Romania is Surfing on the Digital Wave

The Digital Wave has not boundaries. There is a range of evidence that Romania is on an upward trend in terms of new technologies assimilation. Traditionally mapped on emerging-market model, Romania become a country where the IT industry contribution to the GDP is surpassing that of Agriculture … Many of the innovative technologies generating a disruptive reactions in mature economy, are naturally assimilated in Romania. The business value of Romanian Cloud solutions is recognized in EuroCloud international contest.

Romania has been one of the best-performing economies in the European Union in 2015, with a GDP growth rate estimated at 4%. New reports are showing this performances may continue to improve this year, with 5% average GDP growth due to tax cuts and salary increases, which may further boost domestic consumption and may bring new investors to the country.

A country where IT industry has 2^nd contribution at GDP

With more than 7.5% growing in last year, and 6% estimated contribution to country GDP, IT&C is one of the fastest growth industry. Practically IT is 2^nd contributor in Romania’s 2.9% economic growth, more than agriculture contribution. IDC expects IT spending in Romania to grow at a CAGR of 2.4% over the five-year forecast period to total $3.37 billion in 2017. According EU Digital Agenda 2020 projections Romania will reach EUR 2.4 billion in IT&C investments, representing +13% GDP growth, + 11% employment growth, and 2% decline in administrative costs. From EUR 850 million expected from EU Operational Program funding, more than EUR 30 million will be Cloud computing investment.

With +520 Euro million spending in 2015 (IDC), Romanian Cloud computing market is well positioned in regional landscape due to its strong networking infrastructure, low cost high speed Internet and a very skilled human resources base. The market potential is driven by the nature of Romanian Cloud providers, represented by international vendors (offerings SaaS; PaaS, IaaS), local players (represented by traditional service providers, SI and ISV), and webhosting & telco providers.

Cloud adoption key drivers are related to:

• The Impact of Cloud Computing on the IT Industry
• Penetration of Broadband and the Internet
• Large acceptance of Outsourcing Delivery Model
• Level of Virtualization Adoption
• Licensing Policy of ISVs

Big companies are looking to the Cloud

In his Cloud penetration research CIO Council is showing more than 61% from big and very big companies are using Cloud services, 36% already implemented private Cloud infrastructure, 7% public Cloud services and 18% different forms of hybrid Cloud. (“Cloud Adoption, IT Strategies from Business perspective” – CIO Council Romania). Most important drivers for big companies are scalability, development time, and cost reduction.  Security, data & services availability, and legal issues are considered as main inhibitors.  Most popular SaaS are e-Mail & Office Suites (44% of answers), CRM (33%), and ERP solutions (30%).  “Cloud Adoption, IT Strategies from Business perspective” study of  CIO Council Romania (2014) is based on 107 large and big organizations, 48% of them having more than 100 Million Euro turnover, and 58% estimated value over 1 Million Euro for IT budget.

Small and medium companies needs Cloud benefits

Romanian SMB market interest for Cloud and new technologies adoption is real, being dependent of performing applications, remote access, power processing and storage facilities. In GFK/ Intel market research (2014 – 100 SMB companies, 50-200 employers) the main results are showing the main benefits offered by Cloud services are: synchronization and remote access to data and services (75%), fixed cost offered as utilities services (36%), processing and storage facilities (32%). Main threats related to Cloud in SMB vision are data privacy (45%), lack of budgets (40%), and data lost (32%).

Romanian ISV and Start-ups competing on EU Cloud market

Romanian Cloud market aspiring to the mature stage is confirmed by the active participation of local ISV and small developers to international contest organised by EuroCloud Europe:

• Romanian company Ymens won in 2014 the “Best Cloud Service Public Sector” prize for National Registry project performed with Romanian Registry of Rheumatic Diseases Association.
• BigStep Full Metal Cloudwas awarded in 2014 with second prize in “Best IaaS/PaaS Service”
• “Elefin the Cash Therapy App”provided by Elefin, winner in the national EuroCloud Award contest at “Best Cloud Service provided by Start-up Cloud Service Providers” represented Romania in the EuroCloud Award 2015 international final.

Opportunities and growth drivers

As part of the EU accession, Romania gained entry to EU IT&C programs and an inflow of funds, designed to assimilate the country into the EU’s broader Information Society. EUR 850 million is expected to be secured from the European Operational Program funding during 2014-2020. This will ensure continued support of structural funds for IT&C development over the medium term.

According EY estimations (Romanian Business Digest, August 2015) Romania’s GDP growth will average 3.4% annually during 2015-2019, while real private final consumption is forecast to average 2.7% annually over the same period. The bullish growth outlook will boost the IT market via higher levels of consumer and business confidence.

Policy reform will be another important driver of IT market development, reinforcing the positive medium term outlook for the market. Deeper integration into the European policy umbrella is expected to facilitate growth not only in outsourcing, where Romania is a regional leader, but also in more advanced IT services such as cloud computing.

Software will experience less stellar growth, with the ERP market only at an early phase of development, where larger companies and organizations are still the major driver. However, enterprise resource planning has reported 20% growth and looks set to remain a major opportunity as businesses invest in cost saving efficiency measures to modernize and compete at the European level.

Real potential for Cloud industry development

We are confident in Cloud future in Romania. According to some local studies business solutions developed in Cloud will grow with an average 15-20% each year, market potential being estimated at + Euro 200 Million until 2018. SaaS segment will represent according IDC more than 15% of the market sales in the next four years.  Most popular application in Cloud are ERP and CRM systems, with spectacular growing in the next future.

Concluding, we can assume in Romania Cloud industry is gaining a real, ascending trend. For Romanian industrial and business communities Cloud adoption is starting to become more than a disruptive factor. Cloud is a reality.

This article was also published in Romanian IT&C Directory edited by iBusiness Romania.