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In recent years, the Romanian packaged software and IT services market was one of the fastest growing markets in Europe. It continued to expand with annual growth rates of over 30%, reaching USD 2,852 million in 2007 (+30%) and over USD 3,800 million in 2008 (+34%). However, in 2009, due to deteriorating economic conditions and postponement of public procurements, the IT market contracted by 25%.
The IT industry drives a large amount of value creation and growth across Romania‘s economy. The public sector tends to dominate IT purchasing opportunities, as in many other sectors. One of the most ambitious projects is Romania‘s eGovernment project, eRomania, which is currently being initiated. In addition, verticals like utilities, government, retail, manufacturing and telecommunications will continue to grow significantly and represent the main end-users of IT industry.
Finally, Romania plans a number of projects, with important ITC components, financed from European structural funds that will be implemented in 2010-2011.

Market Demand
In 2009, the ICT sector (Information and Communication Technology) overall represented 3.20% of the country‘s GDP and just the IT subsector represented 1.1%. The IT subsector accounts for 45% of the total ICT revenue, the rest being represented by telecommunication services. The financial crisis has decelerated growth in the ICT industry, leading to a 25% decline in 2009, mainly because public sector institutions, which in Romania include state-owned companies, are the main customers, and were forced to reduce their budgets. In 2008, the total revenue exceeded USD 13.7 billion; however, the 2009 figures barely exceeded the 2007 levels.
For 2010, the IT spending is forecast to increase 19.5% reaching amarket value of approximately USD 1.7 billion. The CAGR (Compound Annual Growth Rate) is forecast at 10% for 2010 – 2014. By 2013, the IT sector is expected to contribute a greater share of GDP, reaching 1.6% of the total.
In contrast, the IT hardware subsector is experiencing a slowdown, with slow growth of about 4.2% in spending expected until 2013. Software services are , set to see an increase of 14.2% by then. By the end of 2013, the hardware segment is expected to be a USD 1.96 billion market, while software and IT services at USD.860 million..
To prevent stagnation in the domestic IT market and to stimulate investment, the Romanian government pledged to use the prospect of EU structural funds to support the growth of the industry. Despite the government‘s slow pace in defining and executing these projects to ―absorb‖ the EU funds, Romania remains a relatively strong IT market, and has seen several foreign IT firms expand their existing investments as well as new entrants in 2010, despite the recession Romania‘s IT sector remains a priority for the government, because of its ability to attract foreign investment, employ graduates, and its power as an export revenue generator. However, the country‘s most attractive incentive to IT firms and workers has been the exemption from income taxes for some employees, such as software developers. The Government of Romania has moved to phase out this targeted tax exemption in order to improve public finances. Local industry, including foreign IT firms who have made large investments in Romania, oppose ending the exemption, arguing that it is necessary to attract and retain talented employees in Romania. Without this incentive, Romania software developers, whose skills are highly portable, might seek work elsewhere in the European Union.
Romania is developing a national IT policy in compliance with EU policies. The ‗‘Digital Romania –eStrategy for an Information Society‘‘ initiative and the National Broadband Strategy are the keystones of Romania‘s IT effort. From the total of over USD 530 million allocated, around 70% of the money earmarked for the Ministry of Communications and Information Society (MCSI) is to expand Romania‘s broadband communications infrastructure. According to MCSI these include a number of eGovernance projects in the fields of education, health, culture and tourism that will facilitate the access to public information. The National Broadband Strategy will value creation and stimulate the labor market by creating new jobs.
The development of high-speed networks is of great importance for a country such as Romania in that it facilitates the flow of communication between consumers and business, enhances productivity, and stimulates economic growth. Among the upper-middle (UM) income countries, Romania is ranked 10th in terms of network infrastructure and 59 in the World, based on The Network Readiness Index 2009 –2010.
The Network Readiness Index 2009 – 2010 for UM countries
Rank within income group (UM)
Country/Economy Score Rank in the world
1 Malaysia 4.65 27
2 Chile 4.13 40
3 Lithuania 4.12 41
4 Montenegro 4.10 42
5 Costa Rica 3.95 49
6 Latvia 3.90 52
7 Mauritius 3.89 53
8 Uruguay 3.81 57
9 Panama 3.81 58
10 Romania 3.80 10
Source: Adapted from The Global Information Technology Report 2009-2010

In terms of internet users, Romania has registered a considerable increase. The table below shows that since EU accession in 2007, Romania has boosted the number of internet .
In August 2010, Romania was declared first in Europe and the 4th in the world in terms of the average speed of broadband connection to the Internet.
Romania: Internet Usage and Population Statistics
YEAR Users Population % Pop. Usage
Source
2000 800,000 22,217,700 3.6 % ITU
2004 4,000,000 21,377,426 18.7 % ITU
2006 4,940,000 21,154,226 23.4 % C.I. Almanac
2007 5,062,500 21,154,226 23.9 % ITU
2010 7,786,700 21,959,278 35.5 % ITU
Source: Internet World Stat

