European IT sector caught in a downdraft

It’s official. For the first time in over a decade the European IT industry has slipped into recession.


Infoconomy EuroIndex — June 2002
Source: Infoconomy

The Infoconomy EuroIndex, which tracks the overall revenue growth of Europe’s top 100 IT companies, turned negative in May, dropping to -0.7% from 2.2% a month earlier. The latest figure highlights a precipitous decline over the past year from a growth level of around 17% in the summer of 2001.

The biggest influence on the downturn in May came from a broad spectrum of IT services and software companies. IT services giant Cap Gemini Ernst &Young reported a 15% slump, while its French compatriot, Groupe Bull, saw its systems and services business decline 11%. Almost as severely hit was UK-headquartered networking system distributor and integrator Azlan, where second half revenues dropped 6%.

But there were some surprising shortfalls at some of the former stars of the European software sector. Micromuse, the UK-founded networking software company, put further distance between itself and the runaway success it experienced in 2001 with a 34% crash in quarterly revenues, and Israel’s Check Point Software, the market leader in firewall software, witnessed an uncomfortable 28% falling away of revenue.

Despite such indicators, the weakness in Europe still looks modest compared to the global picture. The US-dominated Infoconomy Global Index, which gauges the performance of 200 IT companies worldwide, has languishing at a less palatable -13% for five months.


Infoconomy Global Index — May 2002
Source: Infoconomy

And, indeed, the financial news in Europe was by no means all negative. One sector – mid-market business applications software – continues to shine, as the UK’s Sage reported a 22% jump in sales, and three Swedish companies – Intentia, IBS and IFS – turned in positive growth of 3%, 10% and 2%, respectively. Pushing hard into their segment, Germany’s business applications giant SAP also pulled off a major achievement in its latest quarter with a 9% revenue hike.

Despite those performances, however, the underlying trend is still downwards, and the EuroIndex is destined to portray a deepening recession in coming months.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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