Mergers critical for survival of European ICT market, says CEO

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Mergers critical for survival of European ICT market, says CEO

Kathleen Hall

The European ICT market will need to undergo a series of mergers if it is to compete with the big American players, said Rheinhard Clemens, CEO of IT services company T-Systems.

Speaking at the launch of T-Systems' innovation centre in Munich, Clemens said: "The end game for the industry is that there will be a lot more mergers and consolidations. In a [crowded] market, size will matter, as it will provide leverage and structure.

"I believe the same will happen in the [rest of the] IT sector. That is what's needed in order to survive in the international battle with American companies - especially when you look at the cash pool of the likes of IBM."

Clemens said that the continental European ICT market is poised for growth, compared with that of the US, which is set to decrease. "The battleground for ICT will be in Europe not America," he said.

"In the US and UK the outsourcing market is already quite mature. But at the moment people on the continent are still afraid to outsource services to a third party."

Clemens believes that European companies are better placed to take advantage of the growing continental market because of a cultural difference in the way they do business.

"In the US if a problem shows up, the first reaction is to consult the contract and work out whose problem it is. Whereas the European attitude is: 'there's a problem, so lets try to find a solution.'

"Outsourcing is like marriage. Its success is down to how you deal with the problems. And the reality is that you are in trouble the moment you sign a contract," he said.

T-Systems is a subsidiary of Deutsche Telekom and increased its revenue by 1.2% in the first quarter of 2010 to €2.1bn, compared to the same period last year. This was driven by the 5.7 % growth in T-Systems' international business.

The company has made 5,000 redundancies since 2007 in order to become a profit-making enterprise, said Clemens.


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