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SOL buy unlikely to bolster IT sector

Executives at Slovakia's biggest Internet portal, Zoznam, have said their latest tie-up with Swedish firm Scandinavia On-line (SOL) will pave the way for massive Internet growth in Slovakia over the next year.
However, analysts have doubted that the IT market will take off before the government makes it priority number one, and say that in fact, many of the country's best IT workers are following large wage packets to Austria and turning their back on the Slovak information superhighway.
Following the Swedish company's $1.2 million pay-out for a 49% stake in the firm, Zoznam business development manager Ivan Debnár said that he was expecting other Internet firms in Slovakia to follow his company's lead and that a flood of new money would come into the industry in the next 6-12 months.


Slovak children enjoy the benefits of being connected to Slovakia's information 'super highway'. However, many talented IT specialists are turning their attention towards better pay packets in Vienna.
photo: TASR

Executives at Slovakia's biggest Internet portal, Zoznam, have said their latest tie-up with Swedish firm Scandinavia On-line (SOL) will pave the way for massive Internet growth in Slovakia over the next year.

However, analysts have doubted that the IT market will take off before the government makes it priority number one, and say that in fact, many of the country's best IT workers are following large wage packets to Austria and turning their back on the Slovak information superhighway.

Following the Swedish company's $1.2 million pay-out for a 49% stake in the firm, Zoznam business development manager Ivan Debnár said that he was expecting other Internet firms in Slovakia to follow his company's lead and that a flood of new money would come into the industry in the next 6-12 months.

"This is not just a boost to Zoznam, but to the whole industry. We have again showed the way, and are the first in Slovakia to make this kind of a deal. I think we will see similar steps by other companies soon," Debnár said.

He added: "There will be a lot more money coming into the Slovak Internet market and we will see a great boom in the near future."

Slovakia's Internet market has lagged behind its central European neighbours in growth and development, and while the SOL deal has been trumpeted by Zoznam as a major breakthrough, many analysts believe that the Slovak IT market's laggardly performance is unlikely to change.

"This is a relatively small market and there is little interest in it. I cannot see this changing at all in any time in the near future," said Pavel Symanski, media and IT analyst for emerging markets at Schroeders Salomon Smith Barney in London.

He added that in comparison with companies in Poland or even the Czech Republic, Zoznam, as Slovakia's largest portal, was registering a tiny number of hits. "In Poland you would be talking about at least between 80 and 90 million hits," he added. Zoznam currently claims 4 million hits per month.

KPMG Slovensko's Information Risk manager Peter Borak said that while there was certainly potential in the Slovak IT sector, more had to be done to stop what was becoming a growing human resource problem.

"The problem is that many young people are leaving Slovakia, certainly from the IT sector, to work in places like Austria. The people are IT-educated enough to do it and the salaries there are much higher," he explained.

Germany has recently offered relaxed visa and work permit requirements for foreign workers in the e-business and IT industries in a drive to fill workforce shortages in the sector, while wages globally in IT have risen by 150% in the last two years.

Borak added that weak Slovak legislation was also a barrier to more significant IT investment in this country. "IT is a highly specific industry and the assets involved are not tangible, so for any kind of investment to occur the legislation has to be smooth. At the moment, the legislation just isn't there. The government has its priorities with privatisation, and cannot make IT its top concern until that is completed," he added.

Good prospects

The Scandanavia deal is expected to bolster Zoznam and secure its position as the leading Internet portal in Slovakia, while giving it an international presence.

However, analysts have been wary of predicting bright futures for purely business to person web services, and said that reasonably certain predictions of health could only be made for IT firms offering business to business websites.

It is expected that Zoznam will now use this opportunity to offer new services.

"This deal is good for Zoznam and will give them room to expand," said Borak.

Zoznam's Debnár added: "The Internet business is moving very fast and we had been looking for an investor to take us to a higher level. With the connection to an international network [with SOL] we can see a much brighter future. We wanted to boost Zoznam and now we have this international technology with a company, SOL, that we think has a very similar approach to us."

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