Market Overview BMI projects that Romania will be one of the fastest growing IT markets in the CEE region. Despite a slight slowdown due to the global economic situation, around 1mn PC units are projected to be sold in 2008, an increase of about 25% in volume terms. In 2008, total IT market growth is likely to be about 12% in dollar value, slightly below last year’s level. Overall PC penetration is around 22%, and the market remains underdeveloped by most indicators, representing consumer growth potential as incomes rise.

The IT market should increase at a CAGR of 13% to around US$2.4bn by 2012. The macroeconomic fundamentals are generally supportive, although a downturn in foreign investment could threaten economic stability. Increased competition and privatisations will provide opportunities for IT vendors in many economic sectors, particularly financial services, banking and telecoms. Business spending as a result of EU entry will be a boost to investments in enterprise resource planning (ERP) applications, although this could be hit by a downturn in the eurozone.

Sales will also be boosted in 2008 by access to EU structural funds which will spur a number of ITC projects in the public sector and beyond. Some US$380mn in EU structural funds are assigned for ICT through 2012, although funds are not always used efficiently. Funds are earmarked for a number of priority areas including rural communities, SMEs, government and business. The government has launched a number of initiatives including ‘Knowledge Economy’ and ‘E-Bids’.

Industry Developments The Ministry of Communications and IT 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.

The finance ministry has made providing the fiscal administration with a computer network as one of its priorities for the year. Another key element of the e-government programme is ‘e-bid’. In a speech in May 2008, the Secretary of State for Information Technology Zoltan Somadi said that the goal when applying new technologies was a dual one of simplification of access to public services, and lowering tariffs for those services.

Company News With many vendors reporting record local market sales for 2007, vendors have set ambitious targets for 2008. Fujitsu-Siemens projects another 30% increase, which would take its local turnover to around EUR85mn. Dell, however, wants to increase its annual sales by 60% in 2008, and take its share of the local market to 11% from 9%. Meanwhile, Taiwanese laptop producer Asus projects that income from Romania will double in 2008.

In response to expanded demand growth, IT retail channel chains are expanding. Romanian IT retail giant Flamingo International has 118 outlets nationwide with around 100 employees. IT and digital products accounted for 57% of turnover in Q108, and PC notebooks were the fastest growing category in that quarter – up 460% year-on-year. Meanwhile, Twister, another main chain and player in the local IT market, intends to open 60 outlets in Romania this year.

Turning to software, and for fiscal 2007 (ending June 2008), market leader Microsoft Romania reported growth of around 45%. The company claimed that licence sales of Vista and Office 2007 grew some 50% – and that the Romanian version was now selling about equal with the English one and could even overtake it this year. Microsoft signed a new agreement with the Romanian government for an additional 39,385 licences with a reported value of US$27.17mn.

Computer Sales The Romanian PC market (including notebooks and accessories) was worth US$686mn in 2007, up from US$607mn in 2006. As many as 1mn PC units are likely to be sold in 2008. Most of the growth is being driven by laptops. In value terms however, desktop sales are declining due to falling prices. Laptops are now more than 40% of the market by value, and could actually account for the majority of unit sales in 2008. BMI projects that this low level of computer penetration represents an opportunity for vendors during our forecast period, with the market set to reach US$1.3bn by 2012. Recent statistics reveal that 43.5% of urban inhabitants in Romania own a computer. The nationwide figure for home computer ownership is just 24.6%. Just 9.8% of Romanians use a computer at work, and 2% at school. Moreover, 70% of Romanians lack basic computing skills.

Software The market value of legally-packaged software in 2007 was estimated by BMI at around US$183mn, and investments by businesses and the public sector should see this increase to US$334mn by 2012. Romania saw big decreases, at least in percentage terms, in software piracy in 2007. The Business Software Association (BSA) reported a 68% drop, although total losses from pirated software still rose due to an expanding market. An anticipated drop in software licence fees should help support growth in spending.

Demand is becoming more sophisticated, with more demand for support and technical assistance. Despite the piracy issue, there should be increasing demand for vertical applications tailored to the needs of particular sectors. These include: administration, healthcare, pension and finance. In the enterprise sector, the enterprise resource planning (ERP) market is still essentially in its early phase.

Services According to BMI estimates, the Romanian IT services market was worth US$288mn in 2007. IT services accounted for around 23% of all IT spending in Romania last year. Spending on services is predicted by BMI to increase at a compound annual growth rate (CAGR) of 13% to around US$525mn by 2012, driven by the large number of complex ICT projects being implemented in public and enterprise sectors with the support of EU funds. The government has announced that IT service providers will be in line to receive EU structural funds worth over EUR550mn during the 2007-2013 period under the EU programme to increase economic competitiveness. General economic reform, including a continuing wave of consolidation and privatisations, together with economic growth, will ensure growing demand for IT expertise. Particular areas of opportunity during the forecast period should include telecoms, financial services and banking, and the public sector.