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Romania Information Technology Report Q1 2011
Business Monitor International, Jan 2011, Pages: 56
Business Monitor International's Romania Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Romania's information technology industry.
Market Overview
Romanian IT spending returned to growth in 2010, following a sharp contraction in 2009. However Consumer and business IT spending will remain constrained in H111 by deleveraging and a fiscal austerity programme, keeping spending below 2008 levels.In 2010 PC shipments were on course to grow at a double-digit rate, boosted by base effects due to the steep contraction in PC shipments in 2009. H110 saw shipment rise by at least 20%, compared with the same period of the previous year. However, due to an estimated 25% decline in average prices, revenues growth failed to keep pace with shipments.
In the medium term, the Romanian IT market's strong fundamentals of low computer penetration, rising incomes and the effects of EU membership should support resumed expansion. BMI expects positive IT spending growth in 2011.
Industry Developments
In July 2010, there were concerns among IT sector companies that the government's introduction of a24% value-added tax (VAT), from July 1 2010, could have a negative impact on demand for IT products and services. Retail sales were expected to be most affected, because of the likelihood that retailers would pass on the tax to consumers in the form of higher prices. Meanwhile demand for IT services for companies in the consumer goods and retail sectors could also be affected.
The government continues to implement its e-Romania agenda, despite fiscal pressures. The National Tax Administration Agency (ANAF) is rumoured to be planning a major upgrade of its IT systems with support from the IMF. The IMF will assist ANAF officials to identify IT issues and to develop measures to improve revenues collection.
In 2009, the Romanian government looked to EU structural funds to prevent stagnation in the domestic IT market and stimulate investment. In 2009, information and communication technology (ICT) projects worth EUR125mn had been approved for financing as of October. A total of EUR383mn has been earmarked for Romania's ICT sector for the 2007-2013 period. Around 70% of the money earmarked for the Ministry of Communications and IT is to expand broadband communications infrastructure.
Competitive Landscape
HP Romania targeted an increase in its PC market share to 17% in 2010, up from 13.6-13.8% in 2009.To help drive sales, HP invested EUR100,000 in opening its first own-brand store in Europe, in Bucharest Plaza mall. HP anticipated that the store, built together with its direct retail partner AltexRomania, would generate earnings of up to US$1mn in its first year.
In September 2010, fellow US giant IBM signed a 10-year, multi-million dollar data centre services agreement with Petrom, the largest oil and gas producer in south east Europe. Under the agreement,Petrom will outsource the operation of its data centre infrastructure to IBM, which will provide services such as cloud computing, hosting, installation, and co-location to Petrom and affiliated companies.
One IT services market trend has been the greater movement of telecoms service providers into the IT services space. In May 2010, the Ministry of Education and Research awarded leading Romanian Telecoms company Romtelecom a EUR5.2mn contract to create an e-learning portal. Romtelecom will partner with local software company Siveco Romania to provide customer software and educational software development and training services, as well as supplying hardware such as computers and photocopiers.
Computer Sales
BMI forecasts that the Romanian computer hardware market (including desktops, notebooks and accessories) will be worth US$776mn in 2011, with double-digit growth compared with 2010. In H110, PC shipments grew strongly, with a double-digit year-on-year increase driven by notebooks. However,average prices declined and Romanian demand for computer hardware will remain constrained in both consumer and business segments due to continued deleveraging and rising unemployment.The low level of computer penetration, at less than 25%, still represents an opportunity for vendors during our forecast period. While recent statistics suggested that 43.5% of urban inhabitants in Romania owned a computer, the nationwide figure for home computer ownership was just 24.6%.
Software
The market value of legal packaged software in 2011 is projected by BMI at around US$2.1bn, with double-digit growth from 2010. As the economy emerges from recession in the second half of2011, investments by businesses and the public sector should see spending on software increase to US$3.2bn by 2015.
The enterprise resource planning (ERP) market is still in its early phase, where larger companies and organisations still provide strong demand. In other Central and Eastern European (CEE) states, the focus of opportunity has now shifted more towards the small and medium-sized enterprise (SME) sector.However, demand has gradually become more sophisticated, with increasing interest in support and technical assistance.
Services
The Romanian IT services market is projected to be worth US$3.4bn in 2011, accounting for around 26%of total IT spending in the country. Spending on IT services was expected by BMI to have contracted in2009 as enterprises cancelled or postponed IT projects as a result of the economic situation. However, a gradual recovery was forecast for 2010 and 2011.
BMI expects IT services spending to increase to US$5.4bn by 2015, driven by an inflow of EU funds and foreign investment. Demand for basic enterprise software and hardware systems is far from saturated and will continue to be an underlying driver for the services market.
E-Readiness
The issuance of a WiMAX licence to National Radio Communications Company in Q408 as well as aCDMA450 licence should help boost broadband growth in the country, particularly in the rural regions.After receiving no bids in its tender for two further WiMAX licences in Q109, the communications authority, the ANC, announced that it was slashing the licence fee and would relaunch the tender. This signalled the regulator's intent to drive growth in the sector.
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