Market Overview Following Bulgaria’s EU accession on January 1 2007, the new member state is set to be transformed by a number of programmes designed to assimilate it into the EU’s broader ‘Information Society’. A wave of new IT projects funded partly by EU and other international financial institutions, are now expected to drive spending on IT products and services.

This situation provides a strong opportunity for domestic IT market growth, with revenue CAGR of 12% predicted for the 2006-2012 period. The market is projected to increase in value during this period from around US$505mn in 2007 to close to US$875mn by 2012.

With a steady period of real annual economic growth of between 5% and 6%, IT vendors should benefit from a continued upswing. EU and government initiatives should drive spending by enterprises, with the SME segment offering more opportunities. The home computer segment is also becoming increasingly important, and the current low computer penetration rate, combined with growing affordability of computers, and government initiatives, should see continuing strong performance through 2012.

Industry Developments Following EU entry, Bulgarian organisations have access to EU funds available for initiatives to enhance the use of ICT by citizens, government agencies, and enterprises. In July 2007 the EU announced that it would make substantial sums available to Bulgaria under its Competitiveness and Innovations programme, which will include EUR 728mn earmarked for policies in the ICT sector.

ICT in Education is also a key priority with a National Programme budgeted at BGN32.5mn in 2007. In 2007 the government confirmed e-government as one of the main components of its drive to modernise administrative procedures, and admitted that Bulgaria was falling behind the rest of Europe in terms of digitalisation.

Company News There are more than 250 PC assembly companies in Bulgaria assembling between 100 and 10,000 units annually. Hewlett Packard (HP), Fujitsu-Siemens, Dell and Acer are among the market leaders for Bulgaria PC sales as brand computers capture a steadily increasing share. However, as the market shifts to laptops, HP’s main rivals in the PC segment are mounting a strong challenge to the market leader.

Most of the major software vendors are present in Bulgaria with Microsoft and SAP the market leaders.

The increasing number of large IT projects is also leading major vendors to increase investment in local IT services and BPO infrastructure. IBM recently said it is to open a BPO centre in Sofia which will provide a range of services, while HP is also expanding activities in Bulgaria.

Computer Sales Sales of computers, including PCs, notebooks and accessories are expected to reach US$309mn in 2008, with the segment forecast to grow at a CAGR of 11% in 2006-2012. By 2009 it is expected that the number of notebooks in the market will equal that of desktops. The number of domestic computers passed one million in 2006 by BMI estimates, and will pass the 2mn mark in 2008, driven by falling prices and government and EU initiatives to increase penetration.

Software BMI predicts a software market value of US$80mn in 2008, up 13% year-on-year (y-o-y). Although the software market is small, many software transactions belong to the shadow economy and are therefore not included in this figure. Legacy investments in hardware are cumulatively feeding demand for software and solutions, although much will depend on progress in reducing a software piracy rate of around 69%.

EU accession should, however, increase demand among enterprises for solutions to improve efficiency.

Services The Bulgarian IT services opportunity is expected to grow to be worth US$114mn in 2008. IT services market CAGR for the 2006-2012 period is estimated at 16%. Major EU-funded projects are coming on stream as Bulgaria attempts to improve its position across a range of ICT indicators. The IT ministry has said that in future it will rely on public private partnerships for IT project implementation, and predicts that Bulgaria will increasingly use outsourcing for major IT projects.