Overview
Romania is the leader in Europe, and sixth in the world, in terms of the number of certified IT specialists, with density rates per 1,000 inhabitants, greater than in the US or Russia.
Romania also hosts the new EU Cybersecurity Competence Centre and is home to an impressive number of international technology companies (including Amazon, HP, IBM, Microsoft and Oracle, etc.), with 50 of the largest tech companies present in Romania having quadrupled their businesses and teams throughout the past years.
The Romanian IT&C industry has also been recently credited with bringing Romania’s GDP “close to pre-crisis level” in Q1 of 2021.
Romania also scores high in terms of telecom networks and Internet speeds. Although the measures taken during the COVID-10 crisis significantly increased demand for Internet capacity, due to the significant infrastructure investments telecom operators succeeded to maintain and quite often to increase the quality of the electronic communication services provided. Thus, companies in Romania have transitioned to remote working without major disruptions.
This comes as no surprise, since Romania ranks 6th place in the top of the fastest-growing countries for fixed broadband and 43rd place among fastest countries for mobile internet. With the introduction of 5G services in Romania, the same scores a 2nd place in terms of downloading speed and 1st place in terms of upload speed, proving once again the high quality of the Romanian mobile networks.
The INS report shows that the cumulative turnover of these companies was over 78 billion lei, with a 4.9% share in the total turnover of companies engaged in economic activity. Of the total turnover, 31.3% accounted for the share of telecommunications companies.
At the same time, the entire Romanian economic sector invested less money in hardware products, namely 88.3 million lei, about 11% less than in 2019. Per 1,000 lei of total net investment, companies in industry and construction invested only 6.3 lei in hardware products, those in trade invested 29.4 lei, and companies providing services - 24.7 lei.
According to the NSI report, Romania’s ICT sector is comprised by manufacturers of electronic components, computers and peripheral equipment, communication equipment, consumer electronics and magnetic and optical recording media; software publishing; telecommunications; information technology services; web portal, data processing, web page administration and related activities; repair of computers and communication equipment.
The countries’ center point for IT development is Bucharest, holding 63% of revenues, along with regions North-West with 18%; West with 5%; Central with 6%; and North-East with 5%.
The Digital Agenda for Romania also sets priorities for key sectors for the Romanian economy and society: Employment, Research and Development (R&D), Climate Change and Energy Sustainability, Education, and Fighting Poverty and Social Exclusion.
Software and IT Services in Romania
The Romanian market for software in IT services has been growing substantially and is likely to become the most important contributor to the local GDP in the medium to long run.
Out of the market value of $6.4 billion estimated by ANIS at the end of 2019, $5.2 billion comes from the Software & IT Services sector while $1.2 billion from various activities on the IT market.
Research and Development
Romania has an important tradition in research, development, and innovation in the technical field. The technical expertise and lower labor costs of engineers have helped attract interesting and more significant projects into local industry. Industry clusters can be found in major university cities: Bucharest, Cluj-Napoca, Iasi, Timisoara, Craiova, and Brasov.
Market Demand
Software Development
The market size, measured by revenue, of the Software Development in Romania industry is €3.2bn in 2022.
Source: IBISWorld 2022
There are 49,619 people employed in Software Development in Romania as of 2022. The average Software Development in Romania business in Romania has six employees. There are 7,931 Software Development in Romania businesses as of 2022, an increase of 0.7% from 2021. The number of businesses in the Software Development in Romania industry has grown 0.7% per year on average over the five years between 2017 - 2022. Software development in Romania has low market share concentration and there are no companies with more than 5% market share.
Cyber Security
The cybersecurity market in Romania is still emerging. Romania boasts the highest rate of per capita technology workers in Europe in this sector. However, the Romanian cybersecurity market is open to foreign players, too, with U.S. suppliers well represented. Market entrants should be aware of the various applicable EU and Romanian market regulations.
