Romanian IT Market Is Expected To Return To Low Single-Digit Growth In 2010

The Romanian IT market is expected to return to low single-digit growth in 2010, following a sharp deceleration in 2009. Consumer and business IT spending will remain constrained by continued deleveraging and rising unemployment, keeping spending growth below pre-2008 levels. An IT market value of US$1.7bn is projected for 2010.

In the medium term, the market's strong fundamentals of low computer penetration, rising incomes and the effects of EU membership should drive continued expansion. We expect modest positive IT spending growth in 2010 and a market CAGR of 10% for 2010-2014. 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

In 2009 the Romanian government looked to EU structural funds to prevent stagnation in the domestic IT market and stimulate investment. In 2009, ICT projects worth EUR125mn had been approved for financing as of October. Romania had been earmarked EUR383mn of European funds for its ICT sector in 2007-2013, plus EUR86mn of public funds.

The government also continued to implement its e-Romania agenda in 2009, despite fiscal pressures. The government's medium term goal is the creation of a huge web portal that will provide nearly 600 online services. The government aims to use the portal to decentralize public services and increase efficiency in interactions between citizens and state institutions.

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.

Competitive Landscape

Romanian 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 2010 Microsoft hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its local sales. In Summer 2009 Microsoft continued to lay the groundwork for the new operating system launch and released the enterprise version of the software in August. Microsoft said in November 2009 that its goal for Romania in the next nine months was to win a share for Windows 7 in excess of the approximately 19% currently achieved by the Vista operating system.

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

We forecast that the Romanian PC market (including notebooks and accessories) will be worth US$853mn in 2010, up from US$819 in 2009. In 2009 there was a sharp deceleration of demand, and few vendors expected pre-2008 levels to be repeated in 2009-2010.

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 2010 is projected at around US$255mn. Despite a deceleration in 2009, investments by businesses and the public sector should see this increase to US$398mn by 2014 at a CAGR of 12%.

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 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$391mn in 2010, accounting for around 23% of total IT spending in the country. Spending on IT services was expected to contract in 2009 as enterprises cancelled or postponed IT projects as a result of the economic situation. We expect IT services spending to increase at a CAGR of 11% to US$597mn by 2014, 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 license to National Radiocommunications Company (SNR) in Q408 as well as a CDMA450 license should help boost broadband growth in the country, particularly in the rural regions. After receiving no bids in its tender for two further WiMAX licenses in Q109, the ANC announced that it was slashing the license fee and would re-launch the tender. This signaled the regulator's intent to drive growth in the sector.

Romania Information Technology Report Q1 2010: CompaniesandMarkets.com