Angst rises in German IT and telcos

In Germany, suppliers of IT and telecommunication products and services are getting downright worried. They’re struggling to cope with their worst recession ever. And the prospect of a quick recovery is, to put it bluntly, wishful thinking.

Angst is spreading fast-not only among the vendors and service providers but also their employees, customers and partners.

And it’s being stoked by a steady flow of gloomy news, like the lowered 2002 growth forecast announced Tuesday by the German Association for Information Technology, Telecommunications and New Media (Bitkom).

Bitkom projects combined IT and telecom sales in Germany will drop 1.3 per cent to 136.1 billion euros (CDN$213.7 billion) in 2002, compared to a 1.7 per cent increase to 137.9 billion euros the year before. As for 2003, it expects only a slight increase of 0.4 per cent to 136.5 billion euros.

Those are numbers that hurt-in more ways than one. More skilled people in the IT and telecom sectors will lose their jobs. “If the numbers are correct, 2003 will be another year of job cuts,” said Volker Jung, Bitkom president and Siemens AG board member, speaking to journalists in Munich.

Remember, this is a country that two years ago introduced a U.S.-style green card to lure IT talent into the country. Now many of these software and hardware engineers are having to pack their bags.

Bitkom projects the sector’s workforce will shrink 3 per cent, or 28,000 people, to 791,000 in 2002, representing its first drop since the early 1990s. Between 1999 and 2001, when the new economy was flourishing, the sector created 87,000 new jobs.

Hewlett-Packard Deutschland GmbH, IBM Deutschland GmbH and Siemens are among the top IT companies in the country to have announced layoffs this year.

According to Bitkom, companies delivering fixed-line and wireless telecom equipment were hit particularly hard by the technology recession, as their operator customers slashed capital expenditures to lower costs and stay afloat. Wireless infrastructure sales, the association said, will drop 40 per cent in this year and another 18 per cent in 2003.

Although the IT sector will also shrink in 2002 and 2003, its decline will not be as great as that of the telecom sector, Bitkom said.