IT Market In EGYPT
Overview
The Egypt IT market’s position within the Middle East and Africa (MEA) region is on the rise, withaverage market growth of 16% expected up to 2013. Overall IT market size is projected by BMI toincrease from US$1.2bn in 2008 to around US$2.5bn in 2013, despite a forecast moderation in economicgrowth. While computers remain a luxury item for many, a number of factors should drive growth overthe forecast period, including new oil and gas discoveries, a large young population and governmentinformation and communication technology (ICT) programmes.
Computer penetration should rise from around 10% currently to about 17% in 2013. Advances will beseen in both household and enterprise sectors, despite constraints of low incomes and economicdisparities. In addition, IT infrastructure spending in the oil and gas sector should be boosted by thediscovery of new reserves of both at several sites. The telecoms sector is growing at an unprecedentedrate, and the banking market, led by the Central Bank of Egypt, is also building on earlier ITinstallations.
BMI therefore expects the Egyptian IT market to see relatively strong all-round growth over the forecastperiod. The Nazif administration seems likely to remain committed to promoting IT as part of its overalldevelopment strategy. The government has announced several plans designed to further computerpenetration. In recent speeches, administration officials have also outlined initiatives in areas such as ITtraining and new IT parks such as the one at Maadi, and government support offers a chance for Egypt tocapture a bigger share of the global outsourcing market..
Industry Developments
In August 2008, the Ministry of Communications and IT announced a nationwide version of the‘Computer for Every Home’ initiative. The programme aims to broaden computer and internet usage tonew sections of Egyptian society. First launched on a limited basis in 2002, ‘Computer for Every Home’is being expanded as part of a co-operation with the National Telecom Regulatory Agency (NTRA) tobundle computers with internet services.
Egypt’s e-government initiatives continue in a number of key areas. The Egyptian Minister of State forAdministrative Development has said that some 200 government services will soon be available onlinethrough 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 currentlyoffer services and licences online.
Another key objective is the government’s drive to develop Egypt as a location for outsourcing andbusiness process outsourcing (BPO) services. In 2007 the government set an ambitious target for thecountry to capture US$1.1bn of the global outsourcing market by 2010, which would be four times the2005 level. A 2008 report from US consulting firm Yankee Group identified Egypt as the Middle Eastcountry most likely to take advantage of the global outsourcing boom.
Competitive Landscape
International vendors have strengthened their position in the fast-growing Egypt PC market. Amongglobal brands, HP has the number one spot, with around 30% of the notebook market. HP recentlycreated a new position of Personal Systems Group (PSG) Manager for Egypt and the Levant countries,based in Cairo. The company plans to roll out new retail stores in Egypt in an attempt to tap into thegrowing retail segment.
With demand for packaged software still growing fairly sedately, vendors are mining opportunities in themost profitable verticals. Leading vendor SAP received a boost in 2008 when it was selected as thestrategic IT provider for a major government ERP implementation programme. For its part, rival Oracleclaims to have served over 1,800 customers and supported over 80 local partners during its 10 years in theEgyptian market.
IBM expanded aggressively in Egypt in 2008, opening a new Global Service Delivery (GSD) centre inCairo, and completing a major tender to build a new state of the art data centre for Telecom Egypt. IBMalso signed an agreement to establish a nanotechnology research centre in Egypt. Meanwhile, Indian giantSatyam is looking to grow its regional consulting and outsourcing businesses by 100% in the next fewyears.
Computer Sales
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. Egypt spent an estimatedUS$736mn of its 2008 IT budget on hardware, equivalent to 62% of IT spending. There is room forconsiderable PC growth, as the current low level of computerisation is low, with penetration estimated ataround 10%, and rising to around 17% by 2013. Some 20-25% of unit sales are accounted for byhouseholds, with almost 1-1.5mn households said to possess a computer at present. Vendors will beparticularly focused on the business sector where only around 10% of 400,000 medium or large-sizedcompanies have computers, according to a recent survey.
