Catherine Houghton SCO Vienna, Austria

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Important Trends -Europe's evolving IT/Telecom
market AUSTRIA

• Catherine HoughtonSCO Vienna, Austria
•  
• Trade Winds Conference
• May 14-15, 2007
• Arlington, VA

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Overview
AUSTRIA AT A GLANCE  COMPUTER SOFTWARE AND IT SER
VICES  TELECOMMUNICATIONS MARKET ENTRY STRATEGIE
S TWO SUCCESSES
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I. Austria at a Glance
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Small but dynamic
Population 8.2 million GDP 320 billion Growth 3
.3 percent Per capita income 38,631 Unemploymen
t 4.9 percent Close historical and economic ties
to the 8 countries surrounding it, boosting its
economic vitality and flexibility.
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U.S. Business in Austria
After Germany and Italy, U.S. is Austria's third
most important trading partner, and its number
one partner outside Europe, with 10.7 billion in
bilateral trade.  U.S. is the number two investor
in Austria after Germany, with 6.2 billion
invested, and 370 U.S. firms, of which 150 have
regional responsibilities in Central and Eastern
Europe.
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II COMPUTER SOFTWARE AND IT SERVICES
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Market size
Software 1.5 billion (growth 7.1)
IT services 3.7 billion (growth 5.7)
Combined expenditures in 2006 5.2 billion
But key differences between two sectors
Major expansion of software as a service, esp.
among SMEs, with Web 2.0 technologies
Limited opportunities for traditional IT
services, with saturated demand and intense
competition
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Market overview
Dramatic development in software industry is
changing how businesses integrate and operate
their systems.  Areas to watch convergence of s
oftware and services, security software as
priority, and Virtualization 2.0
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Market trends
Software Dynamic change, as Web/Enterprise 2.0
solutions drive innovation. Blogs, wikis, mash-u
ps, composite applications, social networking,
online communities, Internet book marking, social
tagging, voice over IP, instant messaging and
presence, Ajax and Flash programming, personal
dashboards, use of online hubs
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Market trends
IT SERVICES Flat or modest growth, saturated
demand, intensifying competition, and no clear
drivers. Fewer large-scale projects, each
fiercely fought over, with vendors lowering
prices to capture the deal.  An increasingly virt
ualized IT environment, creating opportunities
for vendors of infrastructure software to help
businesses manage it. Performance monitoring,
provisioning, compliance reporting, cluster
visibility, and change and configuration
management.
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Additional trends
Mergers and acquisitions as a way of growing and
staying competitive Government projects, master
plans, and IT upgrades in Ministries
More selectivity in outsourcing
Growth in security software and vulnerability
management Expanding mobile networks, and relate
d security
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III TELECOMMUNICATIONS
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Market size
Services 6.9 billion Equipment 370 millio
n Total telecommunications expenditures in 2006
7.3 billion
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Market overview
Austria is one of the most sophisticated,
competitive, and fastest-growing telecom markets
in Western Europe.  Market structure and developm
ent patterns are similar to Germany.
Consolidation has been rapid, with mergers and
acquisitions by both fixed and mobile operators.
Major opportunities exist in growth of broadband
and in mobile data services.
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Market overview
Telekom Austria (30-controlled by a state
holding co.) has 54 of market.
Tele2UTA (product of a merger) has a 26 share.
In broadband, Telekom Austria's ADSL accounts f
or 60 of market. UPC Telekabel (the cable TV op
erator which also bought Inode), accounts for
most of the remaining market.
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Market overview
In mobile, TA's wholly owned sub Mobilcom has
42 of market. Number two wireless operator T-M
obile (which bought tele-ring) has 37.
ONE has 19 and was being courted by new entrant
Tele2. Hutchison 3G is another fast growing new
entrant. Mobilcom operates GSM/GPRS and 3G UMTS
networks.
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Market trends
VoIP is the wave of the future Markets for IP
PBX, IP Centrex, and Mobile PBX are growing
rapidly. IP PBX will reach 23, IP Centrex 20,
and Mobile PBX 12 by 2010.  Attractions Cost-s
avings and increased efficiency resulting from
IP, outsource-ability of IP, adaptability of IP
to a mobile workforce.  Challenges Quality of s
ervice and security.
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Other trends in network architecture
Migration to All-IP platforms
Convergence of data and voice
Increasing flexibility of IMS-based networks
(Internet Protocol Multimedia Subsystems)
Mobile operators' offer of 100 percent wireless
solutions instead of PBX systems for data and
voice
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Other trends in network architecture
Equipment vendors will see intense competition,
especially in PBX and Centrex IP solutions.
Tips Focus on clearly identified market
segments and choose a good partner.
 System integrators and value-added resellers
will focus more on medium and large firms and IP
PBX, and less on small businesses. However they
will have opportunities in IP Centrex at carrier
and service provider sites.
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Other trends in telecom
Mobile broadband -- the global evolution of
UMTS/HSPA - 3GPP release 7 Telematics telemedic
ine, distance learning, and intelligent traffic
and weather systems for the highways.
Convergence wireline and wireless
interoperable satellite and terrestrial mobile
telecom and non-telecom including media and IT
mobile TV and Internet TV and broadband
Internet via fiber optic cable TV.
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IV. Market Entry StrategiesTwo Successes
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Success Number 1
Industry Specialized applications software for
telecom billing and accounting.
Strategy CS Vienna organized a targeted Gold
Key search to find appropriate partners for this
niche market firm. CS programs Counseling, Gold
Key Service
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Success Number 1
Players U.S. exporter, a privately owned specia
lty software firm, had sales of 15 million and
80 employees. Was just researching and entering
European market.  Austrian buyers were the larges
t and second largest mobile telecom companies in
Austria, a smaller mobile operator new to the
market, and one of the largest electronic
equipment manufacturers.
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Success Number 1
Strategy and success Initially company's rep
balked at fee for Gold Key and tried to get
appointments herself. No party returned her
calls. She then signed up for GKS. CS Vienna
obtained six meetings for her, and four produced
business. Lesson learned Client companies some
times need to learn value of CS services the hard
way -- in industry contacts identified, doors
opened, and knowledge condensed.
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Success Number 2
Industry Highly automated inter-modal logistics
services Strategy CS Vienna worked over near
ly three years to help U.S. client educate
Austrian public entity on advantages of project,
intervening at critical levels of authority to
save it. CS programs Counseling and advocacy
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Success Number 2
Players U.S. investor (privately owned), whic
h reports 7 to 13 million in annual revenues,
will have 50 employees at site and generate 150
additional jobs for a total of 200 jobs in U.S.
 Austrian buyer is an infrastructure facility and
its organization (a monopoly), owned by Vienna
City Government.
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Success Number 2
Strategy and success At outset, negotiations
were upbeat, and U.S. firm expected a contract
soon. Three years later, after many near
failures and delays, and repeated high level
intervention and conciliation by CS Vienna to
save project, as well as repeated prevarication
on project owner's part, contract was signed.
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Success Number 2
 Lesson learned A U.S. new to market firm
introducing a state-of-the-art services concept
to a conservative partner may encounter many
barriers before success. (Fear of strikes by
unions, defiance of EU rules, changing of terms
of contract midstream.) Patience maybe required
to get agreement.
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For specific guidance on market entry, including
competitive factors, market access rules under
the EU, criteria to be met, and distribution
channels, please contact Ingeborg Doblinger C
ommercial Specialist U.S. Commercial Service Vie
nna, Austria Tel. [phone] Fax 43-1-310
-6917 E-mail Ingeborg.Doblinger_at_mail.doc.gov