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The Association of Independent Software Exporters CISEx has published the financial results of its member companies for 2023, which they say was challenging for the IT sector. The total revenues of the association’s members significantly exceed one billion euros, growing at a rate of 17 percent in 2023, while revenues from abroad, i.e., exports, amount to 613 million euros, representing a growth of 13 percent compared to 2022.
The share of exports in sales revenue remains at a ‘still solid’ 57 percent. At the same time, when observing the indicators of all companies in Croatia for which annual reports are available, approximately 159 thousand, the adjusted revenue growth was around nine percent, while there was no growth in exports last year, according to the announcement signed by Tajana Barančić, director of Astra Business Engineering.
– Last year was extremely challenging for the IT sector, and many companies felt it. Overall, we achieved further growth in revenue, exports, and employees compared to 2022, which would be challenging even in a ‘normal’ year without such disruptions in the global market that are particularly reflected in the IT sector, as 2022 was an exceptionally strong year with a growth of 26 percent. Such results are not easy to repeat, let alone exceed, which we have managed to do together – stated Barančić.
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The reported results are actually better than expected, commented Ivan Bešlić, the recent president of CISEx, given the rather bad news from the United States and Western Europe.
– Although we have been used to seeing growth of 15 to 30 percent in previous years, we can say that a growth of 13 percent is satisfactory as we are still in a period of stagnation. The results show that the Croatian IT market is more robust and has not declined. We also see a positive trend in employment, where there has been a growth of 10 percent compared to 2023 – said Bešlić, referring to the fact that CISEx members opened more than a thousand jobs last year, despite the slowdown in employment in the IT sector.
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– During the expansion and cheap capital, many companies were in an investment cycle. Software was ordered more than usual, and we had much higher growth than usual in previous years. The market is now normalizing, there are no longer such large investments, and money is being handled more cautiously, which has led to a smaller percentage of growth – added Bešlić.
One of the Goals is Higher Margins
Revenue per employee grew by six percent and exceeded 100 thousand euros per employee. Of the 243 companies that are members of CISEx, 220 are profitable, while 23 members recorded a loss. According to revenues, exports, and the number of employees, CISEx currently represents about a quarter of the Croatian software industry. Additionally, the average net salary per hour of work is ten percent higher in CISEx members than in the industry average. However, the average effective corporate tax rate is 13.6 percent, which, Barančić noted, could be much lower.
– Namely, a significant number of members still do not utilize tax benefits through the Investment Promotion Act or State Aid for Research and Development Projects. The average net margin, expressed as the ratio of net profit to operating revenue, is realistically 11 percent – wrote Barančić.
Increasing margins in the IT sector is one of CISEx’s goals. Bešlić warned that companies whose business model is renting programmers will be ‘in trouble due to competition from the East’.
– Low-quality projects can be carried out from any country in the world, so the goal is for Croatian IT companies to work on increasing the knowledge level of their employees. In this way, we will be able to produce quality software for the most challenging markets and will not have competitors from the East. Complex solutions are worth much more, and high margins can be achieved on them. Exports and revenue can also grow on the ‘sale’ of working hours, but just as the goal in tourism is to develop hotels, the goal in the IT sector is to develop large robust companies that can compete in top markets – concluded Bešlić.
CISEx, along with the financial results, published a list of the 75 largest exporters with revenues from abroad exceeding one million euros, among which 20 in 2023 experienced a decline in exports compared to the previous year. In the top 10 software exporters were, in order, Infobip, Span, Rimac Technology, Nanobit, Happening, Endava, Sofa IT, Infinum, Asseco SEE, and Q.
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