12%

-2%

-4%

-3%

-5%

4%

-5%

-13%

-3%

-14%

-26%

-3%

0%

-14%

6%

-1%

-18%

-19%

-9%

2010*

2%

9%

7%

-1%

0%

7%

1%

10%

7%

2%

10%

4%

7%

5%

7%

6%

1%

6%

10%

8%

European Purchases O IT Consulting And Sstems Integration Services Will Shrink B 4%

Forrester last published a orecast or the European I consulting and outsourcing market in 2006.7

While that report has not been updated, we have adjusted the data in that report based on trends

or soware investment (since systems integration work or soware is the largest category o

I services spending) in each market as well as overall trends or I services vendor revenues in

Europe, Te market will be €54 billion in 2009, down 4% rom €57 billion in 2008. Germany is the

largest European market or consulting and systems integration services, ollowed by France, with

the UK a distant third. Te German and French markets or I services will slip by 2% in 2009; the

UK market will drop by 12% in euros, but by 4% in pounds sterling. Italy and the Netherlands are

the next largest markets or project-based I services. As with soware, Switzerland and the Nordic

countries have a disproportionate share o the European I services market at 13%, while Spain is

under-represented. Most European countries will cut their purchases o I consulting and systems

integration services by 2% to 3%. Te exception will be the Central European and Baltic countries,

where cutbacks are likely to be 15% or more (see Figure 12).






20

Figure 12 lagest Eopean Makets Fo IT consting An Integation Ae Geman an Fane


*Forrester forecast



UK

Italy

Germany

France

Spain

Netherlands

Switzerland

Belgium

Sweden

Austria

Norway

Poland

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

Slovakia

2009*

-2%

-12%

-2%

-2%

-2%

-3%

-3%

-2%

-13%

-2%

-12%

-21%

-3%

-2%

-11%

2%

-2%

-13%

-15%

-15%

IT consulting and systems integration services purchases(billions of euros, 2009 forecast)

€ 14.8

€ 6.7

€ 12.5

€ 4.5

€ 1.9

€ 3.8

€ 2.6

€ 0.8

€ 1.8

€ 1.0

€ 0.8

€ 0.5

€ 1.0

€ 0.1

€ 0.2

€ 1.0

€ 0.1

€ 0.1

€ 0.1

€ 0.0

2010*

6%

3%

6%

6%

6%

4%

5%

5%

-2%

5%

5%

0%

4%

6%

7%

6%

6%

2%

6%

2%

European Purchases O IT Outsourcing Services Will Shrink B 6% In 2009

In our calculation o I outsourcing services, we exclude the business process outsourcing category

because very ew companies count BPO services — or even the I component o BPO services — in

their I budgets. Tat still leaves €394 billion in 2009, down 6% rom €42 billion in 2008. Te UK

is by ar the largest European market, with almost twice the amount o I outsourcing purchases

as No. 2 Germany or No. 3 France. Te UK I outsourcing market will decrease by 10% in euros in

2009, but by 2% in pounds sterling. Te German and French markets or I outsourcing services

will slip by 3% in 2009, with insourcing taking place in these markets as the challenges o laying

o sta causes rms to bring outsourced activities back in house to put their sta to use. Te

Netherlands is the ourth largest I outsourcing market, with more activity than Italy and more than

twice as much I outsourcing as occurs in Spain, Sweden, or Switzerland (see Figure 13).






21

Figure 13 lagest Eopean Maket Fo IT Otsoing Is The uK, Then Geman An Fane


*Forrester forecast


IT outsourcing purchases(billions of euros, 2009 forecast)


UK

Italy

Germany

France

Spain

Netherlands

Switzerland

Belgium

SwedenAustria

Norway

Poland

Denmark

Greece

Ireland

Finland

Portugal

Czech Republic

Hungary

Slovakia

€ 7.7

€ 13.1

€ 6.5

€ 2.4

€ 1.0

€ 2.6

€ 1.3

€ 0.4

€ 1.2

€ 0.5

€ 0.6

€ 0.2

€ 0.7

€ 0.1

€ 0.1

€ 0.7

€ 0.0

€ 0.0

€ 0.0

€ 0.0

2009*

-3%

-10%

-3%

-3%

-1%

-2%

-3%

-3%

-11%

-3%

-11%

-22%

-2%

-3%

-12%

4%

-1%

-13%

-14%

-16%

2010*

5%

6%

5%

5%

7%

6%

5%

5%

0%

5%

7%

0%

6%

5%

5%

8%

6%

2%

7%

1%

r E c O M M E N d A T I O N S

FOCUS IN 2009 ON SPECIFIC COUNTRy OPPORTUNITIES FOR DIFFERENT PRODUCTS

O a the geogaphi makets in the o o IT venos, Eope i be the eakest in 2009. This

is espeia te o uS IT venos, hee the stength o the oa against the eo means eve

eo, pon, an, o kone/kona/kona o evene geneates ee oas in 2009 than in

2008. Bt the Eopean IT maket is sti the seon agest in the o ate the uS, an Eope

has man onties — an man ompanies — that ae as avane in thei se o tehnoog as

the uS o uS ms. So teh venos annot an sho not ite Eope o as a maket to pse.

