Latvia has been identified as a high
priority market for the IT sector, which is developing very fast towards
western forms and standards, in terms of both technical and business
infrastructure. The most important target area for development of the IT
sector is Latvia in the short to medium term is software development
outsourcing. Software development has grown to include over 100 companies,
employing around 4000 qualified staff.
Other areas of particular interest include
the development and hosting of e-commerce solutions, Web-design and
Web-hosting. Latvia is also an attractive hub for high-tech manufacturing
because of its low cost, skilled workforce and a well developed transport
infrastructure.
Opportunities for foreign participants
should be enhanced as a result of a reduction in the Corporation Tax Rate for
companies producing high-tech products, which came into effect in January
2001, and the proposed liberalization of the telecommunications market in
2003.
Size of the Market
More than 45,000 PCs were purchased in
Latvia in 1998. This represented some 55% of the overall expenditure of $150
million. There is no local production of computers in Latvia other than
assembly. Packaged software and services are 12% and 33% of the market
respectively.
About 40% of all sales of PCs and PC
services were imported, an increase in value of 30% over 1997. The volume of
IT services exports to the west has grown considerably. In 1999 Latvia's two
largest software producers, DATI and SWH-Technology, exported software
products and services worth US $20 million.
Around 85% of the PCs are used by business
entities, with households comprising around 5% of the total PC market. Until a
higher proportion of households in Latvia purchase PCs and Internet
connection, Latvia will not be a major participant or candidate for
e-commerce, although it is skilled in the development and hosting of
e-commerce solutions.
Trends
Software design is the most significant
segment of the IT sector in Latvia. Software maintenance, integration,
consulting and training are other rapidly growing areas. Outsourcing has
become a core competence of Latvian software-development companies, which have
gained significant experience from large-scale software-development projects
undertaken for major international companies.
As well as the demand from the banking
industry for software development, many of the larger government and state
institutions require IT development. The telecommunications, public, education
and transportation sectors are the greatest consumers of computer equipment.
The small office-home office (SOHO) market is also developing rapidly.
Main Competitors
The main suppliers of PCs are Hewlett
Packard, IBM, Compaq and Dell.
Latvian software developers are working with
companies like IBM, Siemens, Unisys and large banks on IT development
projects. A number of global software and technology firms including Lotus,
Oracle, Microsoft and IBM are assisting the Latvian government in developing
training programs to meet the demand.
Amongst the major software-development
companies in Latvia are:
DATI, which specializes in large-scale
project design including new systems development, re-engineering, software
testing and CASE tools. Fortech which specializes in IT systems integration
and business applications. The company has more than 4000 clients in the
Baltics, including Latvian State Institutions, major companies and public
organizations. SWH -Technology which specializes in the development of medium
and large scale IT projects, as well as implementation, consulting and
training. Core competencies include: Java, Lotus Notes, SAP, B2B, internet
technologies, software re-engineering, Interfacing R/3 with legacy systems and
ABAP/4 programming. Tieto Konts is a leading developer and provider of
credit/debit card processing systems. It is the only supplier in Eastern
Europe whose products have received certification from major international
card organizations like VISA, Europay, American Express and Diners Club.
Constraints
There are relatively few experienced systems
analysts, project managers, technical writers and IT consultants, with some
disparity between what the universities teach and industry demands.
There is also a relative lack of home-grown
industries that could drive the demand for such services as e-commerce. For
example, the small size of the financial markets makes online brokerage
development impossible.
Most companies in Latvia are too small to be
able to offer complete outsourcing services to large international clients
directly. The lack of marketing skills and experience of projects for foreign
clients is also a constraint on the potential trade in IT services and
products - but at the same time may provide opportunities for collaboration
with foreign partners same time may provide opportunities for collaboration
with foreign partners.