European IT Sector Shows Rapid Growth Despite an Overall Weak Economy

NEWS ANALYSIS: The European economy has yet to fully recover from the recession that started six years ago, with the exception of the IT sector, which is growing rapidly.

CeBIT Preview

HANNOVER, Germany—The European economy is weak, especially when compared to the recovering U.S. economy. The difference is so great that it's beginning to negatively affect the earnings of multinational companies.

In fact, those weak earnings, brought on in part by a strong U.S. dollar, caused a 300-point drop in the New York Stock Exchange on Jan. 27. The strong dollar was brought about not only by a strong U.S. economy, but also by the relatively weak euro.

The weak euro is a symptom of a European recession that was triggered and prolonged by the continent's persistent debt problems, along with economic policies that tended to further erode the euro's value.

Of course, there are other factors coming into play. The euro hit an 11-year-low against the dollar on Jan. 26 after an anti-austerity party declared victory in Greece's parliamentary election on Jan. 25.

While the strong dollar is nice for American visitors to Europe, it's not great for big companies that are selling things to Europeans. So, how is it that BITKOM is reporting 73 percent growth for the European IT industry this year over 2014's results? And how is it that IT hiring is up sharply to the point that the biggest factor holding it back is a lack of skilled people?

It's against this economic backdrop that the organizers of CeBIT, which carries the reputation as the world's largest and most international computer exposition, were briefing the media the week of Jan. 26 about what they will see when the show convenes March 16 to 20.

According to Oliver Frese, a member of the managing board for Deutsche Messe, the company responsible for CeBIT, much of the rapid growth in the IT industry is being driven by Germany's small and midsize businesses. Germany is the largest economy in the European Union, and that factor means that it would have to lead any economic recovery.

Frese said that one important sign of the strength of the European IT market was in the number of companies planning to attend CeBIT when the show opens in March.

He said that the exhibitor count is already going to be ahead of last year's numbers and that a number of companies that stopped attending when the recession started are coming back this year.

Many international IT companies beat a path to CeBIT because IT is a global industry. The IT industry is bucking the persistent trend of stagnant European economic growth because the weak euro is giving Europe, especially Germany, an advantage over U.S. IT companies. The strong dollar and relatively weak euro enables European IT companies to sell products and services for less than their U.S. counterparts.

European enterprises know that to return to sustainable growth they must invest in new technology now, Frese said.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...