Starting in 2021, Bucharest has hosted the European Cybersecurity Industrial, Technology and Research Competence Center, a hub to distribute EU and national funding for cybersecurity research projects. Bucharest was selected from a list of seven vying cities to host the center.
The EU Cyber Centre’s role is to reinforce the European Union’s resilience, deterrence and response to cyber-attacks, aiming to retain and develop essential cyber-security technological capacities to secure EU’s Digital Single Market (DSM). The Competence Centre will implement parts of the Digital Europe and Horizon Europe programs by allocating grants and carrying out procurements.
Regarding cyber education, in the 2019-2020 academic year more than 15 programs of cybersecurity were developed nationwide in over 11 universities and high schools on topics ranging from cybersecurity of the military information systems, cryptography, and digital investigations to machine learning and network security. In 2019, the annual European Cyber Security Challenge, the most important cybersecurity event of the year, was organized in Romania by the Cyberint Center of the Romanian Intelligence Service, the national CERT, and the National Association for Information Systems Security (ANSSI).
5G coverage is available in Bucharest (provided by the largest telecom operators). Consumers with a 5G subscription and a compatible phone benefit from maximum download speeds of up to 1.2Gbps.
The nearly 212,000 employees in the IT&C sector made a 6.7% contribution to GDP formation in the third quarter of 2021, according to data published by the National Institute of Statistics. In only 4 years, the contribution of the star sector of the economy to the GDP has increased by two percentage points and is heading with rapid steps towards a share of 7% of GDP.
Romania manages in recent years to prove that it becomes a force in the IT&C field it is a field in which Romania is not only behind the West, but from many points of view converges towards a European average and frequently exceeds it as a level of competence, as a level of value of jobs, and even in recent years, as a level of labor cost in many contexts.
The IT&C sector’s contribution to GDP has increased over the last four years from 4.7% to almost 7%. Each year, the number of IT professionals has increased by 10,000 to 212,000 employees.
IT&C is one of the few sectors where the contribution to GDP has increased in recent years. Industry, for example, one of the main pillars of the economy, reached a contribution to GDP of 19.6% in Q3/2021, down from 24.3% in Q3/2018.
An employee in the IT&C sector earns, on average, a salary of more than 7,100 lei net per month, double that of an employee paid the average wage in the economy. In software manufacturing, the average salary of almost 8,600 lei net in October 2021 was the highest nationwide.
Market Entry
Selling through an established local Romanian channel partner is the lowest-risk market entry strategy for most U.S. manufacturers. However, when selling to Romanian government departments, it may be necessary to establish a direct business presence in Romania, especially when competing for projects related to national security. Cooperation with ANSSI (www.anssi.ro), the most important local association in cybersecurity, offers U.S. companies interested in the Romanian market the best approach in finding partners, information about the market, and business opportunities with the public sector.
Companies can benefit from an additional deduction of 50% from the eligible expenses for research and development. Moreover, accelerated depreciation may be applied for devices and equipment used in research and development activity. For large investments, state aid schemes or individual aid may be available.
Romania has laws on electronic commerce, online copyrights, electronic signature, electronic payment, online advertising, personal data protection, cybercrime, internet pornography, and electronic communications.
The government also developed some draft laws for minimum security conditions of digital systems for the Public Administration and national electronic records.
Income tax exemption for IT employees providing software development activities
Romania doesn’t tax the incomes of IT employees providing software development activities; Thus, Romania is one the most competitive markets for outsourcing, with an average labor cost of $1,123 for a net salary of $720.
Gender Parity
Regarding gender balance, Romania ranks 3rd in EU statistics on women employees in ICT.
24% of ICT graduates in Romania are female, providing one of the most inclusive and gender-balanced work culture and environment
Leading Sub-Sectors
There are important opportunities for expertise, products, and services, addressing three fundamental pillars:
Regulate:
- Incident response and disaster recovery
- Software reporting, forensic tools, and security information team
- Use of certified software products and technologies, under the interoperability umbrella.
