PRINT THIS PAGE IT sector competitiveness24/05/2006. Source: KPMG.
Europe’s suppliers of information technology systems are losing out to their rivals in the US and Asia because they don’t offer value for money, according to a report by the professional services firm KPMG. KPMG’s report found that global IT buyers believe European IT firms are less attractive to do business with - mainly due to a lack of price competitiveness and innovation. The survey, “A wake up call for Europe – IT sector competitiveness”, was produced in collaboration with the Economist Intelligence Unit and interviewed 126 IT buyers in some of the world’s leading companies.
Crispin O’Brien, head of KPMG’s Technology practice in the UK, said:
“This global survey will have alarm bells ringing in Europe’s IT industry. Nearly everyone expects continued concessions on pricing from their IT suppliers as well as greater flexibility in structuring contracts and innovative solutions.
“But many doubt the ability of European suppliers to deliver in these areas. It is in these areas that they are most vulnerable to Asian competitors not only abroad, but increasingly at home as well.”
Expectations of price decreases could spell harder times for some parts of the European IT industry - the survey found 80 percent of IT purchasers expect prices to fall in software and IT services between now and 2007. This is despite demand for IT products and services worldwide continuing to recover from a ‘post-bubble’ downturn.
However, it wasn’t all bad news for European IT companies; they did rank top for attention to local needs and second behind North America for customer service/product support.
The survey also highlighted that while suppliers of IT services, hardware, desktop software and microelectronics are seen to be losing ground in competition with firms from other regions, some European sectors are actually becoming more competitive. Most notably producers of mobile devices, applications and enterprise software scored high marks, and IT managers believed these firms are becoming more competitive vis-à-vis their American and Asian rivals.
Their responses underpin the IT sector Competitiveness Index, which compares IT suppliers from all three regions against a range of attributes. Asia-Pacific’s IT sector scores 6.7 out of a maximum of 10 in the IT Sector Competitiveness Index, with North America close behind at 6.6 and Europe trailing with 5.9.
Chris McDermott, CEO of LogicaCMG, the market leader in messaging systems, believes price pressure is, in part, down to greater customer power:
“Consolidation in different sectors has increased purchasing power of customers.” But he does detect a changing set of priorities among IT spenders, “Cost reduction has been their prime motivation in the past, but they are now giving greater priority to innovation,” he added.
Mr O’Brien says that to succeed in the future, European IT suppliers must focus on:
- Continuing to pursue excellent service in home markets;
- Providing value for money rather than focusing on cost reduction alone;
- Forming genuine partnerships with Asian IT companies; and a continued commitment to innovation and new product development.
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KPMG is a global network of professional service firms that aims to turn understanding of information, industries and business trends into value. With more than 110,000 people worldwide, KPMG member firms provide assurance, tax, financial advisory and consulting services from more than 830 cities in 159 countries.
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