INTRODUCTION
Brief Overview of the IT Sector in Portugal
Portugal has now grown into the fastest developing markets in Europe in the information technology business. This sector contributes nearly 10% to the GDP of the country, generating around $20 billion in turnover. Thus Portugal is developing a vertically skilled workforce and a supportive environment for scientific research, justifies this acceptance of Portugal's IT market by startups and high-tech companies. In this thriving tech scene of Lisbon, the label "Silicon Valley of Europe" bemirks the presence of a vigorously innovating and developing entrepreneurial ecosystem.
As it further improves the digital skills of its citizens and undertakes strategic initiatives for digital transformation of businesses and government, the country has already positioned itself at 15th place in the EU Digital Economy and Society Index. Ambitiously, the government pursues the realization of advanced technologies, particularly in terms of artificial intelligence and Industry 4.0.
Portugal has made its move as a European technology innovation hub. Lisbon and Porto are home to over 2,500 startups and phenomenal levels of active venture capital funding. The national infrastructure development of incubation and programs devoted to helping entrepreneurs grow and internationalize their ventures has been established. Portugal recorded $811 million in venture capital during the previous year, thereby institutionalizing its depth of investment potential for the country's highly promising technology and innovation sectors.
Key trends and forecasts for 2024
With an expected steady growth from 2024 to 2029, the software development market is sure to cross borders fueled by the ongoing digitalization and technological advancements across industries. At present, the market is currently €1.5 billion with an expected annual growth rate of around 1.0% from 2019 to 2024. The industry confirms moderate growth over the last five years; however, the next five years hold promising prospects as the digital transformation initiatives continue growing.
Software Development in Portugal market size outlook
Total value and annual change from from 2014-2029. Includes 5-year outlook
Market Growth Forecast:
The future of software development in Portugal is expected to rise with a growing demand for system and application software. Further, the strong growth expected for 2024-29 will still be in the course of a much larger growth trend for Europe, reflecting the increased digitalization of people's lives as new technologies such as AI, cloud computing, and automation become more commonplace.
Employment and Companies:
An increased hiring of up to 29557 professionals is expected in Portugal's software development industry in 2024, which is a 9.6% increase in employment from 2019 to 2024. The demand for tech talent continues to sustain this trend going up. Moreover, the industry has about 6,445 companies boasting an average growth rate of 1.8% during this timeline. Literally, all these speak for how the environment in Portugal provides favorable entrepreneurship space for both start-up and small businesses as well as established companies.
Portugal has gone through tremendous growth in the Information Technology industry in recent years. Portugal's income from the IT services market in 2024 is projected to be $2.79 billion, which reflects the growth continuing this sector. The IT services market is further segmented into IT outsourcing and IT application services, IT outsourcing ranking first among them, expected to reach $1.09 billion in 2024.
The overall growth of the IT services market in Portugal is expected to be 5.35% every year (CAGR), amounting to a volume of $3.62 billion by 2029.
The following factors are some of the major driving forces of the growth:
• Technological innovations and new services. From then to now, it was necessary to improve the demand on services in cloud computing, cybersecurity, and software development. Among the services, it is most predominant in the areas of artificial intelligence and cybersecurity.
• Rising costs of labor. The average employee spending in the IT services sector is expected to reach $510.50 in 2024, which means better qualifications in this area as well as higher-cost labor.
• Economic and political stability. Portugal is a member of the European Union, which is a good investment environment for the IT sector, and, of course, the geographic location on the Atlantic coast contributes to attractiveness for international companies.
Consequently, it becomes a significant component of the global IT industry as the market for IT services in Portugal continuously grows within the phenomenon of digital transformation of the economy.
General Market Size Data
By 2024, revenue from IT services in Portugal will touch $2.79 billion; with that, quite a lot will be added to previous years' figures, given that it has a compound annual growth rate of 5.35 % (compared to 2024) from 2024 to 2029, reaching a market volume of about $3.62 billion in 2029.
Out of the total revenue earned, which would amount to $1.09 billion in 2024, IT outsourcing is expected to be the largest segment in the IT services market. Other increasing segments in the market include cloud computing, cybersecurity, and software development.
Various factors contribute to the overall growth of the market. They include strategic positioning within the EU as well as a skilled workforce in Portugal. Above all, growing digitalization is turning the market place into a vibrant hub.
Number of IT professionals in Portugal
A dynamic and innovative ICT sector of Portugal, rapidly growing with the valuable contributory result of a young and highly skilled labor force. According to the National Portuguese ICT Cluster TICE, the sector comprises over 80,000 employees and is one of the economically paramount sectors in the country. Accounting for almost 10% of gross domestic product in Portugal, the ICT turnover reaches USD 20 billion. The peculiarity of this sector lies in the fact that it develops, due to qualifications of the workforce and considerable investment in innovative technologies.