Instea, o the net 12 months o so, teh venos nee to be seetive in hee the pt thei saes

an maketing esoes, ith venos o ieent kins o teh pots osing on ieent

ont makets in Eope base on hee the eman o these pots is ike to be best:






22

· “Tech 12” markets in Europe provide best opportunities or next-generation technolog.

whie eaing, goba ompetitive ompanies in a Eopean onties i be inteeste in

nie ommniations an vieooneening, sevie-oiente ahitetes an bsinesspoess management, o ompting an seve vitaization, an smatphones an

mahine-to-mahine inteations, ompanies an govenments in denmak, Finan, The

Netheans, Seen, Sitzean, an the uK ae the most ike bes o these

tehnoogies. This is aea the ase o avane sotae pots sh as ontat ie-

e management, atomate spen anasis an sppie peomane management, an

stome ommnit patoms, so venos o simia pots sho os thei eots on

these makets.

· German, France, and Central Europe ofer biggest markets or sotware apps. As

note eaie, Fane is aea the agest Eopean maket o sotae. Geman aong

ith Astia an centa Eope ae eative nepenetate o some sotae pots

an i be ooking to sotae appiations sh as crM, SrM, an ScM as a a to estoe

ompetitiveness.

· Ital, Spain, Greece, and Central Europe provide growth potential or classic hardware.

despite investments in 3G ieess sstems, these makets sti ag behin the uK o the Nois

in aoption o boaban Intenet netok eqipment o seves, stoage, an Pcs. Venos o

these mate haae pots sho pt most o thei maketing eots into these makets.

· Continental Europe has untouched opportunities or IT outsourcing. The uK has one

etensive otsoing o IT opeations, bt ompanies in Fane, Geman, Ita, an

Spain (among othes) se IT otsoing to a esse egee as abo as have isoage

aoption o IT otsoing that o est in aos. coming ot o the eession manms ma vie IT otsoing as an atenative to hiing ne -time sta, athogh

sotae-as-a-sevie an o ompting senaios i aso ompete o this bsiness.

· Diferent IT consulting services will ollow the underling product adoption. IT sevies

venos that os on SOA, BPM, o nie ommniations i get the most tation in the

“teh 12” onties, hie those that onentate on impementation o ErP o crM sstems

i have moe sess in Geman an Fane. look at the onties that ae aopting the

haae an sotae that o sevies sppot, an taget those onties.

A l T E r N A T I V E V I E w

EUROPEAN IT PURCHASES IN 2009 TURN OUT TO BE FLAT OR JUST DOWN A LITTLE

A ea ago, hen e pbishe o 2008 oeasts o the Eopean IT maket, o main oeast as

moeate bish. Hoeve, in o atenative vie, e sai: “The most ike atenative to this

oeast is that the Eopean eonom oos the uS eonom into negative goth, asing teh

phases in Eope to eine in 2008.” That atenative vie is in at hat happene. So this time,






23

o atenative is the evese, that is, a moe positive otome. whie it is possibe that eonomi

onitions in Eope tn ot to be ose than e assme, e think it is moe ike that the ae

bette than pojete, ith a eative mi an shot-ive eession. Apat om the uK, Iean,an Spain, Eopean onties i not have the kin o hosing bbbe o ove-epenene on

onsme spening that the uS ha. An most o them — ith eeptions ike Ita, Iean, an

pehaps the uK — on’t have the big sa eits that the uS has to hane. So as makets in the

Ameias an Asia Pai stat to eove, man epot-oiente onties ike Geman, Fane,

Bene, an centa Eope i ome bak stong. I so, the teh seto i impove ith these

eonomies, an IT phases in Eope i tn ot to be fat o jst on a itte in 2009.

SUPPLEMENTAL MATERIAL

Methodolog

o start, we collected data or major European markets rom the Organization o EconomicCo-Operation and Development on nominal GDP, I investment on computer equipment,

communications equipment and soware rom 2001-2006 (or latest available data, which was

2004 or 2005 or some European countries), and I investment as a percentage o GDP. We

adjusted OECD data on investment in soware to exclude the value o “own account” or internally

developed soware, which Forrester includes in I sta costs. We excluded 45% o the total value o

soware, based on US data on the distribution o soware between “own account,” packaged, and

customizable soware.

Using Forrester data on the annual growth rates in European revenues o leading I vendors by

category or 2004 to 2007, we projected I category purchases by country or these years. We varied

each country’s growth rates, using the ratio o their nominal GDP growth rate to the European average.

