Technology breakthrough

In the coming years, it is anticipated that the technology, media and telecommunications (TMT) sector in the Central and Eastern European (CEE) region will enjoy significant annual growth.

The process of telecom privatisation and increased penetration is continuing, while new services are being added, such as multimedia, data and content. Analysts expect that the mobile telecom market will experience the most significant growth. Also, it is likely that growth will be strong in the data transmission and internet services market, as there has been a rapid development of the market in recent years, and most CEE countries have room for further expansion.

The procurement of IT systems and technology is increasing as companies in the region modernise their IT infrastructure to enhance productivity and competitiveness. Further, the CEE region is increasingly becoming a preferred destination for IT outsourcing, as the benefits of ‘nearsourcing’ are becoming evident to North American and European companies as compared with more remote and difficult emerging markets such as India and China.

In a January 2005 study entitled The Central and Eastern European Opportunity, Creating Global Advantage in Serving Western Europe, the Boston Consulting Group observed: “Companies that sell their products or services into Western Europe may be basing their strategic sourcing decisions on some significant mistaken assumptions. In seeking the competitive advantage to be gained by sourcing and manufacturing in rapidly developing countries, they may be tempted to follow the rush to Asia, and in particular to China, without exploring opportunities closer to the markets they want to serve. But recent research by the Boston Consulting Group confirms that, contrary to popular belief, the CEE offers features that make the region highly competitive with China.”

Perceiving this advantage, many major technology companies recently have set up captive R&D and software development centers, or outsourced service operations in the CEE.

Although the growth in the TMT sector will not be as great as in the past, when the CEE countries emerged from communism, it is likely to significantly outpace Western Europe. It is anticipated that the more developed markets of Poland, the Czech Republic and Hungary will likely continue to show strong growth in the TMT sector. The more emerging markets to the East, in particular Russia, Ukraine, Romania and Bulgaria, will likely show the most significant growth as foreign investment and modernization continues at a rapid pace.

Isabel Davies is head of TMT at CMS Cameron McKenna