It really underlines the way the booming tech scene in Lisbon has actually turned into an important destination for IT professionals and their startups - a situation marked by great demand for engineers and developers. About 90,000 graduates in Portugal every year come from fields like STEM, so there is a continuous flow of new workforce professionals into the ICT sector. Top institutions such as Instituto Superior Técnico and Nova School of Science and Technology have added to making Lisbon also one of the main cities in the development of highly skilled IT personnel.
This legacy of success with digital technologies is accompanied by strategies for developing digital competencies, like the national initiative INCoDe.2030, which seeks to develop digital skills in the population at large. Consequently, Portugal is closing in on the average number of IT professionals per capita in the EU, which will further its technology development.
TECHNOLOGICAL TRENDS IN 2024
New Directions in IT Development in Portugal
With a GDP contribution of nearly 10%, the Portuguese IT industry is among the most innovative and dynamic in Europe: it has annual sales above $20 billion and a workforce numbering more than 80,000 people. Lisbon is fast establishing itself as a major technology hub-the Silicon Valley of Europe.
Portugal hides as a startup hotspot because of the high levels of education at STEM-level and the presence of qualified engineers. This has actively enabled the country in developing new technologies and innovative solutions thereby attracting investments in the high-tech sector.
Important areas of development include artificial intelligence, advanced computing, and digitalization of the economy. Portugal also actively supports digital skills among the population, which contributes to business development and improvement of public administration.
The role of startups and innovation
The start-up and innovation dimension is fundamental for the Portuguese economy. Over recent years, dynamic growth has been observed among Portuguese startups with new technology solutions and business models, a clear evolution from simple ICT companies in the past to highly specialized startups working with artificial intelligence, cloud tech, or other advanced innovations. Emerging changes are bolstering scientific research cooperation with many top universities in Portugal towards the establishment of an innovative environment. This is the emerging area for growth in the technology sector, supplemented by government support in investment and entrepreneurship programs like Startup Portugal, which stimulate the formation of new companies and the entrance of investments from abroad.
Lisbon, often referenced as the European Silicon Valley, has emerged as the hub for many startup ventures. Most importantly, have excellent universities, a very high proficiency in English, and various tech events such as the Web Summit, which are attracting developers to the city. The coworking space is really vibrant here, which makes it an excellent environment for collaboration and the building of tech startup companies. The same kind of innovative atmosphere in the city is what fosters both the large and small tech companies that may someday achieve unicorn status per ser.
It was able to flourish because of investments in science and technology, the creation of incubators, and national initiatives such as e.2030, which develop digital skills at all levels of the population. This does help Portugal attract international talent and investments, positioning it quite strongly amongst European counterparts in the startup scene. Among the many recent successes is the phenomenal increase in unicorns like OutSystems and Farfetch, which indicates how successful Portuguese startups have become on the international scene. In summary, innovation and startups in Portugal are certainly facilitating a boost to give the country a competitive edge on the global technology market by stimulating economic growth.
TOP IT COMPANIES IN PORTUGAL
Presentation of the list of companies
In all, there are 10,046 software companies in Portugal. This is the largest state Lisbon and accounts for 39% of the market with 3,952 software companies. Second is Porto, with 1,810 companies making up 18% of the total, and Braga hosts 677 software companies. It now makes up a total of 64% market share contribution, as these three provinces take together into account the market share of the total software industry in Portugal.
Here are some of the top software companies operating in Portugal:
• Logicalis Portugal, SA - Oeiras (https://www.logicalis.com/)
• Gizz, LDA - Braga (http://www.gizz.pt/)
• GlobaZ, SA - Oliveira de Azeméis (https://www.globaz.ch/)
• Verizon Connect Portugal, SA - Oeiras (https://www.verizonconnect.com/)
• F3M – Information Systems, SA - Braga (https://www.f3m.pt/)
PORTUGAL'S PLACE IN THE GLOBAL IT CONTEXT
Investment attractiveness
According, to the EY European Attractiveness Study 2022, Portugal is in the eighth position among European countries in terms of foreign direct investment (FDI) attractiveness. In fact, 200 FDI projects were attracted to Portugal in 2021, a rise from 30% in 2020. That is already a marker of the country's development towards investment climate improvement, ahead of both Poland and Ireland.
The main sectors of investment are software and IT services, vehicle manufacturing, transport and logistics. The biggest investments are in the USA, showing the high interest among foreign investors in the Portuguese market.
One of the most emerging arenas is the developing startup ecosystem. The Portuguese start-ups represent more than 1% of the GDP of Portugal, thus indicating their stable growth. In 2023, over 2500 startups will be listed in the country, being buoyed by both government and also private initiatives. It is a significant component of this ecosystem: total funding in startup companies in 2022 reached USD 811 million, and late-stage financing increased by about 55 times over the past years.
Portugal has now become active in the construction of its startup infrastructure, such as through incubators and funds, like the 200 Million Fund. This has resulted in the existence of 7 unicorns in the country, such as SWORD Health, OutSystems, and Farfetch, with a total value of $41.5 billion.