Facilitate
- Validation of security environment
- Emergency response team working with private/public sector teams, shared intelligence
Collaborate
- Research on cyber warfare
- Exchanging information, forums, and communities
- Education
Opportunities
One of the biggest opportunities for Romanian IT&C sector is represented by the European Recovery and Resilience Facility and subsequently by the Romania’s National Recovery and Resilience Plan, which is based on green and digital transition.
IT&C is present in all the six pillars that make up the plan, but two of them are strongly related to digital transformation of Romanian society.
The second Pillar (Digital Transformation) is based on four priorities:
- Public services digitalization
- Digital skills
- Secure and resilient digital infrastructures
- Digital transformation of SMEs
The main component of second pillar is Governmental Cloud and digital public systems with a budget of $2.08 billion. It consists of four reforms and 19 investments, among which we can mention: Governmental Cloud, Electronic Identity card for 8.5 million people, and skilling/up-skilling/re-skilling for 30,000 civil servants and 100,000 citizens at 65 organizations that will improve their cyber security.
On the other hand, the third Pillar (Smart, Sustainable and Inclusive Growth) includes another important Component (Sprijin pentru mediul de afaceri, cercetare, dezvoltare și inovare) proposes two reforms and five investments with a total budget of $2.6 billion. Among the results assumed by those investments related to IT&C are that at least 3,000 SMEs must undergo a digital transformation process. Also, funds for digitalization, climate action and other areas of interest are co-managed with the European Investment Bank as an implementing partner. Also, support for at least three organizations with expertise in microelectronics to join projects of European Partnership for Key Digital Technologies.
One of the top priorities of the Romanian government’s IT strategy is digitalization of the Public Sector, with the implementation of associated cybersecurity programs.
Education
Regarding public schools’ reform in Romania with digital transformation, actions across this field focus around digital inclusion, upskilling of ICT competences and advanced digital skills to enable key emerging and breakthrough technologies and innovation in the public and private sector, as well as many others.
Projects launched within this framework include delivery of ICT equipment (both hardware and software) to schools with a special focus on rural areas, training programs aiming to enhance teachers’ digital competences, and raising awareness on digital skills and initiatives supporting the digitalization in the public and private sector.
Healthcare
The health sector is an important buyer of cybersecurity services due to the large volumes of personal data that are managed by the health system. Large telemedicine projects are currently under discussion, and they should have an important cybersecurity component. However, certain steps need to be taken in order to implement telemedicine projects. The most important part is the expected further detailing of the rules for the procedures laid down by the implementation of law 362/2018. Published in January 2019, the law seeks to set a common level of network and informational system security. This law is addressed, among other sectors, to suppliers of medical services, whether public or private.
Opportunities also exist in the private sector to supply organizations of all sizes from SMEs to large corporations. Currently, enterprise application is noticeably below the EU-28 average. Thus, there is high potential for companies to target enterprises by offering low-cost solutions. The most substantial opportunities can be found in organizations for which IT security is critical:
- Financial, banking, and insurance sectors
- Critical infrastructure networks (energy and utilities)
- Telecommunications (telco).
Utilities and Energy Transport
An emergency ordinance has been initiated by the Ministry of Research, Innovation and Digitization on the government cloud. A milestone in PNRR (National Recovery and Resilience Plan) was an investment of almost €600 million and, more importantly, a crucial first step in Romania’s digital transformation. Government cloud will allow public institutions to communicate with each other, which leads to productivity, development, and modernization.
Some objectives are:
- public-private partnership will be provided through the hybrid cloud. This hybrid system will allow for an optimal mix between state-of-the-art private solutions and public systems that guarantee protection of citizens’ data
- virtual marketplace app store for public institutions
- access logging and citizen notifications when private data is accessed, through a blockchain solution.
Trade Events
Tech Week: https://www.techweek.ro/
Dev Talks: https://www.devtalks.ro/
RoOUG ConTech: https://contech2022.rooug.ro/
Contact information:
Alina Capat