The government's medium-term goal is for the creation of a huge web portal that will provide nearly 600 online services. The government aims to use the portal to decentralize public services and increase efficiency in interactions between citizens and state institutions. The Romanian Government plans improved legislation and infrastructure projects to encourage investment and promote partnership between IT sector researchers and academic institutions.
In the last two years foreign direct investment in IT was concentrated in opening new R&D and
Excellence Centers or developing the existing ones. The list of new Excellence IT Centers includes:
Microsoft (Technical Support, created in Bucharest, February 2007)
SAP (Global Consulting, Bucharest 2007)
CapGemini (BPO Services, Iasi 2007 and extension in August 2009)
Ericsson (Global Service Delivery, Bucharest 2008)
Raiffeisen Informatik (IT Services, Bucharest 2008)
Kaspersky (IT Services, Bucharest 2008)
IBM (IT Services, Brasov 2009)
Perot Systems (IT Services and Solutions, Bucharest, January 2009)

The existing Excellence Centers of: IBM, Oracle, HP, Genpact, Siemens/Forte, Accenture, Wipro, etc., launched new locations and recruited hundreds of new employees.

Market Data
In recent years, the Romanian packaged software and IT services market was one of the fastest growing markets in Europe. However, in 2009, due to the financial crisis and the collapse of the economy, the IT market dropped by 25%.
Software represents only 12% of overall IT expenditure, and the market volume is still relatively low compared to other Central-Eastern European countries or with the EU-27 average. However, the Romanian software market is one of the fastest growing in Europe, fuelled by the requirements of infrastructure modernization aimed at aligning the public sector with EU standards and norms. The market saw the registration of a series of mergers between companies, alliances between competitors as well as between restructuring and bankruptcy situations.
Hardware and software products are available, but at high prices, due to the weak purchasing power in Romania. The purchase of expensive computer systems (from 1000 USD and up) is impractical for the vast majority of individuals and businesses, despite the general drop in computer prices in the European market in recent years.
Imports cover more than 50% of the total software and IT services market and American software products represent more than 75% of total imports. Practically all internationally well-known software producers are present on the Romanian market. At the same time, local software companies are increasingly involved in packaged software development, especially in ERP/EAS, antivirus, e-health and e-learning areas. A number of Romanian software products have gained success on the global market, winning awards at an international level (BitDefender/Softwin security and antivirus product, Siveco's AeL eLearning platform, the Intuitext/Softwin e-learning suite or TotalSoft and Transart's ERP solutions).
In the last three years, multinational IT vendors and foreign investment funds made a number of acquisitions and investments in Romanian companies. These include Siemens SBS' and Ness Technologies' acquisitions of IT service providers Forte and Radix, investment by Intel Capital in Siveco Romania, TechTeam Global's purchase of offshore development specialist Akela Informatique, Adobe's acquisition of InterAKT, investments by American and European funds in TotalSoft, UTI or Romsys and many others. Recently announced are the acquisitions by groups of investment funds and angel investors of minority participation in Axigen/GeCAD and BitDefender/Softwin.
By the end of 2013, the IT market will stimulate the creation of more than 200 new small and locally owned organizations. IT-related activities are envisaged to register a value of USD 424 million in taxes in 2009, which means USD 679 million in aggregate net new taxes over the next four years if spending will grow at 7,0% a year. This will increase the IT labor market by 65,000 jobs by the end of 2013, which represents a 7.4% yearly growth from now through 2013, which is more than fifty times faster than the growth of total employment.

