Market Overview The total size of the Serbia IT market in 2008 was estimated at around US$660mn, up from US$541mn in 2007, and well above the level of 2004, the previous peak. The report forecasts an IT market compound annual growth rate (CAGR) of 19% for 2008-2013, as the market continues to grow at a rate above the regional average.

The context for this growth opportunity is Serbia’s currently low level of information technology development. The current level of per capita IT spending, estimated at around US$67 in 2008, is only about 30% of the level in countries like Hungary and Greece, and 20% of Serbia’s fellow republic in the former Yugoslavia, Slovenia.

BMI’s forecast of Serbia IT market growth takes into consideration a number of local constraints, including low levels of computer literacy, low computer and internet penetration, lack of capital and general low income levels. Despite these factors however, the PC market grew close to 20% in 2007, and was expanding even faster in the first half of 2008, thanks to growing affordability and more retail choice.

By 2013 the IT market it is projected that the market will pass the US$1.5bn level against a backdrop of steady economic growth.

The government’s stated agenda of privatisations would, if implemented, be an important driver of spending in sectors such as banking, telecoms and utilities. Vendors will also target Serbia’s 318,745 small enterprises, many of which are still looking to deploy basic IT infrastructure. Government has the potential to be an important spender on IT, within the framework of the 2006 Strategy for Public Administration Reform.

Industry Developments The Serbian coalition government elected in 2007 has an IT agenda of attracting new investment into the sector skills initiatives and speeding up the application of IT. Jasna Matic of the G17 Plus party was put in charge of the Ministry of Telecoms and Information Society, which had been founded earlier in the year.

Among the early announcements of the new government was a generous financial support scheme to encourage increased foreign investment in the IT sector and support for a major IT Park in the municipality of Indjija. The government has also pledged to tackle Serbia’s acute shortage of IT skills, which is exacerbated because the majority of skilled IT experts go overseas.

Funds from EU institutions will be used to support infomatisation in a number of sectors including smalland medium-sized enterprises (SMEs) and Education. Among these projects, the European Agency for Reconstruction is funding an Education Ministry program ‘VET Reform of Secondary Education.’ Under the programme millions of dollars of IT equipment are to be installed in over 300 locations across Serbia.

The government also has an e-government agenda, although progress has been slow, due partly to low computer penetration in the population. The administration has set out a programme for rapid development of e- government, with the schedule providing for a network to be established at both the national and local level within a four-year period.

Competitive Landscape The largest computer seller in Serbia is local IT giant ComTrade, followed by HP and Fujitsu Siemens.

Aside from ComTrade, other major computer equipment distributors in Serbia include Pakom, Cores, Informatika, Saga, BS Procesor, Tehnicom and Sinteh i Adacom. These companies distribute brands, including global vendor brands, to a few large – and over 1,000 small – retailers. ComTrade opened a new computer production line in October 2008, with an estimated annual capacity of 300,000 computers.

All the major international software companies are represented in Serbia, either directly or using the services of product distributors/developers, in order to sell their products. Microsoft dominates in the operating system segment and in 2008 was also reaching out to SMEs with its Dynamics business software suite. For its part, European business software giant SAP reported 2007 revenues growth of 30% in the Serbia market. SAP has around 70 clients using its software in Serbia.

The IT services opportunity is a draw for vendor investment in the country. In September 2006, IBM opened its first office in Serbia, while in 2007 HP revealed that its software and services revenues in Serbia-Montenegro had grown 550% since 2002. In the biggest regional deal of 2008, ComTrade group merged with Slovenian IT giant Hermes Softlab to create one of the biggest IT groups in central and South Eastern Europe.

Computer Sales Computer sales were estimated at US$356mn in 2008, growing from US$288mn in 2007. BMI predicts a 20% CAGR, with computer sales including notebooks and accessories reaching US$593mn by 2013.

With only around 40% of households having a computer according to government figures, the market looks set to be dominated by hardware sales for some time to come. In the first half of 2008, the growth trend of computers accelerated, with more than 100,000 computers sold in the first quarter alone, around one third of which were notebooks. The general trend for the computer sector since 2000 has been one of significant growth, boosted by the government’s elimination of the tax on new PC purchases. Laptop sales are increasing several times faster than desktops.

Software The domestic software market is expected to grow strongly from US$21mn in 2007 to US$64mn by 2013. Serbia lags far behind most regional neighbours in software deployment, but there is a growing awareness among enterprises of the potential benefits of utilising IT. SMEs will be an important target for vendors due to their generally low level of informatisation, which adds up to a big potential market for basic enterprise resource planning (ERP) and enterprise resource management (ERM) applications.

Larger companies will continue to offer important opportunities however, as the new Serbian government has pledged to accelerate privatisation of key state enterprises. Further market growth will of course depend on the government’s efforts in combating piracy, which is still around 76%, although down from 90% a few years ago.

Services The Serbian IT services market was expected to be worth around US$125mn in 2008 according to BMI estimates, accounting for around 20% of all IT spending in Serbia in 2006. Spending on services is predicted by BMI to increase to continue thereafter to expand, as the banking and government sectors in particular invest in the IT that will enable them to compete in a changing environment. The CAGR for the sector for 2007-2013 period will be around 16%, with the market opportunity passing US$300mn by 2013. IT outsourcing and managed services accounts for around 20% of the IT services total currently with a value of about US$26mn in 2008.