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European IT Industry: Challenging Times Ahead in the Wake of Consumerisation of IT

Mar 11, 2015 | Technology | Future Market Insights

The European IT industry is restructuring itself in order to adapt to the transformation brought by emerging technologies. The proliferation of smartphones and tablets has brought a sea-change in the manner in which software companies operate, and the situation is no different in Europe.

The IT industry in Europe is facing a lot of pressure as the spending on research and development (R&D) has gone up, but the revenues have not been up to the mark. In fact, according to Truffle Capital, a European venture capital firm, profits have been lower than the investments on R&D for the second time in a row.

Consumerisation of IT has Brought a Paradigm Shift in the European IT Industry

Consumerisation of IT has been a dominant trend in the recent past, and it has had a massive impact on the European IT industry. There has been a paradigm shift in the manner in the flow of technology, with businesses and governments now having to adapt to the “consumer market” technologies - technologies that people use at home or in their personal space.

Although consumerisation of IT is being perceived as a positive trend, the transition from enterprise software to consumer-driven software is a costly affair, and the software vendors in Europe have been bogged down by the sheer magnitude of transition.  European IT industry has been witnessing slow growth rates, with most firms reporting a growth rate of less than 3%. Considering the advancement in cloud computing, mobile, and software as a service (SaaS), the European IT companies find themselves in a precarious position. If they hope to succeed in the fiercely-competitive and ever-changing IT market, they will need to adopt new technologies, while also keeping a track of their quarterly and yearly profits.

According to Sudip Saha, Managing Consultant at Future Market Insights (FMI), “The transition to cloud computing and SaaS is a challenge for most European software vendors and they will need to make a holistic change to their business model. The software vendors should work on building the fundamentals and avoid knee-jerk reactions of incorporating cloud computing and SaaS in a random manner. Those vendors that focus on delivering high-quality services will eventually succeed in the long run.”

Emergence of Mobility, Cloud Computing, Big Data, and Predictive Analytics has Created Enormous Opportunities in the European IT Industry

Although the emergence of mobility, cloud computing, big data, and predictive analytics has emerged as a challenge for the European software and service providers, it is anticipated these developments will also create a plethora of opportunities in the near future. The acceptance of new technologies will create growth in online marketing apps and enterprise social networks.

Mergers & Acquisitions: Key Trend in the European IT Industry

Many leading European IT companies have been acquired by foreign companies in the recent past. Some of the well-known IT suppliers that were acquired by foreign investors in the last five years include Autonomy, Misys, and Logica. The acquisition of Logica by Canadian behemoth CGI for around US$ 2.6 Bn in 2012 was seen by many analysts as a testament to the sad state of affairs in the European IT industry. The troubles for the European IT industry seem never-ending and the Eurozone crisis has made things more difficult. Moreover, unlike America and India, the stock markets in Europe have been tepid about technology companies and this has made it difficult for software service providers to access capital markets. These factors have been primarily responsible for the slow growth in the European IT industry.

The future of the European IT industry is full of challenges, and those companies that align themselves with the new consumer trends will find themselves in an advantageous position in the future. On the other hand, those software vendors that resist the change, or don’t execute their plans in an organised manner will find it difficult to stay profitable.