Five Key Tendencies in Lithuanian IT Sector Development
The Lithuanian economic growth that lasted for seven years has stopped for a while meeting the global financial crisis. Economic challenges invoked the newly formed Government to review the economic strategy – attraction of investments from technology companies, development of science and technology parks and export of IT services and products became the most important priorities. On the other hand, during the seven-year economic growth the whole IT sector has become considerably stronger – markets of information technologies, Internet and communications have expanded by several times.
Exporters of cathode-ray TV sets are replaced with companies exporting mobile technologies and programming services. International programming companies establish their branches in Lithuania. We observe the changing tendencies in the Lithuanian IT sector development.
IT Market – Transition from Fast Growth to Stable Development
Following the data of the Department of Statistics under the Government of the Republic of Lithuania in 2007, the share of Lithuanian IT sector represented 3.7% of GDP of the whole country, and the output of IT sector reached EUR 1,608 m (LTL 5,550 m) . Foreign direct investment in IT sector amounted to EUR 985.08 m (LTL 3,401.3 m ). The biggest share of this investment – 81.3%– was received by telecommunication companies. Among investors Denmark (EUR 580.63 m, 58.9% of all FDI), Sweden (EUR 189.56 m, 19.2%), Finland (EUR 63.63 m, 6.5%) are the leading countries.
Assessing trading dynamics of all Lithuanian IT companies within the last five years, one may notice some tendencies:
First, significant growth in IT wholesale. In the year 2004 the sector expanded by 34%, in the year 2005 – by 52.4%, in the year 2006 – by 18.2%, in the year 2007 – by 17.2%. This jump in IT consumption, first of all, was predetermined by intensive bank crediting; tax allowances were applied to residents who acquired their first computer, fast establishment of new workplaces in business companies and public organizations.
Second, the scope of services in the field of software development and IT infrastructure introduction has expanded on average to 25% per year.
Third, the growth of telecommunication sector, which does not dominate in the field of IT sales, has been stable. In fact, till the year 2008 the growth was influenced by harsh competition because of new consumers. Development of telecommunication market of the forthcoming years shall be stimulated by 3G and planned 4G telecommunication services.
During economic boom IT import exceeded export. In the year 2007 export in IT sector represented 4.4% of total Lithuanian export or made up EUR 552.54 m (LTL 1,910 m). The value of imported goods amounted to EUR 1,175 m (LTL 4,057 billion). On the other hand, there was a stable growth of export of companies engaged in provision of software services and production of telecommunication equipment. One of priorities of economic policy by the Government of the Republic of Lithuania is export of high technologies. To this end, public investment into the establishment of technological parks are made. It is forecasted that IT export will expand from 10 to 15% per year.
The most important IT export partners of Lithuania are the following: in the year 2007 the biggest share of IT goods was exported to Russia (22.2%), Latvia (21.0%), Estonia (12.9%). The largest share of IT goods was imported from Netherlands (16.1%), Germany (12.8%), Finland (11.6% of total import of IT products).
In September and October 2008 the survey of ”Infobalt” association members was performed to assess the potential of export of the Lithuanian ICT sector. The aim of the survey was to collect more comprehensive information about the activities of the Lithuanian ICT export in certain fields.
Following the data provided by the survey, the companies develop the following products by their own means:
Telecommunication Sector - Leader in Europe
Due to strong competition the number of mobile connection subscribers in Lithuania increased up to 147 per one hundred residents within the last years (diagram). This index is the second after Luxembourg among all European countries. It is noteworthy that 81% of foreign direct investment into IT sector were attracted by telecommunication sector. At the end of the year 2007 total investment into telecommunication sector reached EUR 801 m (LTL 2,766.2 m) (diagram). In the market of mobile communications there dominate three companies: ”Omnitel”, “Tele2” and ”Bitë”, fixed communications – operator TEO LT managed by the Swedish company “TeliaSonera”.
From the year 2000 to 2007 the number of mobile communication users increased by 9.7 times. Currently providers of mobile services employ quantitative market occupation for services of new quality. Lithuania, one among the first in the world, has introduced mobile e-signature. Companies and individuals are actively using mobile banking. It has taken a hand in speed-up of e-commerce development.
Telecommunication companies influenced fast Internet spread within the last five years. In 2003 only 6.2 per cent of households had internet access, and in 2008 – already 47 per cent used the Internet. Almost a half of all subscribers uses broadband link services. Mobile Internet becomes more and more popular.
Lithuania is among the first countries which have started introducing 4G connection. Since March 2009 Lietuvos radijo ir televizijos centras AB has provided Internet services based on WiMAX technology. TV centre specialists who perform testing of base stations are glad at especially good results exceeding expectations – real data transfer rate received by users reaches up to 10 Mb/s and it is not a limit. Mobile WiMAX (in English Worldwide Interoperability Microwave Access) is a fourth generation (4G) mobile communication technology based on the most innovative radio communication technology. Later the network will be expanded in other large cities of Lithuania, as well.
