IDC RESEARCH RO SRL

 | 

LAURENTIU POPESCU

  |  08.11.2013

Romanian IT&C Market Overview

The IT market in Romania grew 4.3% year on year in 2012 to reach a value of $2.92 billion. Hardware accounted for 70.3% of the total market, while software made up 14.8% share and IT services 14.9%.

IDC RESEARCH RO SRL

LAURENTIU POPESCU

LAURENTIU POPESCU

IDC RESEARCH RO SRL

IDC expects IT spending in Romania to grow at a CAGR of 2.4% over the five-year forecast period to total $3.37 billion in 2017. The software market will expand at a CAGR of 3.3% during that same period. There are several drivers and inhibitors with a direct impact on the future development of the Romanian software market, such as:

 

Drivers

 

► Going Mobile: The adoption of mobile devices and services grew substantially in 2012, a trend that will continue in 2013. More companies in several industries, including retail, utilities, and finance, are looking to increase their employees' mobility and are thus investing accordingly. The devices themselves are just a small part of such investments, but they generate additional revenue from software applications, including EAS, security, storage and mobile applications.

► Hardware Usage: As IT budgets are still frozen for many companies, the renewal rate of hardware devices remains low. However, in the absence of additional investments in IT infrastructure, companies are striving to optimize their existing IT architecture, which creates further opportunities for small and very specific investments.

► Pent-up Demand: Pent-up demand during 2008–2012 and the current low penetration rate keep the IT market growing despite the very difficult political and economic situation. Following an impressive boom in 2006–2007, large investments dwindled substantially. While the chances of companies returning to large-scale infrastructure projects are very small, some processes clearly need to be updated, so decision makers now have two options: make small-scale upgrades in critical application areas or start outsourcing.

► EU Funds: Although the EU fund absorption rate in Romania is among the lowest in the region, this rate increased substantially in 2012. Thus, of 11.5% of EU funds drawn over the 2007–2013 period, 5.9 percentage points were drawn in 2012, meaning that last year the country absorbed more than it had in the previous five years combined. As usual, no special allocation for IT projects is given in EU funds, but a considerable amount is usually spent on IT investments.

► Increased Internet Penetration: An increasing number of Romanians access the Internet from home. According to IDC's latest research, 41.3% of Romanian households have access to the Internet, with most connections being broadband. 4G services were launched on a small scale at the end of 2012, and IDC expects constant growth in coverage in 2013. The new transfer speeds 4G offers will enable services that were not applicable for mobile users previously.

► New Technology and Delivery Models: The rapid development of the Romanian IT market is leading to the emergence of new technologies and delivery models. As a result, mobility and cloud are gaining wider acceptance even in verticals such as banking, insurance, and government, which are usually inclined to maintain a traditional approach, keeping both hardware and software infrastructure exclusively inside their firewalls.

 

Inhibitors

 

► Political Instability: The political situation in Romania was extremely difficult for the business sector (all businesses) through most of 2012. Many projects were delayed, postponed, or even canceled. As usual in Romania during an election year, the government decided to increase social benefits in order to gain the sympathy of citizens; however, in order to keep budgetary expenses in check, the government decided to cut back on investments. As a result, public sector investments were at a minimum, which had a direct negative impact on overall IT spending.

► IT Budgets: During the last few years, many businesses have frozen their IT budgets, and this is likely to remain the case in the near future. New contracts are determined by cost-cutting strategies and optimization initiatives, and many existing contracts are being renegotiated. Home users have also been reluctant to spend in this recession environment.

► Hardware Market: Year 2012 was a very tough one for hardware vendors, with negative growth rates in the server, storage, and printing markets. This had a direct impact on IT services spending related to new IT acquisitions and applications that could not be compensated by the rollout of projects from previous years.

► Foreign investments: Foreign direct investments (FDI) continued to decline in Romania in 2012, according to the National Bank of Romania. It was the fourth consecutive year of decline, with the FDI level falling to €1.6 billion, representing an 11% year-on-year decrease.

► Cost of Finances: Financing costs in Romania are still very high compared with those in most other EU countries. The average interest rate on a loan of less than €1 million is around 10%, four times more expensive than in the Czech Republic, for example. This high rate is set by the financial institutions providing the loans, which have low confidence in borrowers' ability to repay loans. The high cost of financing obviously has a direct impact on the volume of investments, including IT investments. Therefore, without access to cheap loans or other financial incentives, it is extremely difficult for software developers to financially sustain the R&D related investments necessary for developing and marketing packaged software applications and thus creating IP (intellectual property).

 

Overview of the Computer Systems market

 

The server segment decreased for the second year in the row, reaching 9.440 units and a value of $53 million. In the 5 year forecast this segment is expected to grow at a CAGR of -1.4 %.

 

The storage segment followed the trend of the server market and decreased to $32.8 million and a capacity sold of 25K Terabytes. In the 5 year forecast this segment is expected to grow at a CAGR of 3.4%.

 

The HCP (Printers & Copiers) segment decreased for the second year in the row, reaching 256.376 Units and a value of 68M $. In the 5 year forecast his segment is expected to grow at a CAGR of 9%.

 

The PC segment decreased in value to reach 462M $ but it had a growth of 5.9% in volume reaching 727.611 units. In the 5 year forecast his segment is expected to grow at a CAGR of 6.6%.

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