Apart from that, Portugal provides a highly conducive tax system including tax exemptions available for companies that perform research and development which helps grow innovative firms. Moreover, as part of the national strategy “AI Portugal 2030", the government develops an active view on the development of artificial intelligence, which could eventually prove to be one of the main engines for future economic growth.
Infrastructure investments are one of the great motivators for business development. Portugal has been heavily investing in broadband infrastructure and 5G in the past years. International projects that serve submarine cable links to other continents, such as Portugal, are key players in this process, enhancing the nation's positioning as a digital hub between Europe and the rest of the world.
Impact on the European market
Currently, Portugal holds 31st position out of 133 economies worldwide in innovative potential according to Global Innovation Index GII for this year 2024. In Europe, however, it gets 20th position from among all economies on the continent, thereby ensuring its stability within the innovation ecosystem on the continent.
No science and technology clusters from Portugal ranked in the top hundred of the Global Innovation Index. However, with an upward trend in its innovation performance, particularly in technology, digitalization, and sustainability, Portugal remains relevant to the European market. Its adoption of emerging technologies-e.g., electric vehicles, 5G, robotics, and broadband-is getting better, having a positive impact on the European market.
Especially, Portugal's increased investment in research, R&D and venture capital are capable of developing such economically competitive innovations at European level. Compared to the year before, scientific publications and international patent applications registered an increase in the number of investment-forging activities by European and international corporations in Portugal. However, given the challenge of global warming and the economic crisis, Portugal should keep on improving its innovation strategy to sustain competitiveness at the EU level.
Such achievements should enable Portugal to consolidate its potential in the European market, particularly when it comes to adapting to technological changes that will determine future economic development in Europe.
CONCLUSION
Forecasts for the future
Portugal's IT sector is experiencing a consistent upward trend trend, especially in software development and IT services. The IT services industry in Portugal is pre-supposed to hit $3.62 billion by 2029 with an annual average growth rate of 5.35%. The country is fully into the changes that happen in that field, most especially artificial intelligence, cloud computing, and cybersecurity. These will create competitive products that could have a potential scope for getting into overseas markets.
As far as the software market is concerned, there are good prospects for improvement given that it still records phenomenal growth due to digitalization and the adoption of new technologies. Demand for system and application software is expected to grow, which will make an impact on the development of new companies and startups.
Especially in the dense cities of Lisbon and Porto, Portugal is fast becoming a key techno hub in Europe, with more and more startups sprouting and a growing tendency towards VC investments. The year 2022 was indeed a leap year for the country which received $811 million worth of venture capital investment, thereby fueling investment expectancy hype within the technology and innovation sector.
The country of Europe appears hefty on investing much more than other investments into infrastructure development like broadband and in 5G systems to take the digital economy to another level. Additionally, the government even has some support given by pulling through startup and innovation programs to boost the whole technological development.
In this way, Portugal appears to have very sound and stable forecasts for further development as an increasingly important player in the European technology market, which will ease its integration into the global innovation ecosystem.
Results of IT development in 2024
The economy, taking into account the contribution of the IT sector, is expected to see slow growth in 2024 in Portugal. Almost a GDP contribution of 10 percent comes with such information technology sectors, while turnover figures about $20 billion in gross value. Particularly, the software and IT services marketplaces are so active that expectations have been raised for additional growth. Growth figures for the IT services market predict a 5.35% increase from 2022 figures through 2024 to approximately $2.79 billion.
Portugal further develops its capabilities for innovation in the year 2024, scoring 31st position-GII 2024, which is much higher than last years. Among that haul, it secured 20th rank with respect to the European economies in the continent-highlighting thus a stable position in the innovation and technology atmosphere in the continent.
The more we go deeper into the passage of time in the year 2024, the most prominent and noticeable emerging trend is the increasing demand for technologies like artificial intelligence, big data and cloud computing, cybersecurity, and automation in innovative service and product enhancement. There are many other fronts of evolution as well, for example: digitalization of economies by better utilization of cutting-edge technologies like 5G, electric vehicles, and robotics.
Portugal will keep attracting huge investment in startups in 2024, which is another aspect of the growth of the IT sector. The developments in venture capital and startup support programs also speed up the growth of technology companies, including many startups that have made it globally famous, such as OutSystems and Farfetch.
So, 2024 is a historical point in the development of Portugal's IT industry, as it leads to investment growth, technological innovation, and assistance to start-ups in making the country advance its position in stable European and international markets.
References
IBISWorld - Software Development Industry in Portugal
Overview and analysis of the software development industry in Portugal, including trends and statistics.
Statista - IT Services Outlook in Portugal
Data and projections for the IT services sector in Portugal, focusing on market size and revenue growth.
WIPO Global Innovation Index - Portugal
Insights into Portugal’s performance in global innovation rankings and key indicators.
BoldData - Software Companies in Portugal
Comprehensive database and information about software companies operating in Portugal.
Trade.gov - ICT Sector in Portugal
Analysis of Portugal’s information and communications technology (ICT) market, with a focus on opportunities for businesses.
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