2009-11-25 14:49:04 - Egypt Information Technology Report Q4 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/egypt-informat ..

Market Overview Egypt´s IT spending is forecast to increase from US$1.2bn in 2009 to US$1.9bn by 2013. Despite a deceleration this year, government stimulus packages, and pay raises for civil servants and other groups, should help to keep sales in positive territory. The market will benefit from youthful demographics, and improving information and communication technology (ICT) infrastructure, despite some environmental constraints including a sub-optimal regional channel network.

BMI projects a 2009-2013 IT spending compound annual growth rate (CAGR) of 12%, which puts Egypt in the top-tier of global IT growth markets. Despite current economic headwinds, Egypt is expected to continue its rise over the next few years as one of the key regional opportunities for IT vendors, even if growth will

 

 

be slightly below the previous trend level of 2006-2008.

While computers remain a luxury item for many, a series of factors should drive growth over the forecast period, including new oil and gas discoveries, a large young population and constructive medium-term economic outlook. Computer penetration is forecast to rise from around 10% currently to about 17% in 2013. Opportunities will also be generated by Egypt´s emergence as an outsourcing destination.

Industry Developments

In H109, the Ministry of Communication and Information Technology (MCIT) purchased more than 10,000 notebooks for distribution to students and teachers, in what was described as the largest computer procurement tender by a public body in Egypt. The MCIT has pledged further initiatives to further the use of technology in education.

A number of policies have been implemented to attract foreign investment in IT outsourcing, including local employment subsidies, lower corporate taxes and deductions for training costs. In 2009, Egypt has made further progress, with Indian IT giant Wipro recently announcing that in future it would outsource 20% of its Indian and Middle Eastern software development work to Egypt.

The Egyptian minister of state for administrative development has said that 200 government services will soon be available online through a new e-government portal. The portal will offer 70 services in both English and Arabic. According to the Ministry for Administrative Development, more than 20 government agencies currently offer services and licences online.

Competitive Landscape

In the PC segment, Fujitsu Technology Solutions was the winner in a 10,000 notebooks procurement by the MCIT. Meanwhile, HP planned to roll out new retail stores in Egypt in an attempt to tap into the growing retail segment. The company will open outlets within malls.

Leading business software vendor SAP received a boost in 2008 when it was selected as the IT provider for a major government enterprise resource planning (ERP) implementation programme. The project´s value was reported at US$10mn and started with a five-year project for the Egyptian National Postal Organisation (ENPO).

Indian IT services giants have increased their presence in Egypt. Mahindra Satyam, the new brand identity of Satyam Computer Services, aims to grow its consulting and outsourcing businesses by 100% in the next few years, leveraging its Global Development Centre in Cairo´s Giza Smart village. In May, Wipro announced that it was planning to save costs by outsourcing 20% of its Indian and Middle Eastern work to Egypt.

Computer Sales

Egypt´s computer hardware sales are projected at US$757mn in 2009 and are forecast to reach around US$1.2bn in 2013. An estimated 275,000 computers were sold in Egypt in 2008 despite a slowdown in H2. Despite the economic slowdown, there is considerable growth potential as the current low level of computerisation is low.

Egypt´s IT market will stay hardware dominated, with spending on PCs sustained by initiatives like the ´Computer For Every Student´ and ´PC for Every Home´ programmes. Hardware accounted for an estimated 62% of Egypt´s IT spending last year. Households account for 20-25% of unit sales, with almost 1-1.5mn households said to possess a computer at present.

Software

Overall spending on software remains rather low, being projected at US$171mn in 2009. The estimated 14% share of the total Egyptian IT spending accounted for by software reflects the relative immaturity of Egypt´s IT market. However, the domestic software market is expected to grow at a CAGR of around 11% over the forecast period until end-2013.

One market driver has been a significant fall in software piracy, with the illegal software usage rate, as measured by the Business Software Association, falling a further 1% to 59% in 2008. While large corporations have long understood the business case for deploying technology, small and medium-sized enterprises (SMEs) are increasingly beginning to see such investments as important if they are to avoid being overtaken by more tech-competent competitors.

Services

IT services revenues are forecast at around US$296mn in 2009, accounting for about 24% of Egypt´s total spending on IT. A market CAGR of 13% is projected for the next period through to 2013. The economic situation and credit tightening are likely to have an impact on projects in some key verticals which have been driving IT spending, particularly oil and gas.

Other vulnerable sectors include construction and real estate. Government spending, the largest segment, is projected to be maintained, or even increased, as a counter-cyclical stimulus to flagging domestic demand. IT-business process outsourcing (BPO) growth will stimulate vendor investment.

E-Readiness

In 2008, Egypt continued liberalisation of the telecoms market, with the award of a second national fixed licence. This development, which followed the award of 3G licences to three mobile telecoms service providers in 2007, is likely to drive new opportunities for IT vendors. As well as generating additional spending on IT products and services from the telecoms sector, the spread of internet should provide a boost to the PC market over the next few years.

A similar story could be told about broadband, although cost remains a big barrier to broadband subscription in Egypt. It has been well documented that private broadband subscribers often club together with two or three neighbouring families to get a shared broadband subscription and Wi-Fi router. More competition in the market should hopefully bring prices down in the future and lead to subscriber growth.