BMI's Executive Summary

[TOP]

The Sector At A Glance

Key Insights On The Information Technology sector Of Bulgaria

Market Overview

A wave of new IT projects supported by the EU and other international financial institution funds, are expected to drive Bulgarian spending on IT products and services over the forecast period. Indeed, in the past three years the government has already become the country’s largest purchaser of IT equipment and services, accounting for as much as 50% of all sales in the market, which grew an estimated 23% in dollar terms in 2005. A steady period of real annual economic growth of between 5% and 6% should see IT vendors benefit from a continued upswing. However, the Bulgarian IT industry is facing a strong challenge as it prepares to operate in the new conditions, which will develop after the country’s recently confirmed access to the EU.

The home consumer segment is becoming increasingly important, and the current low computer penetration rate, combined with growing affordability of computers, and government initiatives, should see continuing strong performance through 2010. Indeed, stronger than expected growth in the computer hardware market in 2005 has already led to an upward revision in BMI’s IT Sector forecasts for the Bulgaria market. The computer hardware segment, which includes PC, notebooks, servers, and peripherals is estimated at US$224mn in 2005. With hardware still accounting for around 60% of national IT spending, total sector value was estimated at US$380mn in 2005. Overall, the total size of the IT market is expected by BMI to increase from US$380mn in 2005 to around US$710mn in 2010, with services accounting for around 25%.

Industry Developments

Despite some question marks over the results of the tender organised in late 2006, Bulgaria’s government has confirmed its intention to press ahead proceed with its project to create an integrated e-government system. The winner of the tender to provide a system to make public services accessible electronically was announced in September 2006, but has since been shrouded in controversy with accusations that the tender had been designed to suit a single bidder. For its part, the government has said that its requirements were reasonable, and has expressed its determination to continue with the project which is designed to streamline many of the state’s more bureaucratic procedures.

In late August, the Minister of State Administration identified e-government as one of the key components of its drive to modernise administrative procedures, and admitted that Bulgaria was falling behind the rest of Europe in terms of digitalisation.

Meanwhile, Bulgaria’s Prime Minister has said that Bulgaria is planning around EUR13bn of investment in infrastructure in the 2006-2015 period, as part of the National Infrastructure Development Plan for that period. The spending will be supported by structural funds from the EU and other international institutions, and includes major IT projects.

Company News

Competition between local assemblers and global players is intensifying, and as the quality of locally assembled machines rises, global vendors are coming under greater pressure across the range of form factors. An increasing demand for brand named and higher-end computers is forcing a change to the competitive structure of the industry in Bulgaria, with many local companies starting to restructure their activities base. The number of Bulgarians who have access to a PC has doubled in two years, according to the government’s e-Bulgaria 2006 report released in August, and the market is becoming more sophisticated.

The increase in usage is coming not merely from business segments, where PC penetration has doubled in the past two years, but also from home users who have seen a three-fold increase since 2003. Indeed the largest sales growth figures according to local industry association BAIT, has been recorded by those companies selling hardware and software directly to end consumers. Among home uses, children still remain the main driver for the purchase of a PC, and in 2006 11% of households with children are planning to buy a computer, as compared with 35% of families without children.

Special Focus: E-Government

Launched in 2005, the third phase of Bulgaria’s e-government project includes information technology applications and infrastructure, enabling citizens of Bulgaria to access online government services from the securely connected ministries and other government locations. The government is receiving ITU assistance for this most recent phase of the project, which includes the provision of information technology equipment (computers hardware, software and networking components) for public access locations (multi-purpose community telecentres) in urban areas, and an ongoing Bulgarian government and UNDP initiative for providing public internet access to citizens via telecentres enabling access to secure services (as provided in Phases 1 and 2.)

The first online government services were officially launched September 2003 as the first stage in implementation of Bulgaria’s national strategy for building an efficient e-government system. According to the project’s target, a total of 20 online administrative services, including firms and vehicles registration, should be available in Bulgaria by the end of 2005. Optical cable infrastructure now covers more than half of Bulgaria, facilitating faster exchange of information between institutions.

E-Readiness

The most recent EIU e-readiness rankings found Bulgaria ranking 44th among 68 countries assessed, and 9t6h out of 14 in the CEE region. A major factor holding Bulgaira back remains delays in implementing liberalisation measures in telecoms, despite plans for a number of projects such as digitalisation of the teleoms networks, cable expansion, and programs to mprove Internet access. According to SAITC, 30% of Bulgarians over 15 have internet access, while home-based broadband access stood at 10.6% of the population as of October 2005, not so far behind the EU average of 10.8%. If the trend continues, internet penetration is expected by the government to pass 30% in 2006.

Turning to the commercial sector, during 2005, the newly founded SME Promotion Agency funded 105 projects, 25 of which concerned IT businesses. The 2006 budget for the SME Promotion Agency is BGN7mn, which is BGN2mn more than in 2005. According to a recently published National Statistical Institute (NSI) survey, IT penetration is relatively high in the corporate sector but still lagging behind EU countries. The level of convergence is best for use of computers, but less good in relation to internet access and e-commerce.

Despite the weaker IT profile, the gap is not that big as might be suggested by relative average income levels. The share of companies using computers is estimated at 83.5% of the total (2004) compared to 90% in the EU. The proportions vary from 80.5% for small firms (10-49 employees) to 98.3% for large companies (249+). Nearly 79% of the sample covers small enterprises while another 18% refer to medium size firms, highlighting the significance of these segments for IT vendors.

Internet access was enjoyed by 61.8% of the firms surveyed, compared with 89% in EU 25 and 90% in EU 15. A detailed breakdown of the figures is shown in the table below.

Contents

[TOP]

Chapter 1 - Executive Summary

Market Overview

Industry Developments

Company News

Special Focus: Hardware Distributors’ Strong 2005 Growth

Special Focus: E-Government

E-Readiness

Table: IT Utilisation In The Bulgarian Enterprise Sector (%)

Computer Sales

Bulgaria IT Sector SWOT

Bulgaria Business Environment SWOT

Chapter 2 - CEE Regional IT Markets Overview

IT Penetration

Market Growth & Drivers

Sectors & Verticals

Chapter 3 - Market Overview

Government Authority

EU Authority

History And Market Structure

Key Issues for Investors

Hardware

Software

Services

End-user Analysis

Industry Developments

Chapter 4 - Industry Forecast Scenario

Table: Bulgaria Industry Historical Data And Forecasts

Chapter 5 - Economic Outlook

Table: Bulgaria GDP, Output & Population

Chapter 6 - Country Snapshot: Bulgaria Demographic Data

Section 1: Population:

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education & Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption and Stratification

Table: Wages per year

Chapter 7 - Competitive Landscape

Chapter 8 - Company Profiles

IBM Bulgaria

Prosoft

Computer 2000 And Westech

Microsoft

HP

Dell

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

IT Industry

Chapter 10 - Appendix: Regional Demographic Data

Wages (ave labour force per annum), US$ PPP

Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Europe Information Technology: Sample of  
Companies Ranked

[TOP]

Company profiles, including SWOT (strengths, weaknesses, opportunities and threats) analyses, business activity, leading products and services. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company profiles and SWOT analyses covering competitive positioning; leading products, services and brands; annual sales and share of domestic hardware, software and components markets; headline financials and M&A; pan-regional expansion strategies and strategic partners. Companies covered include:

Network of Information Technology Sources

[TOP]

BMI's European IT Reports are based on an extensive network of multilateral organisations, government departments, IT industry associations, chambers of commerce and company reports. Information sources include: