The Economic Impact of IT, Software and Innovation”

The Economic Impact of IT, Software and Innovation

April 2007Czech Republic

Executive SummaryExecutive Summary

• Growth in the IT sector is dynamic and will continue on an upward trajectory through 2011

• The software market will grow at 9% average compound growth rate between 2006 and 2011

• In the next five years, the IT sector will generate over 46,000 new jobs; annual tax revenues will be almost $700 million higher in 2011 than 2006

• Approximately 53% of all Czech IT employees are engaged in creating, distributing, or servicing software – for external customers or internal corporate users – and just over 65% of all IT tax revenues come from the software-related sector

• For every dollar of Microsoft revenue in the region another $7 were generated by other companies selling hardware or software that works on Microsoft operating systems or servicing that software.

Source: IDC IT Economic Impact Study, 2007, Czech Republic

Strong IT Market GrowthStrong IT Market Growth

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

IT Spending in Czech Republic

($M) (Constant 2006 Dollars)


Czech Republic’s IT Industry – Source of Economic GrowthCzech Republic’s IT Industry – Source of Economic Growth

IT as a % of GDP


YE 2000-2010

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20113.2% 2.9% 2.6% 2.6% 2.5% 2.5% 2.7% 2.8% 2.9% 3.0% 3.1%

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

$m

IT spending ($m) IT Tax revenues ($m)

IT Market Topics and Issues in Czech RepublicIT Market Topics and Issues in Czech Republic

§ Software and Services Pushing IT Market Growth

§ Hot Areas of Interest: Security, Application Integration, BI and Analytics, Mobile Solutions

§ SMB Uptake in Applications Space, Driving Overall Apps Market Growth

§ Czech IT Market Beginning to Display Development Trends in Line with Mature WE Countries, but with Much Higher Growth Rates

§ Central European Market Emerging –Czech Solutions Providers Going Regional, Foreign Firms Coming to Czech

IT Will Benefit Local EconomiesIT Will Benefit Local Economies

$600

$900

$1,200

$1,500

$1,800

2006 2007 2008 2009 2010 2011

($M

)

IT-Related Tax Revenues

$695 million in new tax revenues

over 5 years

Personal & Social TaxesCorporate Income Taxes

VAT


IT Will Create New JobsIT Will Create New Jobs

90

100

110

120

130

140

150

160

170

180

190

2006 2007 2008 2009 2010 2011

Thou

sand

s

IT-Related Employment in Czech Republic

Between 2006 and 2011 there is

growth of 46,000+ new IT jobs


Hardware employeesSoftware employees

Channel and Services employeesIT Professionals

IT and Software Related Employment in 2006IT and Software Related Employment in 2006• Close to 133,000 people were employed in IT-related

functions Czech Republic in 2006• Between 2006 and 2011, IT growth will fuel an

additional 46,000 new IT jobs • While software represents only 21% of total IT

spending, it drives 53% of employment

Local Channel & Service

Firms

Local End User IT Organizations

49,269 69,015

IT Producers(Hardware

& Software)

13,975

2006 IT Employment by Sector


Software’s Influence will Continue to IncreaseSoftware’s Influence will Continue to Increase

Software21%

Hardware &Services79%

IT Spending, 2006 Employment, 2006

$3.61 Billion132,259 IT Jobs

Software VendorsChannel FirmsServices FirmsIT Professionals

Hardware VendorsChannel FirmsServices FirmsIT Professionals


Software Related EmploymentSoftware Related Employment

• Software-related employment in 2006 was more than 70,000 people

• By the end of 2006, software accounted for 53% of IT employment in Czech Republic, and reach 57% by 2011

Total IT Employees


0

50,000

100,000

150,000

200,000

2001 2004 2007 2010

Total Software and Software Related EmployeesOther IT ProfessionalsOther Services and ChannelsIT Hardware

Software Drives IT Benefits

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2006 2007 2008 2009 2010 2011

46,000 new IT jobs between 2006 and

2011Most will be software-

related

New Software-Related Jobs Added Each Year


The Impact of Microsoft in 2006The Impact of Microsoft in 2006• MS-related employment* for Czech Republic in 2006

was almost 58,000 jobs, representing 44% of total IT employment

* Employees in companies that create, sell, distribute, or service hardware or software that runs on Microsoft operating systems and IT employees at user organization that develop applications, service, or maintain such hardware or software

0

20,000

40,000

60,000

80,000

100,000

Hardware Software Services &Channels

IT Professionals

Microsoft-related employment

Total employement

Related IT Spending - Hardware, Software and Services, 2006Related IT Spending - Hardware, Software and Services, 2006

For each $1 of Microsoft revenue, there is downstream revenue of$9.2 for the local IT sectorIn 2006, Microsoft related tax revenue was more than $440 million


Hardware67%

Software14%

Services19%

IT Economic Impact Model

Standard Definitions

IT Spending Statistics by

CountryValidation by

Country Officials

Import/Export Factors

Study Methodology

Macroeconomic Data

Tax Rates, Labor Rates, Exchange

Rates

IDC Analysts in 45 Countries


The Economic Impact of IT, Software and Innovation”

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