Business Review

Tempted by opportunities on international markets, IT companies based in Romania such as Siveco, TotalSoft and Bitdefender have taken the plunge and started investing some time ago in projects outside the borders. Now they are thinking of consolidating and expanding their international presence either by opening new branches or by taking on more projects that should make them more visible on external markets.

Although Romania is an emerging economy, pundits seem to agree that local IT&C companies will not emerge unscathed from the sharp drop on the international financial markets, and will have to closely monitor their performances and bring their optimistic estimates down a tad. Business Review overviews some of the possible effects and their implications on this industry.

As the public sector undergoes modernization, ITC companies are seeking lucrative state contracts. Last week, Intrarom and subcontractor Siveco won a public contract worth over EUR 120 million, the second largest after the NetCity fiber optic metropolitan backbone project given to UTI Systems. This fall will see several substantial public auctions which could greatly enrich ITC bidders.

Competition is sharpening up on the informatics security market, as Kaspersky announced it would open a local office, most likely mid-October, as well as an online store. On a market expected to reach EUR 10 million, Kaspersky wants to achieve a 10 percent share in its first year of activity.

The much-anticipated iPhone 3G launch took place in Romania on August 22. While the number of handsets sold on the night of the launch was modest in comparison with other countries, where the iPhone did much better, there were more than 6,000 pre-orders on the Orange Romania website. The handset arrives on a competitive market that will see more smartphone launches, but Orange Romania hopes the iPhone 3G will not only shine within its own range but also poach customers from the competition.

Worldwide IT&C giants such as Oracle, IBM, Microsoft and Ericsson have found in Romania a good fishing pool of talent for their operations and decided to open technical support centers that serve either the entire region or just local customers. Recently, another important IT player with a local branch, Adobe Systems, announced its intention to open a technical support center to cater for its local clients.

On a market where the mobile phone penetration rate exceeds 100 percent, pundits say the only way is up, although the growth may not be so buoyant. Most seem to agree that 4 to 5 million units were sold last year by the locally present brands, and the number is expected to grow by a half to one million this year. Voice is no longer manufacturers' top priority, as 3G is coming strongly from behind and a more technology-oriented buyer will want from their phone 3G capabilities and other functions that satisfy their need for entertainment.

Romania is one of the worst two software pirates in the European Union, with 68 percent of the software used locally illegal copies. Total losses rose to $151 million last year and software developers locally and internationally are complaining that their businesses could do even better if piracy were not eating away at their profits. A crackdown on this phenomenon would require greater involvement from the authorities plus education of the potential consumers, both corporate and residential, say players.

A decision by the Court of Appeal dealt a heavy blow to the Bucharest City Hall in its plans to go ahead with the Net City project, as doubts about its feasibility multiply. Meanwhile, City Hall officials and cable companies' representatives are launching accusations at each other over the project which has not even seen the light of day on paper. In fact, this is precisely why it has not yet seen the light of day on paper.

With each cable company trying to infringe on the other one's territory, 2008 promises to be a year to remember. The frontier between telecom operators and cable players is becoming blurrier than ever. Add to this the controversial NetCity project and the market development - such as the growth of DTH to the detriment of CATV and the need to have multi-play services - and this will make for a very interesting year in which players on the cable market will fight fiercefully for larger customer base and market shares.