Hungary Information Technology Report Q2 2014
The economic environment will enable faster growth in IT market spending in 2014, however with business and consumer confidence remaining fragile in the context of external risks we do not expect a sharp uptick in spending. Despite these challenges there are solid fundamentals for medium-term growth. In the retail market relatively low penetration rates, combined with declining device prices, particularly in the tablet market, will see Hungary outperform developed markets in terms of growth rates. Meanwhile, the dispersal of EU funds for projects and Hungarian IT firms, the modernisation by Hungarian enterprises as they face the pressures of international competition and cloud computing demand will all drive spending growth.
Headline Expenditure Projections
Computer Hardware Sales: HUF266.1bn in 2013 to HUF277.5bn in 2014, an increase of 4.3% in local currency terms. Strong tablet sales will compensate for the decline in desktop and notebook shipments, but with consumers opting for cheaper devices increases in market value will trail unit growth.
Software Sales: HUF166.9bn in 2013 to HUF180.9bn in 2014, an increase of 8.4% in local currency terms. Software is forecast to be the outperforming segment in 2014, driven by demand for ERP and security software.
IT Services Sales: HUF230.6bn in 2013 to HUF249.6bn in 2014, an increase of 8.2% in local currency terms. Cloud computing services are the fastest area of growth, but overall growth will be constrained by the government drive to cut IT services spending.
Key Trends And Developments
The cutback in public spending hit the IT services market in 2012 and 2013, with only limited growth prospects in 2014. In January 2014 the Minister of State for Infocommunication stated that the state had reduced annual expenditure on IT services by over HUF20bn in 2013 as a result of modernisation and reorganisations. The public sector cuts squeezed the IT services market and we believe the growth of the software market will continue to outperform in 2014, driven by strong demand for enterprises as the economy emerges from recession.
Although the Hungarian IT market development has been stymied by economic weakness, in recent years several innovative domestic IT companies have expanded rapidly. One example is NEXON, the leading HR software provider in the domestic market. It is in the process of expanding across Europe, driving revenue growth. While NEXON is well established by 2013, there is also a vibrant start-up scene in Hungary, centred on Budapest. The leading of the new generation of Hungarian IT enterprises is Prezi, a provider of presentation software using a SaaS freemium business model to challenge the dominance of Microsoft's PowerPoint. Prezi is expanding rapidly, reporting in July 2013 that it had 26mn users from 190 countries who had used Prezi on desktops, browsers and Apple iPads/iPhones. NEXON and Prezi are included in BMI's new competitive landscape for international and local IT companies in Hungary.