Romania’s IT market is in a state of rapid development as a result of the stimulus of EU membership and a large influx of EU funds. Indeed the market is currently one of the fastest growing in Europe. Computer sales rose particularly fast in the second half of 2007, and notebook unit sales in the fourth quarter were nearly equivalent to the combined figure for the first three quarters.

Total spending on IT products and services was estimated at around US$1.35bn in 2007. IT spending is projected by BMI to increase at a CAGR of 13% through 2012, in which year the IT market will be worth around US$2.4bn. The economic environment remains positive for growth although a downturn in foreign investment could threaten economic stability.

Increased competition and privatisations will also provide opportunities in many economic sectors, particularly Banking. Some US$380mn in EU structural funds are assigned for ICT through 2012. The new EU state is set to be transformed by a number of initiatives designed to assimilate it into the EU’s broader ‘Information Society’. Funds are earmarked for a number of priority areas including rural communities, SMEs, government and business.

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. Among other programmes, the government wants to help SMEs access EU funds to purchase computers for each workplace, up to a maximum of 10 computers.

EU funds are also potentially available for the purchase of software licences. Beyond that, discretionary funds can also cover other projects such as the purchase of servers and printers, as well as projects like electronic signature and website execution. Besides rural communities and SMEs, MCIT will also focus on other areas including e-government and business. The finance ministry, when laying out its strategy for 2008, included providing the fiscal administration with a computer network as one of its priorities for the year.

Company News

Flamingo Computers, Dell and HP were the leaders in the computer market last year and accounted for more than one-third of the market between them. The leading local company, Flamingo, reported a turnover of EUR171mn in 2007, and has set a target of EUR210mn for 2008. The company hopes to boost net profits by a factor of five, to EUR2.6mn. Meanwhile, Dell’s Romanian subsidy achieved about a 60% increase in sales in 2007.

Turning to software, and Microsoft has recently signed a new agreement with the Romanian government for an additional 39,385 licences with a reported value of US$27.17mn. The agreement is an extension of the framework agreement signed in 2005 by which the government bought the right to 50,155 licences worth US$54.6mn. In the applications segment, Oracle has the biggest share and has been growing faster than the market. Oracle recently signed a licence and support agreement with the Bucharest metro operator, Metronex.

Computer Sales

The Romanian PC market (including notebooks and accessories) was worth US$722mn in 2007, up from US$607mn in 2006. Recent statistics reveal that 43.5% of urban inhabitants in Romanian 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. 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. In the second half of 2007, computer sales increased very rapidly, driven primarily by notebooks, which enjoyed a record quarter. However, desktop sales also performed relatively strongly last year as the average prices of desktops and notebooks dropped 8%-10%. Desktops still account for more than 70% of the market in Romania, but this is expected to fall.

Software

The market value of legally-packaged software in 2007 was estimated by BMI at around US$176mn, and investments by businesses and the public sector should see this increase to US$343mn by 2012. 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, where larger companies and organisations still provide strong demand. In other CEE countries, the focus of opportunity has now shifted towards the small to medium-sized enterprise (SME) sector.

Services

According to BMI estimates, the Romanian IT services market was worth US$311mn in 2007, representing 22% year-on-year (y-o-y) growth. 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 12% to around US$539mn 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.