2012-09-10 06:20:13 - Israel Information Technology Report Q1 2012 - a new market research report on companiesandmarkets.com
BMI projects that the Israeli IT market will grow to a value of US$6.1bn in 2012, consolidating a recovery in 2011 from the impact of the global economic situation. The market should expand at a compound annual growth rate (CAGR) of 8% over BMIs 2012-2016 forecast period, owing to stable demand from defence and government sectors as well as opportunities in verticals such as financial services and small and medium-sized enterprises (SMEs).
In 2011, vendors reported solid demand for IT services across industrial, government, defence, and financial services segments, with new projects initiated by the Israeli Ministry of Defence (MOD) and the Israel Electric Company. The Israeli IT market has strong fundamentals that should keep it in positive territory during BMIs
five-year forecast period. Household computer penetration of around 75% offers potential for further growth. High internet penetration, including growing broadband penetration, are drivers for the retail segment, while the financial services sector accounts for about 15% of Israeli IT spending.
As part of its modernisation agenda, the government is pressing ahead with various strands of its egovernment project. Among other initiatives, there has been spending on computers in healthcare and the nationwide paperless court initiative. The e-government programme is leading to increased demand for computers, with the Israeli government reaching supply agreements with vendors such as Dell and HP.
The Israeli IT services market is competitive, with leading multinational competitors IBM and HP (following its merger with EDS) both estimated to have Israeli IT services market shares of around 10%. HP Israels software division hosts HPs biggest research and development (R&D) centre worldwide, and the company also has significant production facilities in Israel.
In June 2011, Israeli IT giant Ness confirmed its acquisition by an affiliate of Citi Venture Capital International for approximately US$307mn. Ness reported revenue of US$141mn in Q211, with just 1% annualised growth, and revenue from the Israeli market at 42% of the total. Meanwhile, in Q311, rival Israeli vendor Matrix reported 16.6% growth in revenue to a record NIS435mn.
Cloud computing is a major focus of IT company investment in the Israeli market. In H111, US PC hardware leader Dell inaugurated a new Israeli R&D centre, which will focus on developing storage technologies and cloud computing solutions. Meanwhile, cloud computing now accounts for around 70% of the work at Microsofts Israel-based R&D centre.
The Israeli computer hardware market, including desktops, notebooks, servers and accessories, is forecast to reach US$2.6bn in 2012, up from US$2.5bn in 2011. The market is expected to grow at a CAGR of 6% over the forecast period to reach US$3.3bn in 2016. The current rate of PC penetration, while high for the region, represents potential for organic growth.
The Israeli IT market is relatively mature, but hardware still accounts for around half of the total market, excluding communications hardware. Notebooks are the fastest-growing segment of the market, but smartphones and tables are emerging as alternative connectivity solutions.
Israeli software spending is projected at US$1.4bn in 2012, up from US$1.3bn in 2011. The packaged software segment is expected to grow at a CAGR of around 9% over the forecast period. In Q111, the pick-up in demand for systems and upgrades continued in both public and private sectors, with investment by government organisations such the MOD and Israeli Police, and from utilities and financial sector companies.
Software spending is shifting towards the SME segment, which forms the mainstay of the Israeli business sector. Spending on enterprise solutions has grown since 2007, with reviving or emerging areas of opportunity including security, customer relationship management (CRM) solutions and business intelligence. In terms of verticals, the financial sector has been a mainstay of demand, with other key opportunities including defence and healthcare.
The IT services segment is forecast to reach a value of US$2.0bn in 2011 and this is expected to grow at a CAGR of 10% over the forecast period to reach US$2.9bn in 2016. In 2011, vendors reported a continued flow of new projects in sectors such as government, financial services, homeland security, and utilities.
Government and defence are two key sectors likely to be a continued source of opportunities, while other growth areas include healthcare IT and utilities. Despite failing to capitalise in the past, Israel is starting to emerge as a desirable location for packaged applications and localisation services.
Israels relatively high PC penetration and the growing availability of broadband access mean internet penetration is likely to continue its upward trajectory. The government has announced it intends to make a big effort to narrow the digital gaps that manifest themselves across various demographic lines.
Israels strong broadband growth has long relied on a handful of developments across the market. These include the competition between Bezeq and the cable companies, with five major internet service providers (ISPs) vying for market share from both the corporate and residential markets, which enjoy high PC penetration rates, advanced telecoms infrastructure, and minimal regulatory intervention.
Another development likely to stimulate growth is the introduction of local loop unbundling (LLU), which will give alternative operators access to Bezeqs network and stimulate much greater competition.The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.
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