Software
Overall spending on software remains rather low, amounting to US$31mn in 2008. The estimated 14%share of the total Egyptian IT spending accounted for by software reflects the relative immaturity ofEgypt’s IT market. However, the domestic software market is expected to grow at a compound annualgrowth rate (CAGR) of around 16% over the forecast period until 2013. One recent driver has been asignificant fall in software piracy, which was down to 60% in 2007 from 63% the previous year,according to the Business Software Association. The progress is due largely to government deals withvendors to provide software for government or education sectors. With more than 50% of the regionalbusiness community comprising of small to medium-sized enterprises (SMEs), this sector is likely toemerge as the main driver of enterprise application spending over the next few years. The entry of newtelecoms service providers should spur spending on OSS and BSS systems as well as applications andservice platforms.
Services
IT services were worth around US$283mn in 2008, accounting for about 24% of Egypt’s total spendingon IT. A market CAGR of 17% is projected for the next period through to 2013. Egypt’s fast-growing ITsector is starting to create demand for larger projects, with larger customers becoming more demanding interms of their IT expectations, particularly in sectors such as banking, which is increasingly looking touse IDC hosting solutions. However, basic support and maintenance services represent around one-thirdof IT services spending. Egypt has started to become something of a hub for international companieswhich offering mobile phone technical service. Nokia recently opened a new regional maintenance centrein Cairo’s Smart Village. LG is also to open a regional technical support centre.
E-Readiness
In 2008 Egypt continued liberalisation of the Telecoms market, with the award of a second national fixedlicence. This development, which followed the award of 3G licences to three mobile telecoms serviceproviders in 2007, is likely to drive new opportunities for IT vendors. As well as generating additionalspending on IT products and services from the telecoms sector, the spread of internet should provide aboost to the PC market over the next few years.
A similar story could be told about broadband, where the number of users is expected to increase to2.6mn by 2013. However, while the rate of internet penetration will reach 27.6% by that year, broadbandpenetration will lag far behind at just 3.1%.
Overview
The Egypt IT market’s position within the Middle East and Africa (MEA) region is on the rise, withaverage market growth of 16% expected up to 2013. Overall IT market size is projected by BMI toincrease from US$1.2bn in 2008 to around US$2.5bn in 2013, despite a forecast moderation in economicgrowth. While computers remain a luxury item for many, a number of factors should drive growth overthe forecast period, including new oil and gas discoveries, a large young population and governmentinformation and communication technology (ICT) programmes.
Computer penetration should rise from around 10% currently to about 17% in 2013. Advances will beseen in both household and enterprise sectors, despite constraints of low incomes and economicdisparities. In addition, IT infrastructure spending in the oil and gas sector should be boosted by thediscovery of new reserves of both at several sites. The telecoms sector is growing at an unprecedentedrate, and the banking market, led by the Central Bank of Egypt, is also building on earlier ITinstallations.
BMI therefore expects the Egyptian IT market to see relatively strong all-round growth over the forecastperiod. The Nazif administration seems likely to remain committed to promoting IT as part of its overalldevelopment strategy. The government has announced several plans designed to further computerpenetration. In recent speeches, administration officials have also outlined initiatives in areas such as ITtraining and new IT parks such as the one at Maadi, and government support offers a chance for Egypt tocapture a bigger share of the global outsourcing market..
Industry Developments
In August 2008, the Ministry of Communications and IT announced a nationwide version of the‘Computer for Every Home’ initiative. The programme aims to broaden computer and internet usage tonew sections of Egyptian society. First launched on a limited basis in 2002, ‘Computer for Every Home’is being expanded as part of a co-operation with the National Telecom Regulatory Agency (NTRA) tobundle computers with internet services.
Egypt’s e-government initiatives continue in a number of key areas. The Egyptian Minister of State forAdministrative Development has said that some 200 government services will soon be available onlinethrough 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 currentlyoffer services and licences online.