Best Prospects
Recently, the government of Romania emphasized the strategic importance of the IT sector, indicating that even during the downturn, IT solutions have increased productivity, spurred innovation and played a leading role in economic health and national competitiveness on the long term.
IT for Energy
Cooperation between the IT industry, other sectors and public authorities is essential to accelerate development and the wide-scale roll out of IT-based solutions for smart grids and meters, near-zero energy buildings and intelligent transport systems. The IT sector is able to deliver modeling, analysis, monitoring and visualization tools to evaluate the energy performance and emissions of buildings, vehicles, companies, cities and regions.
Sustainable healthcare through IT industry
There is an urgent need in the health sector for global standardization and interoperability of technical, security and semantic technologies. The application of IT solutions will enable the introduction of mobility to healthcare, which will in turn facilitate the sharing of best practices and improve patent treatments. Funding of projects that support the introduction of real-time access to information in the area of healthcare will enable the provision of eHealth or telemedicine services to remote areas, both in country and cross-border. The deployment of eHealth technologies is expected to improve the quality of care, reduce medical costs and foster independent living, including in remote places. An essential condition for success is the fact that these technologies incorporate the right of individuals to have their personal health information safely stored within a healthcare system accessible online.
eGovernment
The effective usage of IT can significantly reduce costs and enhance the quality of public services.
eGovernment services:
Offer a cost-effective route to better service for every citizen and business and participatory open and transparent government.
Can reduce costs and save time for public administrations, citizens and businesses.
Can also help mitigate the risks of climate change, natural and manmade hazards by including the sharing of environmental data and environment related information.
Support streamlined administrative processes.
Facilitate information sharing and simplify interaction with public authorities.
Intelligent Transport Systems
Intelligent Transports Systems (ITS) make transport more efficient, faster, easier and reliable. The focus is on smart solutions to integrate passenger and freight flows across transport modes and provide sustainable solutions to infrastructure bottlenecks affecting roads, railways, sky, sea and waterways. As Romania seeks to build basic transport infrastructure (road and rail) to catch up to West European standards, there is an opportunity to build-in ITS solutions.
Enterprise Application Solutions
The EAS market was worth USD 72 million in 2008. The top three vendors (SAP, local player Siveco and Oracle) captured 65% of the Romanian EAS market. The large corporate and the government sectors are still the biggest spenders on EAS, but the market is progressively expanding into the small and mediumsized businesses segments. The top-selling EAS modules are the resources management and core functionalities, but demand is increasing for more complex applications like customer relationship (CRM), supply chain (SCM), or business analytics, which are expected to grow rapidly in the next years. The largest vertical EAS spender in 2008 was the combined (process and discrete) manufacturing sector, followed by retail, and then medical and utilities. Spending on content and documenting management solutions is largely confined to the government and financial services sectors. The security software market now dominated by Anti-Virus, and firewall/VPN software is changing with significant growth in the 3As (Authentication, Authorization, Administration) application sector. The market for applications related to technology management is still in an early stage of development. Therefore, the entrance conditions on the market are favorable for investments.
For the next two to three years, ASWP (Application Software Products) is expected to see growth rates between 20-25% with the business application segment the main contributor to this development. Together with its maturation, the ASWP market will see a deeper consolidation, and some local players may be forced to merge in order to remain on the market.
Higher spending on software applications is expected for the next two years, driven by economic growth and companies' efforts to improve business process efficiency and regulatory compliance as well as to to compete in the EU marketplace. As mentioned previously, government implementation of planned large IT projects for information systems for public administration at both local and national levels, and the expansion of e-government and e-commerce. Functional markets providing the best opportunities include EAS, BI, CRM, SCM, IT security, e-health,and e-learning.

Key Suppliers
More than 2,000 Romanian software firms export their services to the EU and North America. They also produce niche software, such as special telecommunications programs and industrial security systems. Imports satisfy the remainder of the market, of which 75% of such imports are American. Most of the major U.S. software companies are active in the market, led by Microsoft and Oracle. The software systems and development tools segment of the market accounts for more than 50 % of all local software expenditure and is dominated by US vendors Microsoft, Oracle and IBM. However, there is room for additional players in this segment.
Prospective Buyers
The software and IT services market depends on corporate and public sector customers. The biggest purchasers of software and IT services are in production, telecommunication, banking, and public industries. Spending takes the form of licenses, consultancy, system integration, specific applications development, training, and external services. Demand from verticals like utilities, government, retail, manufacturing and telecommunications will continue to grow significantly as the economic conditions improve.

Market Entry
In accordance with Romania‘s World Trade Organization committees, there are no restrictions for the import of ICT products. Import licenses are automatic and issued for statistical purposes. However, ICT products (hardware, software or communications equipment) have to be certified by a specialized department of the Ministry of Communications and Information Technology.
0.5% custom commission - calculated on the cost, insurance, and freight value (CIF) – is levied on imported products.
Romania is a signatory of the Information Technology Agreement, which eliminates duties on IT equipment and software, but there is still a 24% VAT assessed on imports and domestic products. In order to enter and succeed on the Romanian market, a physical presence is mandatory. Active and aggressive marketing and representation are highly recommended.

Market Issues & Obstacles
The Government of Romania, Ministry of Communications, and Information Society is responsible for administering ICT standards. The IT standards adopted by the Romanian Government are relevant for the International Organization for Standardization/International Electrotechnical Commission (ISO/IEC) standards. These standards are not compulsory.
The main market professional certifications and credentials are accepted and recognized in Romania. A large percent of the private sector speak English, and the proportion in the public sector is rising slowly. Because public sector sales are an important part of the market, it is necessary to be able to conduct business in Romanian.


