Romania Information Technology Report Q1 2009
Book Details
Author(s)Business Monitor International
PublisherMarketResearch.com
ISBN / ASINB002AMJA20
ISBN-13978B002AMJA24
MarketplaceUnited Kingdom 🇬🇧
Description
Market Overview
The Romanian IT market continued to grow robustly in the first nine months of 2008. Despite fears abouttightening consumer credit and eurozone slowdown, BMI projects a market compound annual growthrate (CAGR) of 14.2% for 2008-2013. This scenario reflects fundamentals of low computer penetration,rising incomes, and the effects of EU membership, which should underpin continued expansion goingforward. The domestic IT market is projected to grow from an estimated US$1.69bn in 2008 to almostUS$3.29bn in 2013.
Despite an expected slowdown in 2009 owing to the global economic situation, around 1mn PC unitswere expected to have been sold in 2008, an increase of about 25% in volume terms. In 2008, total ITmarket growth was estimated at 18.0% in US dollar terms, among the fastest in the Central and EasternEurope (CEE) region. Overall PC penetration is around 22%, and the market remains underdeveloped bymost indicators, representing consumer growth opportunities as incomes rise.
Wider economic reform and privatisation should be another factor driving spending, and could accelerateif greater political stability results from November 2008 elections, following which a coalitiongovernment was formed by the Democratic Liberal Party (PD-L) and the Social Democratic Party (PSD).Following EU accession in January 2007, Romania is being transformed by an inflow of funds, whichhelp finance ICT programmes such as ‘Knowledge-Based Economy’.
Industry Developments
The Ministry of Communications and IT (MCIT) has outlined key areas for ICT-related EU structuralfunds. The funds earmarked for Romania’s ICT sector for the 2007-2013 period have been confirmed ataround EUR383mn. Around 70% of the money earmarked for MCIT is to expand broadbandcommunications infrastructure, but the government has identified some priority groups.
The government is particularly keen to help small- and medium-sized enterprises (SMEs) have easieraccess to EU ICT programmes. In Q408, the government revealed that state aid worth EUR38mn wouldpotentially be made available to SMEs by2013, for IT projects. The funds are to be distributed under the‘e-Growth!’ initiative, which is part of the ‘Knowledge-Based Economy’ programme part-funded by theWorld Bank.
The government considers that national computer penetration has now reached a critical mass sufficientto develop online public services. In 2008, the finance ministry made providing the fiscal administrationwith a computer network one of its e-government priorities for the year. In a speech, the Secretary ofState for Information Technology Zoltan Somadi said that the dual aim when applying new technologieswas to simplify access to public services and to lower tariffs for those services.
Company News
The main PC vendors reported fast growth in H108, despite fears of credit tightening, and they generallyadhered to optimistic FY08 targets. The recent fast growth of the notebook segment, which accounted fornearly half of all sales in H108, has strengthened the position of foreign vendors. Fujitsu-Siemens hopesthat an agreement with IT distributor Altex can deliver a 300% rise in its Romania turnover in its 2008financial year (ending March 31 2009). Dell, meanwhile, wanted to increase its annual sales by 60% in2008.
PC retail groups like Altex, Flamingo Computers and K-Tech are significant players in the PC market.Leading local IT retailer Flamingo reported a turnover of EUR171mn in 2007, and had a target ofEUR210mn for 2008. The company hoped to boost net profits to EUR2.6mn, and in H108 focused onboth the retail and wholesale segments, opening new shops.
In its last fiscal year (which ended in June 2008), market leader Microsoft Romania achieved revenuesof some EUR24.5mn and profits of EUR5.6mn, according to finance ministry data. However, it is likelythat this figure does not capture the full domestic business of Microsoft Romania, which actually claimedrevenues growth of around 45% in its last fiscal year, thus implying a higher figure. In the applicationssegment, Oracle is the clear market leader and has been growing faster than the market as a whole.
