Romania Information Technology Report Q4 2009

Market Overview

The Romanian IT market is expected to contract in 2009, due to the challenging economic outlook. BMI has now downwardly revised its five-year IT spending forecast for Romania. In the medium term, however, the market's strong fundamentals of low computer penetration, rising incomes and the effects of EU membership should drive continued expansion. BMI expects modest positive IT spending growth in 2010 and a market compound annual growth rate (CAGR) of 11% for 2010-2013. In the medium term, Romania is probably better placed than many other markets to withstand the global economic headwinds. In the historic fifth wave of enlargement of the EU on January 1 2007, new member state Romania is being transformed by various programmes and an inflow of funds, designed to assimilate the country into the EU's broader 'Information Society'. A total of EUR383mn has been earmarked for Romania's information and technology (ICT) sector for the 2007-2013 period. The government has said that it expects several IT projects to be cancelled this year, but has pledged to use the prospect of EU structural funds to try and encourage continued investment. Romania is now one of the fastest growing IT markets in the CEE region and one that attracts increasing attention from vendors. Industry Developments The Ministry of Communications and IT (MCIT) has outlined key areas for ICT-related EU structural funds. The funds earmarked for Romania's ICT sector for the 2007-2013 period have been confirmed at around EUR383mn. Around 70% of the money earmarked for MCIT is to expand broadband communications infrastructure, but the government has identified some priority groups. In 2009, the Romanian government continued to implement some parts of its e-government agenda. One project involved the installation of new computer systems by the Ministry of Public Finance. The finance ministry's strategic goals include providing the fiscal administration with a computer network as one of its priorities. Another key element of the e-government programme is 'e-bid', which allows public institutions to procure assets by electronic means. The government is particularly keen to help small- and medium-sized enterprises (SMEs) have easier access to EU ICT programmes. In Q408, the government revealed that state aid worth EUR38mn would potentially be made available to SMEs by 2013 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 the World Bank.

Competitive Landscape

Romania PC vendors generally anticipated slower growth in 2009. Notebook segment leader Acer planned to respond to the slowdown with more aggressive promotions, and by strengthening relations with distributors. Meanwhile, Fujitsu-Siemens anticipated losing more of the low-tier market to Asian vendors and said that it would target the IT infrastructure service sector, which it hopes will account for 30% of sales in 2009. In 2009 Microsoft wants to increase the number of its partners in the Romania market by 20-30%. In the last fiscal year, market leader Microsoft Romania achieved revenues of some EUR24.5mn, and profits of EUR5.6mn, according to finance ministry data. The company is targeting the consumer and business solutions segments as growth opportunities. Siveco Romania has targeted 10% growth in revenues in 2009 to as much as US$99mn, up from around US$90mn last year. Siveco is looking at projects based on structural funds, and services such as systems integration to power growth. The company, which is estimated to have at least 20% of the local enterprise application solutions (EAS) and enterprise resource planning (ERP) market, was part of a consortium that recently won a contract for informatisation of Turkey's customs system.

Computer Sales

BMI forecasts that the Romanian PC market (including notebooks and accessories) will be worth US$764mn in 2009, down 4% from US$790mn in 2008. By the end of 2008, there were signs of a slowdown, and few vendors expect 2008 growth levels to be repeated in 2009-2010. In the short term, sales are likely to slow most in the household segment, while a deterioration in business sentiment is also likely to lead to cutbacks or deferments of spending among enterprises. As a result, vendors are likely to focus their attentions more on government ICT infrastructure tenders and big projects.

Software

The market value of legal packaged software in 2009 is projected by BMI at around US$222m. Despite a deceleration in 2009, investments by businesses and the public sector should see this increase to US$328mn by 2013 at a CAGR of 10%. Romania saw a further decrease, at least in percentage terms, in software piracy in 2007, to 66%, building on progress made in 2007. In the short term, the economic slowdown may have a negative impact on the market for enterprise application software. The ERP market is still in its early phase, where larger companies and organisations still provide strong demand. In other CEE states, the focus of opportunity has now shifted more towards the SME sector.

Services

The Romanian IT services market is projected to be worth US$343mn in 2009. Spending on IT services is expected by BMI to contract in 2009 as enterprises cancel or postpone IT projects as a result of the economic situation. The slowdown is likely to affect demand across several sectors. BMI expects IT services spending to increase at a CAGR of 10% to US$495mn by 2013, 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 Radiocommunications Company (SNR) in Q408 as well as a CDMA450 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 ANC announced that it was slashing the licence fee and would re-launch the tender. This signalled the regulator's intent to drive growth in the sector.