Story image

Atradius report outlines the ‘major shifts’ in the global ICT market

22 Jun 2018

The global information and communications technology (ICT) market continues to expand, with sales of ICT products and services expected to increase by more than 3% per annum in 2018 and 2019.

That’s according to a new market research report from Atradius, which forecasts strong growth in business software and IT services, with the communications services sector continuing to drive the most spending. Atradius managing director for A/NZ Mark Hoppe says, “There is uncertainty on the horizon due to the potentially negative impact of Brexit, interest rate increases, currency fluctuations, and international trade disputes.

“However, despite these challenges, businesses will continue to invest in ICT as they anticipate revenue growth, although their spending patterns are expected to shift. Investments in digital transformation, blockchain, Internet of Things, and the progression from big data to algorithms to machine learning to artificial intelligence will continue to be main growth drivers.” Atradius says advancing technologies and changing market conditions are driving major shifts in the ICT landscape.

It says ICT companies are facing increasing pressure to improve time to market, ensure their offerings are ‘best in class’ and include evolving technologies in a market environment generally characterised by high competition and pressure on margins. Hoppe adds, “this challenging landscape will increase the likelihood of failure for ICT businesses that can’t adapt accordingly.

“The choice many ICT businesses face to survive is either getting big or going niche. Therefore, many ICT businesses will partner up by pooling their resources for mutual gain in areas where they do not compete directly.”

As well as an increased emphasis on partnerships, Hoppe forecasts that mergers and acquisitions will also increase in prominence. “Another strategy for ICT companies in 2018 and 2019 will be mergers, acquisitions, and divesture, which can provide a fast track to fending off competitors from both inside and outside one’s industry,” Hoppe says.  

“However, highly leveraged ICT companies could face challenges in financing mergers and acquisitions or other strategic investments.”

Looking towards local markets

Atradius expects the Australian ICT market to grow further in 2018 and 2019, with both state and federal governments remaining key investors in IT projects, accompanied by business and consumer ICT spending, which is driven by economic growth and technological progress. The other key Australia-specific findings of the report include;

1. The Australian ICT market is highly competitive in the distribution, retail, and system integrators segments. However, in general, ICT is a profitable segment with steady margins. Across subsectors, ICT retail margins are lower compared to margins earned by value-added system integrators.

2. Many ICT businesses are highly leveraged, either via debtor financing for working capital management or through term loans. Banks are quite open and willing to offer loans to the industry. It is important for ICT business to have healthy cash flow as a lot of companies earn extra margin by settling invoices early and, therefore, having working capital in place is important.

3. Payments in the Australian ICT sector generally take between 30 days and 60 days from invoice date or between 30 days and 45 days end of month (EOM). Payment experience over the past two years has been good so far and the level of insolvencies is low, with no major change expected in 2018.

4. Atradius’s underwriting stance remains generally open for all ICT subsectors. The IT producers and service segment generally performs well with profitable businesses, and many companies in the telecommunication segment are financially strong. In contrast, the report is more cautious with ICT retailers, as this subsector accounts for most credit insurance claims in the industry.

Atradius is a credit insurance company that provides tailored risk management solutions and services.

The company actively and routinely conducts ongoing research on the wider ICT market across a wide range of global geographies. 

Microsoft appoints new commercial and partner business director
Bowden already has almost a decade of Microsoft relationship management experience under her belt, having joined the business in 2010.
Zoom’s new Rooms and Meetings features
Zoom has released information about the upcoming releases for its Rooms and Meeting offerings for 2019.
Aussie company set to democratise direct-to-orbit IoT access
Adelaide-based Myriota has released a developer toolkit that has been trialled and tested by a smart waste management platform.
Apple's AirPods now come with 'Hey Siri' functionality
The new AirPods come with a standard case or a Wireless Charging Case that holds additional charges for more than 24 hours of listening time.
Dynatrace takes pole position in APM Magic Quadrant
It placed highest on Ability to Execute and furthest on Completeness of Vision in the 2019 Quadrant for Application Performance Monitoring (APM).
HCL and Xerox expand strategic partnership
Under the terms of the agreement, HCL will manage portions of Xerox’s shared services, including global administrative and support functions.
Avaya expands integration with Google Cloud AI
This includes embedding Google’s machine learning within conversation services for the contact centre, enabling integration of AI capabilities.
Forrester names Crowdstrike leader in incident response
The report provides an in-depth evaluation of the top 15 IR service providers across 11 criteria.