The software and services market in Romania will go up slightly to almost EUR700 million this year, and will thus remain one of the least developed in the region, Eugen Schwab believes.
“PAC estimates the software and IT services (SITS) market will end 2011 much lower than forecast in the Software and IT Services Industry Romania survey, which showed 8% growth for software and services billed locally. The last two months of 2011 will disappoint in terms of performance of most software and services players in Romania,” Schwab said.
One of the scenarios taken into account by PAC for 2011, the official added, and included in strategic consultancy projects for IT industry clients shows a local market very close to the 2010 level. If this pessimistic forecast turns out to be true, the software and IT services market in 2011 will be close to EUR700 million, which means about EUR35 spending per capita calculated against the population numbers in Romania.
“If we look at the region, we can see Romania has a SITS/capita 2.5 times lower than Poland’s and over 4 times lower than Czech Republic’s. It is virtually impossible to have the productivity or GDP/capita increase significantly as long as the most important efficiency and control tools are not adopted.”
Why is this market not seeing stronger growth in Romania? Schwab says it is because of a number of problems.
The first problem on the local software and IT services market is the sharp decline of demand from large companies, which used to generate 60% to 90% of the revenue of the top 100 software and IT services companies. The decline was due on the one hand to the conclusion of big IT projects started after privatization (hence a lower of volume of service and license purchases) and on the other to the price pressure that was unheard of in the 2005-2008 period.
Second, small and medium-sized private companies cut or froze investments in software and IT services because of recession, Schwab says.
One of the biggest problems on the local software and IT services market is what the PAC boss calls a mix of “incompetence and political influence” in the public sector. This causes money invested by the government to be spent ineffectively.
PAC also measured the impact public institutions with politically appointed management have on the software and IT services market for the first time.
“According to PAC’s calculations, 39% of the software and IT services market in Romania is dependent on political decisions and connections,” Schwab said.