Due to the coronavirus pandemic, small and medium-sized Polish IT companies could have lost even 110 200 000 EUR. However, some entrepreneurs see the light at the end of the tunnel and the potential for long-term industry growth.
This conclusion can be drawn from the “COVID-19 Loss Report -First Impact. Analysis of data from March-April 2020” study, made by the Software Development Association Poland (SoDA). The organization affiliates 92 Polish technology companies. As IT business partners, they make custom software (in Poland we call them software houses). Companies like that employ from 20 to even 800 talents.
Companies of this size have tremendous value for the Polish economy. According to the Polish Agency for Enterprise Development (PAED) services are responsible for the employment of ¾ of all IT/ICT sector, and the sector alone generates 8% of a total Polish Gross Domestic Product (GDP).
– That’s why it’s so important to look out for Polish software companies and support their development — says Łukasz Czajkowski, SoDA’s Head of Growth. — These companies have global reach but they are also deeply rooted locally. They offer good jobs and build domestic economic and intellectual potential — says Czajkowski.
The “Comprehensive report…” study, made in March and April, shows how the pandemic impacted the industry but also how much organizations have lost. Combined declared losses reach 11,570 000 EUR, which gives 154 000 EUR per company. Most firms lost from 400 000 EUR to 2 mln EUR and a single loss could reach even 4 mln EUR.
– We should remember that the study depicts only a fragment of the domestic market — points out Michał Moroz from Makimo company, the head of SoDA’s research and analysis committee. — We observe uncertainty among our members. They freeze non-essential projects and focus on strategic ones. That doesn’t mean they passively wait; members also search for new ways to grow — adds Moroz.
Łukasz Czajkowski estimates that losses for the whole sector, only for one month, are worth 2 bln EUR and grow every single day.
What can be done with 2 bln EUR? We can pay monthly salaries for 57,000 highly skilled software developers. It also translates to multi-million losses for the Polish treasury.
IT companies struggle with postponed or even canceled projects. Clients cut on project sizes and even payment for those. For some software development companies this scenario equals employment reduction or even going out of business.
Polish IT companies fight to keep the level of employment while staying competitive on international markets. For now, they do just fine but our local economic potential is different from IT giants in various Western countries — says Konrad Weiske, founder of Spyrosoft company and one of the SoDA’s founders.
Taking into account declarations from the study, the condition of IT companies is slightly better than many firms in other sectors. The negative or very negative impact of COVID-19 was declared by 64% of respondents. For comparison, in the last study for the Economic Situation Monitoring Center, a similar answer was given by 76% of companies from multiple sectors.
“We are in the first phase of the crisis and its limited impact; the situation can turn for the worse in the upcoming months. Smaller companies immediately reacted to the situation generated by the COVID-19. Now the big ones are coming in — their decisions and austerity initiatives will take a toll on the IT sector in the second half of the year” — says Paweł Pustelnik, Managing Director of Future Processing company.
According to the SoDA’s report, almost 30% of the IT companies did not experience any changes in their business situation, 6% experienced the positive impact of the coronavirus.
How is that possible? Experts say it is the result of accelerated digital transformation in other sectors of the economy. Generated demand fuel the need for software development.
Some business owners say the pandemic boosted R&D. Entrepreneurs say, and they can’t stress that enough, that we are going to witness “unprecedented investment in the virtualization of the world”.
Michał Moroz is also an optimist; he bets on the long-term coronavirus impact on software development companies:
– As long businesses will drop the ineffective IT projects for the thought-out ones, the impact of the coronavirus will be positive. That will drive the demand for quality software and secure IT services. The newly developed and deepened trust will also be a factor since remote work will get easier with every single month — predicts Moroz.
Łukasz Czajkowski, SoDA’s Head of Growth: — Polish software development and IT companies are among those who fight the crisis fairly well. As SoDA, we will continue to monitor the situation and make periodical studies of the industry. It’s also important that we should all support each other in the time of need, not burden ourselves with additional taxes. Then the coronavirus can be even a trigger of growth for this sector of the Polish economy. Our observations clearly show that global companies impacted by the COVID-19 optimize budgets, and as an extension of that, look for new business partners. That creates opportunities for Polish software development companies.
The “Comprehensive report on the impact of COVID-19 on IT investments” was possible thanks to the involvement of 117 Polish IT companies. Respondents didn’t have to be SoDA members; they could also answer questions selectively.