CBW, p.44 / E-solution firms adapt amid crisis

With sluggish markets slowing down transactions and software developments not currently in demand, e-solution providers are looking for their own solutions to the economic crisis. Many companies said they remain confident in the strength of their sector but that they are going to have to be more adaptable.

“Software solutions have to bemuchmore flexible now,” said Pavel Šafránek, public relations manager at Asseco Czech Republic. “The customers will not want to spend as much money as in 2008. They will need quick and effective solutions that can help them to optimize their IT.”

Certain markets are undeniably slowing down. Figures from the Czech Statistical Office (ČSÚ) indicated that seasonally unadjusted sales within the e-solution services market decreased by 5.8 percent in the fourth quarter of last year. Moreover, seasonally adjusted sales also went down by 2.1 percent against the previous quarter in real terms, the ČSÚ reported.

“In the U. S., Central and Eastern Europe and the Middle East, we can see that customers are hesitating more before purchase,” said Šimon Vostrý, founder and CEO of e-solution firm Zoom International. In particular, markets in Ukraine and Turkey have been hit, Vostrý said.

While some customers are holding back large purchases, others are showing signs of returning back to their normal transactions. DataLite, a Czech e-solutions firm, found that the economic downturn is shaping paymentmorale. Retail clients put a stop on their orders from DataLite at the end of 2008. Subsequently, at the beginning of 2009most of DataLite’s clients had modified budgets countering the recession. “[Orders] are not on the same level, but the conditions for orders are not so strict, and from our point of view are returning back to normal,” Jiří Kadlec of DataLite told CBW.

Even so, the IT sector in general has not been hard hit by the recent economic downturn. IT firms posted growth of 17.5 percent in the first quarter of 2008 in data processing and database activities. This followed the trend in 2007. Sales in computer and related activities increased by 1.2 percent year-on-year, despite a drop of nearly 11 percent in receipts for maintenance and repair work, from the second quarter of 2008 until the end of the year.

No software developments

With technology advancing everyday, the demand for improved solutions and complex software will always be on themarket. Software is now produced to suit multiple platforms. Programs are designed to counteract various business problems within many sectors. This not only cuts costs, but helps to increase business online. It also enhances business-customer relationships. In spite of this, there have not been any drastic changes in the type of programs required from businesses and companies.

Zoom has its own product line, so it does not work on demand development projects. “We are happy to see that costs of developers are getting to normal situation and good people are available on themarket for adequate money,” Vostrý said. For ZOOM, the downturn has resulted in new positions opening as they are currently hiring.

DataLite plans projects over years, so the firm has not witnessed any changes in the demand for different or new programs that could complement the challenges of the downturn. On the other hand, public administration makes up the principal bulk of Asseco Czech Republic’s customer base. Thus, software and business programs are continually reformed and customized to counter any business problems. “The public administration is now in the process of electronization (e-Government) and a lot of money is flowing into this sector,” Šafránek said.

Revenues still solid

Despite the cutbacks within certain markets, Zoom remains on track in terms of their annual growth. Asseco Czech Republic revealed that their consolidated earnings increased by 27 percent increase in revenue from2007 to 2008 (see Technology, page 57). Moreover, Asseco Czech Republic won new contracts with values totaling Kč 640million (€22.9million) last year.

In spite of the revenue growth, predictions for 2009 remain mixed. “It will be a very tough year and the weaker players will have trouble surviving,” Vostrý said. Normal business will return sooner or later depending on the sector, Kadlec said. For DataLite, there are many factors that should be considered. Themarket for e-solution providers depends on how the economy reacts tomore bad news, or the extent of damage caused from losing markets abroad or the effect from losing more clients, Kadlec said.

On the other hand, Asseco said there could be positive outcomes, too. “We posted our economic results for 2008, which were great,” he told CBW. “IT companies have to adapt to both the business offers and strategy,” he added.

Author: Jaishree Kalia