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Third of Sweden's IT providers could be gone in two years

The IT services sector in Sweden will be decimated as hundreds of local suppliers disappear

A third of Sweden’s regional and local IT providers could disappear within two years as a result of growing competition from global giants.

Sweden’s IT industry faces a radical upheaval, according to IT research firm Radar, which cites Swedish IT’s industrialisation – increased standardisation and mass production from large-scale IT companies – as the principal reason for the change. In addition, competition is growing for Sweden’s local players from new entrants outside the traditional IT sector.

“We are in the early days of the entrance of mass production for IT delivery and supply [in Sweden]. At the same time, there is an increased need for innovation. So we have duality in the market,” Hans Werner, CEO at Radar, told Computer Weekly. “Many of the traditional IT suppliers will be stuck in the middle. They aren’t competing well on scale or innovation.”

Radar’s two-year timeline is based on IT buyers’ behaviour, said Werner. Today, public cloud services account for just 2.9% of Swedish companies total IT costs, but within three years it is expected to hit 32% and reach 45% in the long term. Werner believes this will favour global cloud players such as Amazon Web Services (AWS), Google Cloud, IBM Cloud and Microsoft Azure which trump local companies when it comes to economies of scale.

Radar’s warning is not just targeted at small companies, but any traditional IT suppliers struggling to adapt to current market changes. According to Werner this could mean hundreds of companies. While 10 big suppliers control almost 60% of the Swedish IT market, the remaining 40% is divided up between thousands of smaller players.

“If you are in an unfortunate position where you had limited growth last year and low customer satisfaction, then these are indications that you aren’t well positioned to compete in this rapidly transforming landscape,” said Werner.

Werner stressed the situation is not hopeless even for the more traditional IT suppliers, but they will need to act fast, he warned. The focus should be on innovation and building up digital competencies to stay relevant to customers.

Nordic-wide phenomenon

Sweden is not alone in Radar’s stark scenario. Werner said the situation is similar for other Nordic countries (notably Denmark and Finland) due to the maturity of their IT markets.

“We [in the Nordics] have already been forced to reduce costs in IT organisations. Now we have an increased need for innovation and transformation,” he said. “All these things play out in mature IT markets first before they play out in general markets. Also, the Nordics represent quite limited ecosystems, so it is easier to see these changes.”

Read more about Nordic IT services

And change is coming quickly. Global tech giants are already expressing their growing interest in the Nordic market.

In 2018, AWS plans to open three data hubs in Sweden, while Google recently bought a plot of land in Denmark, with an option to build a datacentre there – though official plans are yet to be announced.

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