Another key objective is the government’s drive to develop Egypt as a location for outsourcing andbusiness process outsourcing (BPO) services. In 2007 the government set an ambitious target for thecountry to capture US$1.1bn of the global outsourcing market by 2010, which would be four times the2005 level. A 2008 report from US consulting firm Yankee Group identified Egypt as the Middle Eastcountry most likely to take advantage of the global outsourcing boom.
Competitive Landscape
International vendors have strengthened their position in the fast-growing Egypt PC market. Amongglobal brands, HP has the number one spot, with around 30% of the notebook market. HP recentlycreated a new position of Personal Systems Group (PSG) Manager for Egypt and the Levant countries,based in Cairo. The company plans to roll out new retail stores in Egypt in an attempt to tap into thegrowing retail segment.
With demand for packaged software still growing fairly sedately, vendors are mining opportunities in themost profitable verticals. Leading vendor SAP received a boost in 2008 when it was selected as thestrategic IT provider for a major government ERP implementation programme. For its part, rival Oracleclaims to have served over 1,800 customers and supported over 80 local partners during its 10 years in theEgyptian market.
IBM expanded aggressively in Egypt in 2008, opening a new Global Service Delivery (GSD) centre inCairo, and completing a major tender to build a new state of the art data centre for Telecom Egypt. IBMalso signed an agreement to establish a nanotechnology research centre in Egypt. Meanwhile, Indian giantSatyam is looking to grow its regional consulting and outsourcing businesses by 100% in the next fewyears.
Computer Sales
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. Egypt spent an estimatedUS$736mn of its 2008 IT budget on hardware, equivalent to 62% of IT spending. There is room forconsiderable PC growth, as the current low level of computerisation is low, with penetration estimated ataround 10%, and rising to around 17% by 2013. Some 20-25% of unit sales are accounted for byhouseholds, with almost 1-1.5mn households said to possess a computer at present. Vendors will beparticularly focused on the business sector where only around 10% of 400,000 medium or large-sizedcompanies have computers, according to a recent survey.
Software
Overall spending on software remains rather low, amounting to US$31mn in 2008. The estimated 14%share of the total Egyptian IT spending accounted for by software reflects the relative immaturity ofEgypt’s IT market. However, the domestic software market is expected to grow at a compound annualgrowth rate (CAGR) of around 16% over the forecast period until 2013. One recent driver has been asignificant fall in software piracy, which was down to 60% in 2007 from 63% the previous year,according to the Business Software Association. The progress is due largely to government deals withvendors to provide software for government or education sectors. With more than 50% of the regionalbusiness community comprising of small to medium-sized enterprises (SMEs), this sector is likely toemerge as the main driver of enterprise application spending over the next few years. The entry of newtelecoms service providers should spur spending on OSS and BSS systems as well as applications andservice platforms.
Services
IT services were worth around US$283mn in 2008, accounting for about 24% of Egypt’s total spendingon IT. A market CAGR of 17% is projected for the next period through to 2013. Egypt’s fast-growing ITsector is starting to create demand for larger projects, with larger customers becoming more demanding interms of their IT expectations, particularly in sectors such as banking, which is increasingly looking touse IDC hosting solutions. However, basic support and maintenance services represent around one-thirdof IT services spending. Egypt has started to become something of a hub for international companieswhich offering mobile phone technical service. Nokia recently opened a new regional maintenance centrein Cairo’s Smart Village. LG is also to open a regional technical support centre.
E-Readiness
In 2008 Egypt continued liberalisation of the Telecoms market, with the award of a second national fixedlicence. This development, which followed the award of 3G licences to three mobile telecoms serviceproviders in 2007, is likely to drive new opportunities for IT vendors. As well as generating additionalspending on IT products and services from the telecoms sector, the spread of internet should provide aboost to the PC market over the next few years.
A similar story could be told about broadband, where the number of users is expected to increase to2.6mn by 2013. However, while the rate of internet penetration will reach 27.6% by that year, broadbandpenetration will lag far behind at just 3.1%.
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