Technology spending goes down in Romania

Technology spending goes down in Romania

The export of products and services generated by the IT industry in Romania will reach 77% of the total IT market in 2017, a significant increase from 69% in 2015

Thus reveal the data provided in the study Software & IT Services in Romania carried out by the Employers’ Association of the Software and Services Industry (ANIS). Compared to exports, the percentage of consumption of products and services in the local market is down from 31% in 2015 to 23% in 2017.


As the IT market (export and local market) has risen in nominal terms, the local market is in a relative stagnation. According to the same sources, under current conditions, a market consolidation is expected, which will increase its value from 4.1 billion euros (the forecast for 2017) to about 5.5 billion euros in 2020. The decisive factor for growth is represented again by exports, which will take up a share of 79% of the IT market in 2020.


Currently, out of the total of 4.1 billion euros, the exports of IT goods and services represent 3.15 billion euros (18.2% increase compared to 2016), while the local market is just under 1 billion euros (0.5 % increase compared to 2016).


A first explanation for this proportion of exports and the local IT market is that, of the top 300 companies, 40% are Romanian companies and 60% are foreign companies. A second explanation is that 78% of the top 50 companies' incomes are owned by foreign companies. The third explanation, which comprises the other two, is that at the level of the entire IT industry, 73% of the revenues belong to the foreign companies and only 27% to the Romanian ones.


Additionally to all these measurable evidence, are the following three hypotheses:

1.     Local technology consumption, both in the public and private sectors, stagnates.

2.     Increased demand from economically strong external markets and innovation-oriented and streamlined technology.

3.     The local consumption of technology has some of the suppliers, foreign companies, which use Romanian specialists. So, we export products and services that we sometimes contract from the suppliers who have accessed the Romanian specialists.


In the first case, the stagnation of technology consumption has an impact on the competitiveness and productivity of the public sector, but especially on the private sector. In the second case, it is a natural external demand, important as volume and significant as income, for suppliers in the local market. In the third case, the recording of the revenues from export, respectively the local market, may be affected by the practice of exporting to foreign companies owning the property rights that sell back to the Romanian market. The lohn work of local developers often has a confusing effect on the values recorded in local consumption.


According to Eurostat, the average productivity index in Romania in 2016 was 62.6, compared to the average of the European Union countries of 100. However, this index has increased from 59.3 in 2015 and 56.9 in 2014.


If competitiveness and productivity are correlated with technology consumption, then it seems that the third hypothesis on export practice to foreign companies buying property rights and selling back customized products to the public sector and companies in Romania seems to be verified.


According to IDC data for Central and Eastern Europe in 2016, digitalization-based IT infrastructure, ERP and CRM solutions, has grown 16% to 31% in Romania. However, according to Eurostat (DESI index), Romania is on the 28th place in the EU. Moreover, the integration of digital technologies by companies, although very important, in Romania has results below the EU average, and the progress is limited.


According to ANCOM, Romanian companies use mobile internet as follows: 67% via mobile devices, 40% via USB stick for laptop, 21% via tablet, while 23% say they do not use mobile internet. Though choices have been made in terms of superior returns to traditional IT applications, the percentage of companies that do not use the mobile Internet is high. As far as digital public services are concerned, Romania's results are below the EU average, but important progress is expected, especially through the promotion of an open data policy (Open Data).


Therefore, the reasons for the high proportion of exports in the total value of the IT market are derived from insufficient local market growth, coupled with high external demand and the export of IT products, some of which come back customized to the market that has produced them with the Romanian specialists.


6 potential solutions:

1.     Capitalize on the talent of local developers and create proprietary products and services that generate added value in the local market so to increase the consumption of technology in Romania

2.     Test on the local market the products developed by the domestic software companies and launch them at the global level so that the export is based on licenses of local products and services

3.     Grant tax incentives for product / service licensing of local entrepreneurial companies

4.     Support the IT industry by creating a framework conducive to education and the creation of start-ups, accelerators, incubators and clusters of technology

5.        Create a transparent framework for access to auctions to purchase solutions provided by local developers

6.        Revamping of the key economic sectors in Romania will continue which will provide opportunities for IT companies in the banking, oil and gas, energy and telecommunication sectors.