For minor European markets like Slovakia, Slovenia, Lithuania, Latvia, Estonia, etc., where OECD data

was not available, we estimated total I investment using I-investment-to-GDP ratios or similar

countries such as Greece. For these countries where the OECD has not published data on investment

in computer equipment, communications equipment, and soware, we estimated these countries’

investment in each category as percentages o Greece’s (based on ratios o their GDP to Greece’s).

We imported country-specic projections or I services and outsourcing or 2005 to 2008 rom

the May 2006 “European I Services Spending Forecast: 2006 o 2011” report. We excluded BPO in

order to ocus specically on categories in the I budget. For 2001 to 2004, we used the November

2003 “Forecasting Europe’s Outsourcing Stampede” report, but: 1) allocated multimarket numbersor Austria/Germany/Switzerland, UK/Ireland, Spain/Portugal, Benelux, and Nordic countries

to the individual countries; 2) used 2001 to 2005 growth rates or Germany and the UK against

updated 2005 I services data to calculate updated historic spending; and 3) estimated 2001 to 2004

I services and outsourcing spending or minor European markets using growth rates in this period

or Spain and Portugal.






24

Forrester’s Enterprise And SMB Global I Budgets And Spending Survey, Q2 2009, was elded to 3,497 I

executives and technology decision-makers located enterprises with 1,000 or more employees in Australia/

New Zealand, Brazil, China, India, Japan, Mexico, Russia, Singapore, South Arica, South Korea, and the

United Arab Emirates, as well as rom companies with two or more employees in Canada, France, Germany,the United Kingdom, and the United States. Tis survey is part o Forrester’s suite o Business Data Services

studies. Forrester elded the survey rom February 2009 to May 2009. Exëvo elded this survey via telephone

on behal o Forrester. Survey respondent incentives include a summary o the research reports. We have

provided exact sample sizes in this report on a question-by-question basis.

Forrester’s Business Data Services elds eight business-to-business technology studies in 19 countries

each calendar year. For quality control, we careully screen respondents according to job title and unction.

Business Data Services ensures that the nal survey population contains only those with signicant

involvement in the planning, unding, and purchasing o I products and services. Additionally, quotas are

set or company size (number o employees) and industry as a means o controlling the data distribution and

establishing alignment with I spend calculated by Forrester analysts.

Companies Analzed For This Document

Accenture

Afliated Computer Services

Alcatel

Atos Origin

Avaya

BearingPoint

CA

Capgemini

CGI

Cisco Systems

Computer Sciences Corporation

Dell

Electronic Data Systems

EMC echnology

Ericsson

Fujitsu

Getronics

Hewlett-Packard

Hitachi

Hyperion Solutions (prior to its acquisition by

Oracle)

IBM

Inosys echnologies

Lenovo

Lucent echnologies

Mercury Interactive (prior to its acquisition by

HP)

Microso

Motorola

NEC

Nokia

Nortel Networks

Oracle






25

SAP

Siebel Systems (prior to its acquisition by

Oracle)

Siemens Business Services

Siemens Network echnologies (prior to its

merger with Nokia)

Storage echnology (prior to its acquisition by

Sun Microsystems)

Sun Microsystems

Symantec

-Systems Enterprise Services

ata Consultancy Services

Unisys

Wipro

ENDNOTES

1 Te OECD published its latest Economic Outlook in June 2009, “OECD Economic Outlook No. 85, June

2009,” (http://www.oecd.org/document/18/0,3343,en_2649_34109_20347538_1_1_1_37443,00.html). Te

real GDP orecasts or the euro-zone countries are in its FlashFiles Summary o projections (http://www.

oecd.org/dataoecd/18/26/2713584.xls).

2 Te countries o Western and Central Europe include 25 countries in the European Union (prior to

the accession o Romania and Bulgaria), plus Switzerland, Norway, and micro-countries like Andorra,

Liechtenstein, etc.

3 For example, CIOs eel they have to keep on investing in security soware to stay ahead o threats and in

soware products to help with regulatory compliance. And I management soware and enterprise process

applications help can drive down other costs.

4 We use the IMF assumption o a 2% decline o the US dollar against the euro, though this may be too low.

5 Our denition o Western and Central Europe includes 25 o the 27 countries in the European Union (we

include Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,

Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Slovakia, Slovenia,

Spain, Sweden, and the UK; we exclude Bulgaria and Romania) plus Iceland, Norway, and Switzerland.

6 We discussed the reasons or the dierent behaviors o the US and Canadian I markets in our recent

report on the US and Global I markets. See the June 29, 2009, “US And Global I Market Outlook: Q2

2009” report.

7 Forrester estimated that the total European market or I services and outsourcing and or business process

outsourcing in 2006 will be €109 billion, o which €17 billion will be spent on application outsourcing, €11billion on business process outsourcing, €24 billion on inrastructure-related outsourcing, and €56 billion

on I consulting and integration services. See the May 3, 2006, “European I Services Spending Forecast:

2006 o 2011” report.











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