Market Monitor ICT France 2019

• Smaller businesses have to adapt business models to survive
• IT hardware market remains under pressure
• Payments take 45 days on average

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As the focus of the French ICT market has increasingly turned towards services over the last couple of years, the IT software and services segment remains the growth driver of the industry. According to the industry federation Syntec/IDC, IT software and services sales grew 4.1% in 2018, to EUR 56.3 billion. This growth was primarily driven by digital transformation projects, with SMACS (Social, Mobility, Analytics, Cloud and Security) increasing 15.4%. The IT software and services industry is expected to grow again about 4% in 2019, despite a more subdued economic outlook for France this year.

In contrast, the French IT hardware market remained under pressure in 2018, decreasing 11.8% in volume (mainly PCs), according to the research company Gartner. Private household related IT hardware sales declined 13%, as hightened economic uncertainty has led to a postponement of renewal purchases. Tablet and PC sales are severely impacted by competition from other devices such as smartphones, a high equipment rate and pressure on prices. Cloud computing, digitalization and virtualization development reduce demand for IT hardware products from corporates.

According to the research institute GfK, sales volume in the French mobile phone market decreased 6% in 2018 (in line with the global trend), but sales revenues rose 3.7%, to EUR 8.6 billion, due to higher average prices (trend towards premium products).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Due to shifting market conditions, away from hardware towards services and new technologies, many ICT companies need to change their business model. Wholesalers try to move away from pure hardware selling, to offer more added value products and IT services to improve profitability, as this provides higher revenues and better margins. However, such efforts are not that easy to make and many companies have not met their targets, as the shift towards a new business model is often complicated and takes longer than expected. Moreover, this shift requires highly skilled management and staff, but several IT companies are currently having difficulty hiring                                                                              or to keeping skilled staff due to a shortage of experts in                                                                                the market.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

On average, payments in the French ICT sector take around 45 days, and for the time being we expect payment delays and insolvencies to remain rather low, with no major changes in H2 of 2019.

However, the situation could quickly worsen, due to the fast changing and very competitive market environment, in which many businesses are having difficulty adjusting their business models. Smaller IT businesses with inflexible cost structures and concentrated customer or supplier portfolios could quickly experience a downturn in revenues. Fierce price pressure and spot deals affect many IT hardware wholesalers and retailers, which suffer from                                                                               structurally tight margins and low equity levels.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Given the volatile market conditions under which sudden business failures cannot be ruled out, our underwriting position in the ICT sector remains generally neutral, with more caution especially for smaller businesses and the wholesale/retail segment.