Bulgaria Information Technology Report 2013

Executive Summary

BMI View: Bulgarian IT spending is estimated by BMI at around US$1.0bn in 2013, with single-digitgrowth in U.S. dollar terms from US$1.0bn in 2012. Bulgarian IT spending is forecast to record lowsingle-digit growth in 2013 as businesses and consumers remain cautious due to the economic situation.

Trading conditions are still challenging for IT vendors, as consumers and businesses remain underpressure. There should still be areas of opportunity however, as despite budgetary stresses, governmentspending on ICT will continue in areas such as healthcare and e-taxation, supported by EU programmes.

Headline Expenditure Projections

Computer hardware sales: US$696mn in 2012 to US$713mn in 2013, +2% in US dollar terms. Forecastin US dollar terms upwardly revised due to macroeconomic factors but strong tablet sales will constrainsales of traditional notebooks.

Software sales: US$113mn in 2012 to US$120mn in 2013, +6% in US dollar terms. Forecast in USdollar terms upwardly revised due to macroeconomic factors and closer ties with EU partners and clientsshould increase demand.

IT services sales: US$195mn in 2012 to US$206mn in 2013, +6% in US dollar terms. Forecast in USdollar terms downwardly revised due to macroeconomic factors but EU funding should drive IT servicesspending, particularly from government.

Risk/Reward Ratings: Bulgaria's score was 43.5 out of 100.0. Bulgaria ranked last in our latest EuropeRRR table, behind regional peers Serbia and Croatia. The market has potential to rise up our rankingsover time, as suggested by its relatively higher Country Rewards score.

Key Trends & Developments

In recent years, as much as 40-50% of Bulgarian IT spending has been generated by thegovernment sector. However, some manufacturing enterprises and private companies,particularly from the trade and tourism sectors, represent growing sources of demand, as domunicipalities, water and power suppliers. After the Bulgarian government, among the largestend-user groups of ICT products and services come telecomsoperators BTC, MobiTel and Globul, followed by big commercial banks and large privateenterprises.

Basic services such as hardware and software support and installation still account forabout 50% of Bulgarian IT services spending. IT outsourcing and managed services is a growingopportunity, however, and BMI forecasts annual growth of around 20% over the forecast period.One driver is the significant number of foreign companies that have established facilities inBulgaria since EU-entry, as the country's low labour costs help it move up the rankings ofEuropean offshoring destinations.

2013 should see further growth of tablet sales in the Bulgarian market. The Multirama chain ofstores forecast that sales of tablets would comprise around 25% of its nationwide mobile PCsales in 2012. More attractive data plans and subsidised devices from broadband serviceproviders, and more localised content, are factors that could boost tablet adoption.