Information Technology/Computer Software

USD millions 2005 2006 2007
Total Market Size 146 168 195
Total Local Production 57 72 93
Total Exports 25 35 50
Total Imports 114 131 152
Imports from the US 85 98 119

Note: The above statistics are based on market research and advisory firms’ (IDC, PAC, etc) reports, EITO publications and unofficial estimates.

The Romanian packaged software market continued to expand with annual growth rates of over 15%, reaching USD 168 millions in 2006 (+15%) and an estimated value of USD 195 millions in 2007 (+16%). Software represents only 12% of overall IT expenditure, and the market volume is still low when compared with other Central-Eastern European countries or with EU-27 average. However, the Romanian software market is one of the fastest growing in Europe, fuelled by a rapidly growing economy, high levels of foreign direct investment and modernization of infrastructure aimed at aligning the public sector with EU standards and norms.

Imports cover 70% of the local software market and more than 3/4 of all foreign software products in Romania are American. Practically all internationally well-known software producers are present on the Romanian market. At the same time, local software companies are increasingly involved in packaged software development, especially in ERP/EAS, antivirus, e-health and e-learning areas. A number of Romanian software products have gained success on the global market, generating substantial levels of sales or winning awards at an international level (BitDefender/Softwin security and antivirus product, Siveco's AeL eLearning platform, the Intuitext/Softwin e-learning suite or TotalSoft and Transart's ERP solutions).

In the last three years, multinational IT vendors and foreign investment funds made a number of acquisitions of, or investments in, Romanian companies. These include Siemens SBS' and Ness Technologies' acquisitions of IT service providers Forte and Radix, investment by Intel Capital in Siveco Romania, TechTeam Global's purchase of offshore development specialist Akela Informatique, Adobe's acquisition of InterAKT, investments by American and European funds in TotalSoft, UTI or Romsys and many others. Recently announced are the acquisitions by groups of investment funds and angel investors of minority participation in Axigen/GeCAD and BitDefender/Softwin.

Best Products/Services
Systems software and development tools market segment accounts for more than 50 % of overall local software expenditure and is dominated by US vendors Microsoft, Oracle and IBM. In December 2007 Microsoft announced more than 100.000 Windows Vista licenses sold in Romania.

The enterprise application solutions market is mainly represented by EAS (Enterprise Application Systems) with a value of USD 53 million in 2006 and a 17,5% year-on-year growth, according to IDC. The top three vendors (SAP, local player Siveco and Oracle) captured 65% of the Romanian EAS market. The large corporate and the government sectors are still the biggest spenders on EAS, but the market is progressively expanding into the small and medium-sized businesses segments. The top-selling EAS modules are the resources management and core functionalities, but an increasing demand is noted for more complex applications like customer relationship (CRM), supply chain (SCM), or business analytics, which are expected to grow rapidly in the next years. The largest vertical EAS spender in 2006 was the combined (process and discrete) manufacturing sector, followed by retail and utilities.

Spending on content and document management solutions (some USD 8 millions in 2007) is largely confined to the government and financial services sectors. The security software market (less than USD 15 millions in 2007), now dominated by Anti-Virus, and firewall/VPN software is changing with significant growth in the 3As (Authentication, Authorization, Administration) application sector. The market for applications related to technology management is still in an early stage of development.

Opportunities
Higher spending on software applications is expected in the next two years, driven by economic growth and companies' efforts to improve business process efficiency and regulatory compliance and to compete in the EU marketplace. Another growth-generating factor will continue to be the government-supported implementation of such large IT projects as the development of information systems for public administration at both local and national levels and the expansion of e-government and e-commerce. Functional markets providing the best opportunities in the next period include EAS, BI, CRM, SCM, security, e-health and e-learning. Verticals like utilities, government, retail, manufacturing and telecommunications will continue to grow significantly.

Internet users 1,000,000
Internet Users Rank 50
Internet Users Date of Information 2002
 Telephones - mobile cellular 645,500
Cell Phone Rank 55
Cell Phone Date of Information 1999
 Telephones - main lines in use 3,777,000
Telephone Rank 40
Telephones Date of Information 1997
GDP - real growth rate(%) 4.5
Growth Rank 57
Growth Date of Information  2002 est.
GDP - per capita $7,400
GDP/pc Rank 96
GDP/pc Date of Information  2002 est.
GDP $166,000,000,000
GDP Rank 43
GDP Date of Information  2002 est.
Population 22,271,839
Pop Rank 50
Pop Date of Information  July 2003 est.

This site was last updated 1 November, 2010