The Romanian Software and IT Services Industry - one year after the EU accession

PIERRE AUDOIN CONSULTANTS

Romania is seen as one of the most attractive IT markets in Eastern Europe,both as a low-cost sourcing location and as a potential area for winning newbusiness. How has the countryʼs accession to the EU impacted its IT industryand what are its future prospects?

One year ago, the Romanian IT market was buzzing with excitement andexpectation.

Software, hardware and IT services suppliers of all shapes and sizes debatedhow the countryʼs accession to the European Union would affect public sectorspending and foreign investment, and what the knock-on impact would be on IT investment.

Since then, progress has been mixed. After a deceptive 2006, with too manylarge postponed or cancelled projects taking their toll on the performance of local IT suppliers, 2007 was more dynamic, with Romanian vendors developing their business both domestically and abroad.

In 2006-2007, the champions of growth were those companies connected tolarge private accounts – most of them under foreign ownership – and able toprovide them with high added-value services.

For many years, public sector projects dominated the Romanian software and IT services market, and international suppliers showed very low interest to open R&D or BPO centers in Romania.

But with the recent development of the local market and the improvement of the countryʼs global image, investments in R&D, BPO or support centers haveconsiderably increased in Romania in the last couple of years.

Based on acquisitions or Greenfield investments, international players likeOracle, Microsoft, IBM, SAP, Ericsson, Adobe, Genpact, Accenture, Sopra,Siemens and others have created thousands of positions for new employees in Romania. Most of these jobs are based around Bucharest and this concentration has led to dangerously high salary inflation around the area for both IT-skilled engineers and people with foreign language abilities.

Pierre Audoin Consultants (PAC) estimates the total value of the software and IT services sold in Romania came to €660m in 2007, which was 23% more compared to the previous year. This increase has been based mainly on project services area, but also on the system infrastructure software sales.

However, taking into account the immature stage of the Romanian marketdevelopment, these growth rates are not as high as many had previouslyexpected.

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