Lithuanian IT Market Trends
Lithuania remains the fastest growing information technologies market in the Baltics. In 2002 the scope of sales among IT wholesalers grew by 27%, sales of personal computers exceeded last year's figure by 43%. The income of solution providers surged significantly from IT services. A general IT market scope reached EUR 265 million.
Currently, several significant tendencies within Lithuanian market could be noticed. A rapidly growing GDP (5,9% in 2002) has influenced home user and small business market, therefore, sales of computer hardware in this segment have been and are still developing very dynamically.
A second tendency is that the bulk of Lithuanian IT companies are specializing by putting much more investment into competency of their workers. Their target is to establish themselves within IT solutions and services market. Thirdly, Lithuanian IT companies are starting to operate in countries of neighbouring region by establishing their daughter companies and exporting technological solutions.
2002 year Lithuanian ICT market size
In total - appr. 1 229 million Euro (appr. 4 240 million Litas).
Note: Data on communication equipment and complex IT solutions market are tentative and approximate.
IT is Becoming an Engine for Growth of Lithuanian Economy
In 2002, when Lithuanian Gross Domestic Product increased by 5,9%, foreign experts recognized the Lithuanian economy as the fastest growing economy in East and Middle Europe. One of the most important growth criterion of Lithuanian economy was the information technologies sector, which has been developing faster than the overall economy by nearly 3 times.
According to the information of the Statistics Department, during the first half of 2002 the value added ratio of IT sector with Lithuanian GDP reached 6%. The forecasts say, that during the entire year 2002 this indicator could account for around 6,5-7%. Whereas in 2000 the value added ratio of IT sector accounted for only 5%, in 2001 - 5,5%.
The growth rate shows, that in 3 years the IT sector contribution to Lithuanian economy will exceed 10% of Lithuanian GDP. It is evident, that the new technologies are becoming one of the most important growth criterion of Lithuania - the largest economy in the Baltics.
The Lithuanian IT sector in 2002 mostly grew due to the recovered consumption in internal market - stable economical development allowed the country's residents to spend much more than 2-3 years ago. A general growth of retail trade in Lithuania last year reached 12,4%, and the boom in purchasing did not abandon the IT sector.
During 2002 the IT companies increased their sales mostly in the domestic market, small and medium size businesses - some computer hardware dealers, offering production to physical individuals, last year were able to increase their turnover by even 70-100%.
Meanwhile, companies offering technological solutions and the technologies for business clients last year took different directions. Some of them - Alna, Blue Bridge - chose a trend of improving personnel qualification and creation of unique solutions. By purchasing a specialized programming company Sidabrinis Tinklas, Blue Bridge expanded an IT system package by starting to offer software applications. By investing several millions of litas into improvement of personnel competence and customer service, Alna is seeking to gain leadership among exporters of specialized software products.
Other IT companies oriented to business segment last year specialized their activity. The largest by turnover Lithuanian IT company Sonex Group, having spun off a distribution activity, is now focusing on design and implementation of large IT systems and hardware manufacturing areas. Sonex resolved to conduct a part of projects, less meaningful to all group together with partners (Lietuvos Telekomas, Omnitel).
Home users Market-oriented Companies Show Growth
Revenues of 20 largest Lithuanian during 2002 grew by 13%. Less subjective factors (revenues of Alna dropped resulting from the sale of daughter company Navision Baltic, and the large sales of Elsis in 2001 were subject to a large order in Russian market), the real sales growth of largest companies would be much more impressive, reaching nearly 20%.
The revenues largely increased by computer hardware manufacturing and trade companies oriented to home users - BMS and Kibernetikos Pasaulis posted a growth of 77 % and 100% respectively.
Achievements of corporate business segment on the surface level seems to be much more modest - earnings of Informacinės Technologijos grew by 6%, Varos Group - 13%, and Blue Bridge with its growth of 20% in this market seems to be a leader.
However, sales is only a part of the positive change - the largest profit share comes from technological solutions, offered to business customers. A good example is Informacinės Technologijos, which profits in 2002 reached 23%. The largest pre-tax profit was earned by Alna (LTL 16,5 million, or EUR 4,8 million), although the bulk of it was subject to sale of its daughter company Navision to Microsoft Corporation.
The IT companies working for business segment during 2003 should further be reinforced with regard to intentions of Lithuanian companies to increase investments into new technologies. In mid 2002, based on survey results of SIC Rinkos Tyrimai, during the upcoming twelve months nearly 75% of Lithuanian companies were expecting to invest into development of IT and telecommunications.
Computer hardware dealers oriented towards home users naturally should react to latest tendencies - more and more computer hardware is bought not at specialized outlets, but at retail chain stores (Topocentras, Elektromarkt, etc.), where personal computers are displayed alongside washing machines, refrigerators and other home appliances.
Geography of Exporting Expands
IT companies, operating in the largest Baltic market, are finding it too small, despite the increasing demand of IT systems in Lithuania. Lithuanian IT leaders, having secured a strong position in Latvia, this year are planning to go further.
Sonex Group, which has opened a computer manufacturing plant in Latvian capital Riga and received awards in a series of competitions is now aiming at Russian and Estonian markets. Russia is also targeted by Elsis - this year it is planning to implement telephone stations in Moscow region.
Varos Group, implementing specialized IT solutions for trade and industry in all three Baltic States in 2003 is planning to gain stronger positions in Latvia and Estonia. This year it is determined to establish three companies in Lithuania and daughter companies in Latvia and Estonia, and by 2005 it is expecting 50 per cent of income outside Lithuania.
