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Having been severely hit not only by the financial and economic crisis, but also by political instability and declining local purchasing power and foreign direct investments, the Romanian market seems to have become too small even for its best IT suppliers.
Hence, they may be beginning to look overseas for business and thus may convert this challenge into an opportunity. These are the conclusions of Pierre Audoin Consultants (PAC), based on its very dynamic strategic consulting business for Romanian companies.
Bucharest, June 02, 2011: Analyzing the preoccupations and strategies of ten key Romanian software and IT services companies, PAC Eastern Europe notices a very interesting trend relating to new markets, mainly for their software solutions.
With almost no chance of reaching their ambitious business plan goals, based only on the development of the Romanian market, several Romanian IT players have started to look for new opportunities, from local partners interested in promoting and selling Romanian software solutions right through to greenfield investments in their own subsidiaries or even acquisitions of small or medium local providers.
“During the last two years, which have been terrible in the domestic market, the versatile ones among the Romanian IT providers have managed to adapt their business and even increase market share, their brand awareness, and, at times even their staff and competences, along with their portfolio. However, their business targets exceed what the domestic market seems to be able to absorb during the next two to five years,” says Eugen Schwab-Chesaru, Managing Director PAC Eastern Europe.
With consolidated competences and solutions already implemented and tested during several years on tens or hundreds of local customers, the Romanian IP is going to penetrate foreign markets, most of the companies looking first to the less mature ones in Central and Eastern Europe like ex-USSR countries, Turkey or even Middle East or Africa.
It is not yet sure if this is a winning strategy or simply a personal ambition of the owner or the management, but PAC believes that this step is required in order to accelerate the maturity of Romanian organization, even of their sales, marketing, delivery and support services, which are all very different in a multinational business, than in a purely local one.
For some of the companies, foreign markets offer their only chance to dramatically increase sales in the mid-term; for others, there is a need to increase business volumes in order to increase profitability, to optimize the R&D, and even to increase company’s value and attractiveness for potential financial or strategic investors.
At the same time, decreasing dependency on a small and difficult market such as Romania has been often set as a strategic goal to be achieved in a couple of years.
“With horizontal offering or extremely niche solutions, several Romanian companies seem to be ready to conquer neighboring countries, and they are supported financially and even pushed by their shareholders to have the ambition to balance the local revenues with international ones by 2013-2015. We have seen such evolution and expansion in Polish groups and it is not excluded that, in the mid-term, Romanian heroes show such performance, at a smaller scale”, believes the head of PAC Romania and Eastern Europe.
The Romanian IT market is still far from a consistent recovery, with the beginning of 2011 showing reluctance from large private accounts, and unstable, unpredictable and chaotic public sector spending. PAC’s former expectations of 6-8% growth in 2011 could hardly be realized in the conditions of low public spending and very low absorption of EU funds for technology.
In this context, according to PAC’s report SITSI® (Software and IT Services Industry), for the third year, Romania risks to be again one of the losers in the region, with a constantly declining share in terms of total IT spending as well as software and IT services (SITS).
About Pierre Audoin Consultants (PAC):
From strategy to execution, PAC delivers focused and objective responses to the growth chal-lenges of Information and Communication Technology (ICT) players.
Founded in 1976, PAC is a privately held research & consulting firm for the software and ICT services market.
PAC helps ICT vendors optimize their strategies by providing quantitative and qualitative market analysis as well as operational and strategic consulting. We advise CIOs and financial investors in evaluating ICT vendors and solutions and support their investment decisions. Public institutions and organizations also rely on our key analyses to develop and shape their ICT policies.