Analytics, Baltic, Forum, Investments, Markets and Companies, Round Table, Technology

The trends

Based on survey results, during the 2010 H1 sales of IT services have declined by 3%, y-o-y. On the other hand, despite continuing stagnation in IT services market, other revenues that include sale of hardware, third-party software and other services are on the rise this period. Growth of other revenues reached 41% mainly due to successful development of Lithuanian market players, namely, Santa Monica Networks, Atea, and Elsis group. All these companies, despite being relatively large, managed to achieve spectacular growth of other revenues totaling 43%, 55% and 268%, respectively. Santa Monica Networks has been actively promoting its products throughout 2009 and now sees the results. In particular, its efforts to promote a complex Santa Care service have paid off. Atea managed to win few notable projects financed from EU funds, invested into higher value services and streamlined its sales process by introducing e-commerce. The company now indicates that private sector is beginning to understand IT as an efficiency enhancing tool rather than a cost centre, and the outlook is optimistic. Elsis Group succeeded in winning projects in AB Lietuvos dujos as well as in public sector and abroad to secure outstanding growth, especially of its telecommunication and intelligent engineering systems business; on the other hand, as indicated by Elsis group management, they feel that mainstream sales to small and middle sized companies are still stagnating.

Surveyed companies’ revenue growth by type, % y-o-y

The top companies

Although Exigen Services has had a 13% drop in IT services revenue in first half of 2010, it still remains among the top IT companies in the Baltics. According to Uldis Smilts, Exigen Services Latvia Vice President, Finance and Administration, the decrease is related to the global economic crisis, which had a particularly severe impact on the Baltic states, thus affecting the volume of IT procurement, especially in the public sector. However, the Company expects to recover from the drop, as current turnover indicates growth. Webmedia finished second, however it experienced a small correction of IT services revenues by - 4%. AS explained by Priit Alamäe, CEO of Webmedia group, the decline is in part attributed to a number of long-term contracts in US dollars and unfavorable exchange rates in 2010H1. In addition, beginning of 2010 was slow on all fronts and many customer decisions were delayed to the second quarter, temporarily influencing the 1st quarter. For the first time top-3 is completed by Baltic Data centre that surpassed Alna group based on 2010 H1 results. Its IT services revenues grew by almost 22% due to new service offerings such as virtual servers

New to the top-20

The most significant addition is Affecto Lietuva that is back to this rating after few years of absence. Other newcomers include Baltnetos Komunikacijos, a Lithuanian internet access and data storage and IT maintenance provider (first time in half-year review), Net group, an Estonian provider of infrastructure and IT solutions, BCS Itera, ERP solutions provider, and NRD, a specialized register systems development company.

The fast and the slow

Smaller companies were more agile in 2010H1. ISoft Solutions was both among the fastest growing and declining companies in different periods, mainly due to its dependence on large scale projects and resulting sales fluctuations. Recently the company secured a project in Latvian census and managed to almost triple its sales, compared to 2009 H1. DPA SIA also was successful in a few major projects both in public and private sector and saw a substantial revenue growth of 165%. Baltnetos komunikacijos grew 44% by introducing complementary products and adding new service offerings. On the other hand, 11 out of 20 companies ranked experienced declining revenues from IT services. In particular, Baltic Amadeus, Lattelecom group and Uptime suffered losses of at least 30%. Baltic Amadeus finished some long term infrastructure projects in 2009 and experienced a decline afterwards. On the other hand, revival and renewed contracts with main clients took place in 2010 H2. Lattelecom Group was influenced by postponed contracts and indicated that most of the business lines were affected by continuing downturn. Uptime also saw its clients postponing IT investment for several months, but most of these projects are under way in 2010 H2 or beginning of 2011.

1 Baltnetos Komunikacijos

2 Baltic Amadeus

3 Lattelecom Group

Disclaimer: The information contained in this document has been obtained from external sources, which we believe to be reliable. Although Prime Investment has taken steps to ensure the accuracy of the information presented we do not guarantee that it is accurate or complete, or make warranties regarding results of its usage. Data used in the tables and graphs are provided by the management of the surveyed companies, unless indicated otherwise.