“Alna”, together with MicroLink - the largest IT company in the Baltics - is under way of establishing a document management systems development and distribution company and is striving to expand IT solutions export geography not only to the Baltics, but also to Scandinavia. Besides, last year Alna signed one of the largest export contracts in Lithuanian history with a US company Bentley Systems.
Export geography is expanded by banking technologies leader and group of Penki Kontinentai, earning well over 50 per cent of income. Having successfully established in East European and Asian markets, last year Penkiu Kontinentu Bankines Technologijos - a daughter company of Penki Kontinentai founded its office in South African region - Zimbabwe.
Computers are Coming to Village
IT companies, which focused on internal market in 2002 did not regret about it. In that year Lithuanian sales accounted for 120 thousand new computers, which is larger by - 60% than in 2001 (75 000). The PC market was mostly boosted by home users, small and medium size business.
A portable computers market expanded even more - based on NK Verslas information, last year the sales of these computers in Lithuania accounted for 7 500. This is more than in 2001 by 2,3 times. It is expected, that during 2003 the portable computers sales will amount to 17 000 units. Besides, according to NK Verslas, last year the portable computer market accounted for about LTL 45 million (EUR 13 million) and this year may grow to LTL 103 million (EUR 29,8 million).
There doubtless that the growth of computer market will not slow down a few more years as households are just beginning to acquire this hardware.
According to the information of Statistics Department, at least one personal computer in the first half of 2002 was owned by 12 per cent of Lithuanian households. This number is smaller than in the EU by 3 times. On the other hand, compared with 2001, acquisitions of computers by households grew by one third, and compared with 1998 - even 6 times. Last year computers were owned by 19 per cent households of largest cities. However, what should really be noted is that computerisation has finally arrived at Lithuanian villages.
Last year computers were owned by 5 per cent of village households, which is 5 times more than 2 years ago. Business enterprises have already purchased computers and therefore this segment is growing slower. At the beginning of 2002 computers were used by 84,4% Lithuanian companies (compared with 80,2% in 2001).
Wholesales Market is Growing
The development of computerisation is perfectly reflected by changes in wholesale market of computer hardware. In 2002 this market grew by 27% to LTL 498 million (EUR 144,2 million). The largest computer wholesaler GNT Lietuva last year surged by 37,4% to LTL 257 million (EUR 74,4 million). In 2001 this figure accounted for LTL 187 million.
The company GNT Lietuva last year owned 51,6 per cent, Tech Information Lietuva - 17,1 per cent, Elko Kaunas - 11,1 per cent, Acme Kompiuteriu Komponentai - 10,1 per cent, and Asbis - 8,5 percent of Lithuanian wholesale market share in computer hardware.
NK Verslas forecasts, that during the next three years the Lithuanian wholesale market in computer hardware will grow by 2 times and in 2005 will reach LTL 1 billion (EUR 290 million).
The Number of Internet Users has Jumped
The growth in computers and overall IT sector is partially subject to a boom in Internet use. After the state authorities and private businesses united their finances and forces for the development of Internet, Lithuania, which in 2001 was an outsider in Central and East Europe by use of Internet, last year started to catch up with the leaders.
Based on SIC Gallup Media information, in summer of 2002 21% of Lithuanian residents used Internet at least once a half year - at least twice as many as the previous year (11%). In this respect Lithuania has already outnumbered Latvia (16%).
The number of people in Lithuania using Internet at least once a month has increased from 9% in 2001 to 17% in 2002. A surprising growth in Internet lets us hope that the goal set by Lithuanian business people and authorities in 2002 - to achieve the EU level (40 per cent) by number of Internet users in 3 years - will become reality, not the mirage.
Boom in E-banking
A fast Internet use expansion was especially favourable for banks and their branches operating in Lithuania - the expansion of e-banking last year beat even the most optimistic expectations.
The banks expected that in 2002 the number of e-bank service users would triple and reach 200 thousand. The reality exceeded the forecast by 2 times - the respective figure now accounts for around 400 thousand customers of e-banking.
Last year the positions of e-banking leaders changed. Vilniaus Bankas, which until 2002 had been a leader in this sphere gave up its position last year to second largest bank Hansa-LTB. In the beginning of 2003 Hansa-LTB had about 200 thousand users of its real-time system hanza.net. Meanwhile, Vilniaus Bankas lagged behind with its 120 thousand clients of VB Internetas although not all registered users of hanza.net actually use this system. Besides, this year Vilniaus Bankas is planning to invest into information systems about LTL 50 million (EUR 74,5 million) and try to regain the lost position.
The popularity of e-banking is resulting from time effectiveness and low prices of transactions. Local money transfer by cash deposit in major banks of the country costs nearly twice as much as the same operation done by the Internet. Besides, e-banking users have a possibility to settle bills for telecommunications, utility and other services.
E-commerce is Growing Rapidly
With the increase in number of Internet users, Lithuanian IT business is investing more and more into e-commerce - companies are starting to believe that e-business will pay back. This is encouraged by positive examples of computer wholesalers whose 60 per cent of trade is done through e-warehouses. Distribution of software by the Internet is also done quite successfully.
Services of online order collection and provision for companies of various fields are becoming more popular - companies specialised in construction, transportation or publishing find their orders online by paying a regular subscriber's fee.
According to the information of Statistics Department, during the first half of 2002 6,7% of Lithuanian companies indicated that they sold goods (services) by Internet, 9,6% - purchased them online.
Meanwhile, a survey, conducted by SIC Gallup Media showed, that 10 per cent of Lithuanian enterprises were intending to start or develop their business by Internet in the nearest future. An additional 16,7 per cent of enterprises were planning to start or develop e-business as soon as favourable conditions are created.
2003-04-08 | 