Public Services – Lithuania Runs after Strongest EU Members
In 2008, a share of public services for business accounted for 75% performing calculations according to the methodology approved by the European Union, and a share of electronic public services for residents represented 51%.
In the year 2007, 20% of Lithuanian residents 15 to 74 years old addressed public administration institutions (in 2006, the index was equal to 14%). People visit websites of public institutions most, as they are searching for general information about a certain institution, its field of activities (68% of website visitors), for general information about public services rendered by a certain institution, their receipt order (37%), for dominating legal or administrative information (36%). The scope of usage of e-services is expanding: according to research data 28% of public sector website visitors submitted forms completed electronically or other information necessary to receive e-services, 25% of them have sent forms necessary to receive services rendered by institutions electronically. Residents used e-services related to income tax (44% of public sector website visitors used them), job search (27%), learning (19%), legal information search (18%) and transport (18%). Residents believe that e-services related to income tax (40%), work search (32%) and public health (24%) are the most required.
E-Commerce – Breaking Point
E-commerce in Lithuania already counts its first decade. The Lithuanian IT wholesalers were among the first ones, which started using e-commerce. At present gross IT wholesale turnover equals more than EUR 580 m (LTL 2 billion) per year. Some time later wholesale trade in medicine began – the company ”SKS Vaistai” so far supplies the network of 700 pharmacies. (Diagram No. 8) Recently retail e-commerce is actively becoming more popular. Although in 2007 only 7% of all residents had been using the services of e-shops, however, at present several hundred e-shops are functioning.
The greatest turnover is made by the companies distributing plane tickets. The e-shop ”Greitai.lt” has been acknowledged as the best one in Lithuania in the category of small companies – a team of ten persons reached the turnover of EUR 29 million (LTL 100 million) per year. It expanded its activities outside Lithuania, tickets are also sold on Latvian, Estonian and Ukrainian markets.
Success treats well e-shops, which sell online tickets to different events. Over 2008, the company ”Bilietai.lt” reached the turnover of EUR 8.4 million (LTL 35 million). Several tens of e-bookshops, e-shops of electrical devices, clothes and food are functioning in Lithuania.
In 2008, total number of Internet users in Lithuania exceeded 51%. The breaking point is forecasted in retail e-commerce. It is expected that the number of persons buying online will increase by 30% every year.
Based on the data by “Eurostat”, by the share of turnover of companies that goes to e-commerce on the Internet, in 2007 Lithuania among EU countries gave up its position only to Ireland and England.
Strong Core of IT Specialists is under Development
International programming companies “Bentley Systems”, “TietoEnator”, “IBM”, “Microsoft”, “Computer Sciences Corporation”, “Affecto Group”, “Proact” have employed hundreds of employees in Lithuania.
”We searched for people who have good skills in the field of information technologies <...> - we‘ve found them in Lithuania”, Mary Jo Morris, President of “CSC World Sourcing” said.
More than 1400 IT specialists graduate from higher education establishments every year. It is the best index among all EU countries comparing to an amount of IT graduates per 1000 residents. In programming sector there work app. 10,000 professionals. Of course, qualification of graduates of Lithuanian higher education establishments has not yet achieved the level of the best universities of the world. However, both local and international programming companies with rich experience provide new IT specialists with high-level technological knowledge. They become professional project managers, programmers, system administrators within several years.
At the end of the year 2007 there operated 1,777 companies with 25,000 employees in Lithuania. In IT sector there dominate small companies with up to 9 employees. Such companies represent 82% of medium-sized and large companies with 50 and more employees, and accounted for 5% of all companies, however, their employees made up 64% of all employees.
One of the most important IT sector development steps of recent years is technological parks established in Lithuania, which team up future specialists of IT companies, scientific research institutes, production companies and higher education establishments. Currently there already operate five technological parks: Visoriai IT Park, Saulëtekis Valley, Technopolis, etc. It is the biggest science and business synergy project executed in Lithuania according to its scope and resources.
The fact that qualification of Lithuanian IT companies is in compliance with the highest requirements set is proved by the famous client names - “DeutchBank”, to which ”Alna Software” provides programming services, ”Nokia”, a partner of which became developer and manufacturer of telecommunication products „Teltonika“, and „Bentley Systems“ which has worked with Lithuanian programmers already for twelve years.
|Association INFOBALT||Akademijos str. 2 - 519/520, LT-08412 Vilnius, Lithuania|
Tel.: +370 5 2 622 623, fax: +370 5 2 622 624. E.mail: office (et) infobalt.lt