After a year in which COVID-19 curbed economic activity and investments in ICT globally, the Dutch technology market is well positioned for growth in 2021, with business and government spending on technology rising above pre-pandemic levels, according to Forrester Research.
Tech spending in the Netherlands is forecast to increase at a faster rate than that of the other top six EU economies, according to Forrester’s latest European Tech Outlook report. Spending on cloud, software and outsourcing services will be a big contributor to growth.
Though no European country escaped the pandemic, which will continue to have an impact in 2021, the Netherlands had lower infection rates and better economic performance than other major EU markets, Forrester noted. In addition, the mix of economic activity that contributes to the country’s gross domestic output tends to favour the tech industry, Forrester said.
Dutch IT spending to outpace EU average
Forrester forecasts tech spending in the Netherlands will hit €77 billion this year, a 3.1% jump from 2020 — about twice the average growth rate for Europe as a whole — and a 1.3% increase from 2019.
The increase this year follows a 1.8% decline in Dutch tech spending in 2020, due in part to cutbacks in new project work, Forrester reported. That compares to a 4.7% decline on average for Europe, according to the report.
This year in the Netherlands, spending on tech outsourcing, in which Forrester includes cloud infrastructure services, will increase 8% to €23 billion, according to the Tech Outlook. Other IT categories set for growth include computers and peripheral equipment, up 2% to €5 billion; communications equipment, up 3% to €5 billion; software, up 3% to €67 billion; and tech consulting services, up 2% to €48 billion. Spending on telecom services will remain flat, at €32 billion, Forrester said.
“A lot of the growth we’re seeing in software is being driven by cloud,” said Forrester analyst Michael O’Grady.
Economically, the Netherlands was not hit as hard by the pandemic as other major European markets. Among the top six EU economies, Dutch GDP declined by 4.6% in 2020, compared to declines of 9.1% for France, 5.5% for Germany, 11.2% for the UK, 11.6% for Spain, and 9.1% for Italy, Forrester said. There are various reasons for this.
Of the top six EU economies, COVID deaths per thousand residents were lower in the Netherlands than in the other top six EU economies in the last two months of 2020, and only Germany had a lower COVID death rate for March through October, Forrester noted.
In addition, the Netherlands does not depend as much as some of its EU peers on tourism, which was devastated by the pandemic, said O’Grady. The Dutch government’s economic stimulus programme, which at about 8.3% of total GDP was larger than that of other EU countries, also helped to buoy the economy, O’Grady said.
Professional services fuel Dutch tech spending
For the tech sector in particular, a big reason why the Dutch IT market is poised for greater growth than most EU nations is that tech underpins much of its economic activity, O’Grady said.
“If you look at the Netherlands compared to other European countries, what you notice is that science and professional services contribute more to the gross value added [to GDP],” O’Grady said. Professional work such as financial services and insurance tend to use more technology than other sectors, O’Grady noted.
The Netherlands tech market is the 13th biggest in the world, which is a remarkably high ranking for a relatively small country, O’Grady noted. “In-house R&D helps drive tech investment,” O’Grady said.
Relative to other European nations, Dutch in-house R&D compares more favourably to US corporate R&D, O’Grady said. “Europe is a little bit behind the US in cloud spending and one reason for that is the US has more large companies with more than 500 employees. These companies have economies of scale and can spend more on R&D,” O’Grady said.
While the Dutch companies may not have the economies of scale that US companies do, “there is a very educated workforce with a lot of knowledge workers,” O’Grady said. One result is that the Netherlands spends more on tech per capita than any other EU nation except for Denmark.
O’Grady noted that Forrester will update its forecast for 2020, based among other things on more complete data for the end of 2020. However, the relative difference between the Dutch market and the EU averages will be similar, he said.