Eastern Europe's market for telecommunications services will almost double in a five-year span, reaching US$17 billion by 2003, says a new report from Framingham, Mass.-based global research firm International Data Corporation (IDC at www.idcresearch.com). At the same time, a separate IDC report poses a daunting question: Where are the workers going to come from to staff Europe's burgeoning information technology (IT) sector?

EU Membership Driving Development

First, the IDC's report on Eastern Europe - which is good facility location news, and for more companies than just the legion of telecom firms that are practically panting to locate in and serve the Eastern European market and its rising expectations. The report indicates that the region, only 10 years after the fall of the Berlin Wall, is fast bulking up its "infostructure" - the information infrastructure that's essential to have inside corporate facilities in order to coordinate multinationals' activities.

The IDC's $17 million market projection, says Jill Finger, IDC senior analyst for Eastern Europe, represents a huge increase in an East European telecommunications network services market was estimated to be worth $8.8 billion in 1998. (The composite figures in the Eastern Europe report come from four IDC reports that cover fixed-line and mobile services in the Czech Republic, Hungary, Poland and Slovakia from 1998 to 2003.)

The European Union (EU) has been a driving factor in the dramatic upsurge in Eastern Europe's technological capabilities, the IDC report indicates. To qualify for EU membership in the next decade, the Czech Republic, Hungary, Poland and Slovakia are preparing to liberalize their Public Switched Telephony Network (PSTN) services. That process has already started with domestic long distance in Poland, Finger says.

"In anticipation of liberalization, new operators are springing up ready to compete with the incumbent PTOs," Finger explains. "Those PTOs are now focusing on increasing penetration rates, rebalancing tariffs, and raising investment through privatizations."

Another factor in the boom in Eastern European information infrastructure, IDC reports, is the region's hot competition in mobile communications.

"The mobile markets in the region, which are already fiercely competitive, will continue to boom with the licensing of new GSM operators, additional spectrum allocations and expansion of prepaid services," Finger says.

Europe's IT Worker Shortage

That's the good location news.

Less sanguine is a separate IDC report that indicates that all of Europe is suffering from a shortage of IT skills. And that situation is worsening, as demand created by Y2K and Euro compliance projects continues to soak up a substantial portion of the continent's IT skill pool.

IDC predicts that the overall shortage of skilled IT professionals in Europe will grow from 5 percent in 1998 to almost 20 percent in 2002.

"Without a strategy for resolving the IT skills shortage, individual countries, and Europe as a whole, will begin to suffer at the expense of other countries and regions, which are already planning more strategically," warns Andrew Milroy, expertise center manager of IDC's European Training and Skills Management research program. "In October 1998, the United States attempted to address supply-side concerns by increasing its allocation of green cards to professionals with IT qualifications and experience." Unless strategies are devised to cope with the skill shortage, companies with facilities in Europe will likely face toughening business conditions, Milroy explains.

"As today's businesses increasingly depend upon IT for communications, the Internet, e-commerce and electronic business, the demand for skilled labor will continue to grow year on year," says Milroy. "Soon the demand will significantly outstrip supply, leading to inflated salaries, increasing staff turnover and, therefore, higher operating costs and lower profit margins."

The IDC report discusses a number of strategies to cope with the IT skills shortage, including retraining and importing offshore workers. In addition, the IDC study looks at a business opportunity that Europe's IT skill shortage is creating - the corporate practice of outsourcing IT needs to "hosted applications."