Computer Sales
BMI estimates that the Romanian PC market (including notebooks and accessories) was worth anestimated US$853mn in 2008, up 18.5% from US$720mn in 2007. As many as 1mn PC units wereexpected to have been sold in 2008. Most of the growth is being driven by laptops, which account formore than 40% of the market by value and could account for the majority of unit sales in 2009. In valueterms, desktop sales are declining owing to falling prices, but unit sales are still growing.
Computer penetration of below 25% represents an opportunity for vendors during our forecast period,with the market set to reach US$1.65bn by 2013. Recent statistics reveal that 43.5% of urban inhabitantsin Romania own a computer. The nationwide figure for home computer ownership is just 24.6%. Just9.8% of Romanians use a computer at work, and 2% at school. Moreover, 70% of Romanians lack basiccomputing skills.
Software
The market value of legally packaged software in 2008 was estimated by BMI at around US$76mn, andinvestments by businesses and the public sector should see this increase to US$156mn by 2013 at aCAGR of 15.5%. Romania saw big decreases, at least in percentage terms, in software piracy in 2007.
Romania Information Technology Report Q1 2009
The Business Software Association (BSA) reported a 68% drop, although total losses from piratedsoftware still rose owing to an expanding market. An anticipated drop in software licence fees should helpsupport growth in spending.
Demand is becoming more sophisticated, with increasing interest in support and technical assistance.Despite the piracy issue, there should be increasing demand for vertical applications tailored to the needsof particular sectors. These include administration, healthcare, pensions and finance. In the enterprisesector, the enterprise resource planning (ERP) market is still essentially in its early phase.
Services
According to BMI estimates, the Romanian IT services market was worth US$381mn in 2008,accounting for 22.5% of total IT spending in the country last year. Spending on services is predicted byBMI to increase at a CAGR of 15.4% to US$780mn by 2013, driven by an inflow of EU funds andforeign investment. The government has announced that IT service providers will be in line to receive EUstructural funds worth over EUR550mn during the 2007-2013 period under the EU programme toincrease economic competitiveness (separate to the previously mentioned EU structural fund ofEUR383mn destined for the wider ICT sector).
General economic reform, including a continuing wave of consolidation and privatisation, together witheconomic growth, should ensure growing demand for IT expertise. Particular areas of opportunity duringthe forecast period should include telecoms, financial services and banking, and the public sector.
The Romanian IT market continued to grow robustly in the first nine months of 2008. Despite fears abouttightening consumer credit and eurozone slowdown, BMI projects a market compound annual growthrate (CAGR) of 14.2% for 2008-2013. This scenario reflects fundamentals of low computer penetration,rising incomes, and the effects of EU membership, which should underpin continued expansion goingforward. The domestic IT market is projected to grow from an estimated US$1.69bn in 2008 to almostUS$3.29bn in 2013.
Despite an expected slowdown in 2009 owing to the global economic situation, around 1mn PC unitswere expected to have been sold in 2008, an increase of about 25% in volume terms. In 2008, total ITmarket growth was estimated at 18.0% in US dollar terms, among the fastest in the Central and EasternEurope (CEE) region. Overall PC penetration is around 22%, and the market remains underdeveloped bymost indicators, representing consumer growth opportunities as incomes rise.
Wider economic reform and privatisation should be another factor driving spending, and could accelerateif greater political stability results from November 2008 elections, following which a coalitiongovernment was formed by the Democratic Liberal Party (PD-L) and the Social Democratic Party (PSD).Following EU accession in January 2007, Romania is being transformed by an inflow of funds, whichhelp finance ICT programmes such as ‘Knowledge-Based Economy’.
Industry Developments
The Ministry of Communications and IT (MCIT) has outlined key areas for ICT-related EU structuralfunds. The funds earmarked for Romania’s ICT sector for the 2007-2013 period have been confirmed ataround EUR383mn. Around 70% of the money earmarked for MCIT is to expand broadbandcommunications infrastructure, but the government has identified some priority groups.
The government is particularly keen to help small- and medium-sized enterprises (SMEs) have easieraccess to EU ICT programmes. In Q408, the government revealed that state aid worth EUR38mn wouldpotentially be made available to SMEs by2013, for IT projects. The funds are to be distributed under the‘e-Growth!’ initiative, which is part of the ‘Knowledge-Based Economy’ programme part-funded by theWorld Bank.
The government considers that national computer penetration has now reached a critical mass sufficientto develop online public services. In 2008, the finance ministry made providing the fiscal administrationwith a computer network one of its e-government priorities for the year. In a speech, the Secretary ofState for Information Technology Zoltan Somadi said that the dual aim when applying new technologieswas to simplify access to public services and to lower tariffs for those services.
Company News
The main PC vendors reported fast growth in H108, despite fears of credit tightening, and they generallyadhered to optimistic FY08 targets. The recent fast growth of the notebook segment, which accounted fornearly half of all sales in H108, has strengthened the position of foreign vendors. Fujitsu-Siemens hopesthat an agreement with IT distributor Altex can deliver a 300% rise in its Romania turnover in its 2008financial year (ending March 31 2009). Dell, meanwhile, wanted to increase its annual sales by 60% in2008.
PC retail groups like Altex, Flamingo Computers and K-Tech are significant players in the PC market.Leading local IT retailer Flamingo reported a turnover of EUR171mn in 2007, and had a target ofEUR210mn for 2008. The company hoped to boost net profits to EUR2.6mn, and in H108 focused onboth the retail and wholesale segments, opening new shops.
In its last fiscal year (which ended in June 2008), market leader Microsoft Romania achieved revenuesof some EUR24.5mn and profits of EUR5.6mn, according to finance ministry data. However, it is likelythat this figure does not capture the full domestic business of Microsoft Romania, which actually claimedrevenues growth of around 45% in its last fiscal year, thus implying a higher figure. In the applicationssegment, Oracle is the clear market leader and has been growing faster than the market as a whole.
Computer Sales
BMI estimates that the Romanian PC market (including notebooks and accessories) was worth anestimated US$853mn in 2008, up 18.5% from US$720mn in 2007. As many as 1mn PC units wereexpected to have been sold in 2008. Most of the growth is being driven by laptops, which account formore than 40% of the market by value and could account for the majority of unit sales in 2009. In valueterms, desktop sales are declining owing to falling prices, but unit sales are still growing.
Computer penetration of below 25% represents an opportunity for vendors during our forecast period,with the market set to reach US$1.65bn by 2013. Recent statistics reveal that 43.5% of urban inhabitantsin Romania own a computer. The nationwide figure for home computer ownership is just 24.6%. Just9.8% of Romanians use a computer at work, and 2% at school. Moreover, 70% of Romanians lack basiccomputing skills.
Software
The market value of legally packaged software in 2008 was estimated by BMI at around US$76mn, andinvestments by businesses and the public sector should see this increase to US$156mn by 2013 at aCAGR of 15.5%. Romania saw big decreases, at least in percentage terms, in software piracy in 2007.
Romania Information Technology Report Q1 2009
The Business Software Association (BSA) reported a 68% drop, although total losses from piratedsoftware still rose owing to an expanding market. An anticipated drop in software licence fees should helpsupport growth in spending.
Demand is becoming more sophisticated, with increasing interest in support and technical assistance.Despite the piracy issue, there should be increasing demand for vertical applications tailored to the needsof particular sectors. These include administration, healthcare, pensions and finance. In the enterprisesector, the enterprise resource planning (ERP) market is still essentially in its early phase.
Services
According to BMI estimates, the Romanian IT services market was worth US$381mn in 2008,accounting for 22.5% of total IT spending in the country last year. Spending on services is predicted byBMI to increase at a CAGR of 15.4% to US$780mn by 2013, driven by an inflow of EU funds andforeign investment. The government has announced that IT service providers will be in line to receive EUstructural funds worth over EUR550mn during the 2007-2013 period under the EU programme toincrease economic competitiveness (separate to the previously mentioned EU structural fund ofEUR383mn destined for the wider ICT sector).
General economic reform, including a continuing wave of consolidation and privatisation, together witheconomic growth, should ensure growing demand for IT expertise. Particular areas of opportunity duringthe forecast period should include telecoms, financial services and banking, and the public sector.
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