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Romania Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 57
Market Overview
Romanian IT spending is expected to report modest expansion in H111, which should accelerate in H211, as the economy recovers. With the Romanian economic recovery expected to broaden over the coming quarter, BMI expects consumer and business IT spending to gradually expand. However, consumer and business IT spending remain constrained by deleveraging and a fiscal austerity programme, keeping spending below 2008 levels.
PC sales grew robustly in Q111. In the medium term, a fundamental equation of rising computer penetration, rising incomes and the effects of EU membership should support IT market expansion. The government is faced with implementing a fiscal austerity programme, but pledged to use EU structural funds to encourage continued information society development.
Industry Developments
E-government and e-public service projects such as the E-Romania portal will help to drive ICT investment across various sectors, with an e-justice that was rolled out in Q111, supported with EU funding. Meanwhile, the National Tax Administration Agency (ANAF) is reportedly planning a major upgrade of its IT systems.
In July 2010 IT firms were concerned that the government's introduction of 24% VAT from July 1 2010 could have a negative effect 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 from companies in the consumer goods and retail sectors could also be affected.
The Romanian government will continue to try and use EU structural funds to support ICT investment. A total of EUR383mn has been earmarked for Romania's ICT sector for the 2007-2013 period. About 70% of the money earmarked for the Ministry of Communications and IT is to expand broadband communications infrastructure.
Competitive Landscape
In Q111 there was further volatility in the Romanian computer market, as overall sales reported strong growth due to an improving economy. The main vendors to benefit were Dell and HP, which grew strongly, partly due to a recovery in business procurements. Meanwhile, the sales of vendors such as Acer and Asus, which mainly address the consumer segment, dropped.
In its 2011 fiscal year, which ended on June 30, Microsoft Romania reported a 5% contraction in local sales. The main cause of the drop was a suspension of the company's contracts with the government, as well as less demand from the business sector. However, revenues from some segments was up, with CRM reporting more than 10% growth.
In September 2010 US firm IBM signed a 10-year, multimillion-dollar datacentre services agreement with Petrom, the largest oil and gas producer in South East Europe. According to the agreement, Petrom will outsource the operation of its datacentre infrastructure to IBM, which will provide services such as cloud computing, hosting, installation and co-location to Petrom and affiliated companies.
Computer Sales
BMI forecasts that the Romanian computer hardware market (including desktops, notebooks and accessories) will be worth US$776mn in 2011, up from US$732 in 2010. In 2010 PC shipments grew strongly, with total shipments of about 600,000 units. However, average prices also declined sharply, and Romanian demand for computer hardware will remain constrained in 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 BMI's forecast period. While the latest 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 about US$205mn, with a resumption of growth. As the economy finally emerges from recession in H211, software investments by key software spending verticals should start to grow again, with total spending reaching US$305mn by 2015. In early 2011 Romania's Banca Transilvania, which has a 500 branch and agency network, said it invested US$19.4mn in a new core banking system.
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 shifted to 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$323mn in 2011, accounting for about 26% of total IT spending in the country. Spending on IT services remained constrained in 2010 as enterprises cancelled or postponed IT projects as a result of the economic situation. However, a gradual recovery is forecast for 2011.
BMI expects IT services spending to increase to US$469mn by 2015, driven by an inflow of EU funds and foreign investment. General economic reform, including a continuing wave of consolidation and privatisation, together with economic growth should drive demand for IT expertise. Demand for basic enterprise software and hardware systems is also far from saturated.
E-Readiness
The issuance of a WiMAX licence to National Radiocommunications Company in Q408 as well as a CDMA450 licence should boost broadband growth in the country, particularly in rural regions. After receiving no bids in its tender for two further WiMAX licences in Q109, the communications authority, the ANC, said 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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