IT market in Romania expected to recover in 2011

The total value of the Romanian IT market declined in 2010 by 2.6 percent to approximately EUR 831 million, a drop not that significant as the one recorded a year earlier, according to a research by PMR.

Researchers expect 2011 revenues to increase to EUR 877 million, with the hardware segment generating 50 percent, IT services 27 percent and software 23 percent of the revenues.

In 2009-2010, the economic crisis in Romania impacted private consumers and companies, which reduced IT budgets. Public IT spending also declined, although the possibility to attract EU structural funds became a factor that was able to rescue part of the IT projects of Romanian authorities in 2010.

General investment perspectives in Romania and perspectives for the IT industry in the country remain uncertain in 2011. The IT vendors that were interviewed by PMR believe the recovery of the demand for IT products and services is conditioned by the overall economic improvement.

However, based on the most optimistic assessments, the recovery of the economic growth in Romania is expected chiefly as of the second half of 2011, and will not exceed 1.5 percent in 2011. This means that a more significant growth in the demand for IT will only happen in 2012, due to the usual six-month lag between economic and investment growth.

All in all, researchers expect that the demand for IT products and services in Romania to show a modest 5.5 percent growth in 2011, to be followed by the stable increase of IT spending in the country over the next few years.

However, average growth in 2011-2012 will not exceed 7 percent, which is quite unimpressive in comparison with the double-digit market expansion in 2005-2008. In the next few years, the development of the IT market in Romania will mostly be based on the internal resources of the economy.

At the same time, analysts believe that the phenomenon of a consumption boom financed by affordable loans from foreign banks will not to be repeated.

Researchers also predict that Romanian IT companies will continue to look at the possibility of offering software development outsourcing services. Local providers such as Asesoft, Ness Technologies, Scop Computers, Siveco and S&T have already started to explore the nearby export markets of Bulgaria, Hungary, Macedonia, Moldova and Serbia.

The share of hardware in the total value of the Romanian IT market dropped significantly in 2009 and 2010, which is explained by the massive reduction of IT spending by individuals and SOHO users.

These customers are buying mainly hardware and spending significantly less on software and services. The decline in computer hardware sales in 2009 and 2010 damaged the businesses of IT distributors and retailers. Both retailers as well as customers were forced to cut expenses and as a result, the number of computer outlets was reduced by many retail chains.

At the same time, online sales in Romania were quickly taking over the share of off-line retail. The decline of the demand on the segments of computer hardware also caused prices to drop.

Several retailers, including eMag, Tornado Systems, Flanco and Scop Computers, were acquired by their competitors or partners. The UltraPro retail chain announced bankruptcy and stopped operating.

The main executor of M&A deals in 2009 and 2010 was Asesoft Distribution. This actually became the first case in the country when the distribution and retail of computer hardware created a vertically integrated structure.

The growing interest in the Romanian market from abroad, including China, Russia and the European Union, could lead to some acquisitions as the fastest way to establish a market presence in the country, researchers believe.

Source: telecompaper

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