According to Fitch Solutions, the IT sector will grow by 19.2% in 2024 compared to last year. This is more than in 2023, when the IT market in our country grew by 12.4% compared to the previous year. The IT sector will also become increasingly important for the domestic economy. In 2022, it accounted for about 3.5% of GDP. In 2025, it will be 4.5%. However, these optimistic forecasts are overshadowed by the current problems of the industry.
The IT bubble has burst
The IT bubble is beginning to burst. Companies in Poland are laying off more and more employees – groups of several hundred people have recently lost their jobs in various companies. The recruitment company Devire reports that there are around 580,000 IT specialists working in Poland. B2B contracts are a popular form of employment among them. Currently, many entities are conducting group layoffs, but when reporting such intentions to labor offices, they do not include people on contracts. The actual scale of reductions is therefore much larger.
The bubble grew during the pandemic, when the need to switch to remote work and learning fueled growth in the entire sector. The huge demand for IT services, supported by money allocated for digital transformation, caused IT companies to increase the number of employees to meet the growing demand for services. Now, many projects that started at that time have been completed or are nearing completion. Companies are adjusting employment to market conditions. In Poland, in 2023, the number of job offers in the IT sector fell by 30% compared to the previous year.
Currently, the financial arrears of the IT sector, as recorded in the National Debt Register, amount to PLN 264 million, and the average debt of one company is PLN 38 thousand. Nearly 7 thousand entities have problems with payments.
The most indebted companies operate in the following provinces: Mazowieckie (PLN 87.8 million), Wielkopolskie (PLN 31.6 million) and Śląskie (PLN 27.2 million). The record holder is a company from Poznań, which has PLN 8.4 million in debt to a securitization fund.
The majority of the arrears, i.e. PLN 198.9 million, IT companies have to pay to financial institutions: banks, leasing and insurance companies or securitization funds that took over the debts from the original creditors. PLN 17.6 million are unpaid bills for telephone, Internet and television subscriptions. PLN 13.7 million are debts to trade. In turn, they owe over PLN 1 million to other entities from the IT sector.
An industry doomed to development
The industry faces many challenges. On the one hand, there is fierce competition on the market and a technological race, reinforced by solutions based on artificial intelligence. On the other, there is the ongoing inflation and economic crisis, which have forced customers to make savings. An additional problem for this sector is invoices with deferred payment terms and expensive, but necessary, business expenses.
– Long settlement periods with contractors, high competition and price pressure, the need to invest in computer equipment, licenses, software, training, as well as difficulties in obtaining loans are the biggest problems reported to us by entrepreneurs from the IT sector. This industry, like no other, is doomed to development. But the rapid pace of innovation forces constant financial outlays, and the basis for stability and competitiveness on the market is maintaining modern infrastructure. This would not be possible without external financing – says Emanuel Nowak, an expert at the factoring company NFG.
Although the IT industry is perceived through the prism of large corporations, the market is also created by many smaller entities. Sole proprietorships are in a difficult financial situation. Their arrears, amounting to PLN 116.1 million, constitute almost 45 percent of the debt of the entire industry. Another PLN 147.9 million are unpaid invoices of limited liability companies. According to data from the Central Economic Information Center, the technology industry is in the top five bankruptcies and top ten in terms of the number of restructurings in the country. In 2023, 21 companies from this sector declared bankruptcy, and 96 restructuring. Maintaining financial liquidity is therefore, according to experts, still a burning problem for companies providing IT services.
Customers order and do not pay
The bulk of the arrears are unsettled liabilities of software companies. This is 2/3 of the debt listed in the KRD – PLN 169 million. IT equipment wholesalers also have their share – almost PLN 35 million, as well as companies dealing with equipment servicing – PLN 26.7 million.
– The reasons for the debt should be sought both in the current market situation and in the lack of payment from customers. They owe IT companies almost PLN 400 million, which is much more than IT companies themselves should pay to their creditors. Despite the numerous challenges that the IT industry is currently facing, the prospects remain good. Investments in the development of employee competences, technological innovations and a flexible approach to changing market conditions have always been a strong point of this sector. In the long term, this will help it survive temporary difficulties – assesses Adam Łącki, President of the Management Board of the National Debt Register of the Economic Information Office.
The amount of PLN 396.7 million owed to the IT industry by business partners consists of arrears of companies from various market segments. The largest amount, PLN 99.7 million, should be paid by contractors from the trade sector. Construction companies did not pay PLN 57.3 million, transport companies – PLN 47.7 million, and industrial companies – PLN 34.4 million.
Source: KRD