Egypt Information Technology Report Q1 2010

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Market Overview Egypt's IT spending is expected to increase from US$1.3bn in 2010 to US$2.1bn by 2014. BMI forecasts that the Egyptian IT market growth will remain below pre-economic crisis levels in 2010, but economic recovery, tenders delayed from 2009 and higher incomes boosted by pay raises for civil servants and other groups should help to keep sales on an upwards trajectory. In 2010, a number of factors should help IT spending growth to recover to high single digits, including new hardware and software upgrade cycles, and sales of Microsoft's new Windows 7 operating system. Over BMI's five-year forecast period, Egypt will benefit from youthful demographics and improving ICT infrastructure, despite a number of constraints and a sub-optimal distribution network outside of Cairo. BMI projects a 2010-2014 IT spending compound annual growth rate (CAGR) of 12%, which puts Egypt in the top-tier of global IT growth markets. Computer penetration is forecast to rise from around 10% currently to about 17% in 2013. Opportunities will also be generated by Egypt's emergence as an outsourcing destination. Industry Developments In H109, the Ministry of Communication and Information Technology (MCIT) purchased more than 10,000 notebooks for distribution to students and teachers, in what was described as the largest computer procurement tender by a public body in Egypt. The MCIT has pledged further initiatives to further the use of technology in education. A number of policies have been implemented to attract foreign investment in IT outsourcing, including local employment subsidies, lower corporate taxes and deductions for training costs. In 2009, Egypt has made further progress, with Indian IT giant Wipro recently announcing that in future it would outsource 20% of its Indian and Middle Eastern software development work to Egypt. The Egyptian minister of state for administrative development has said that 200 government services will soon be available online through 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 currently offer services and licences online. Competitive Landscape In the PC segment, Fujitsu Technology Solutions was the winner in a 10,000 notebooks procurement by the MCIT. Meanwhile, HP planned to roll out new retail stores in Egypt in an attempt to tap into the growing retail segment. The company will open outlets within malls. In 2010 Microsoft hopes that sales of its Windows 7 operating system, launched in October 2009, will boost its sales in the Egyptian market. In Summer 2009 Microsoft continued to lay the groundwork for the new operating system launch and released the enterprise version of the software in August. Indian IT services giants have increased their presence in Egypt. Mahindra Satyam, the new brand identity of Satyam Computer Services, aims to grow its consulting and outsourcing businesses by 100% in the next few years, leveraging its Global Development Centre in Cairo's Giza Smart village. In May, Wipro announced that it was planning to save costs by outsourcing 20% of its Indian and Middle Eastern work to Egypt. Computer Sales Egypt's computer hardware sales are projected at US$821mn in 2010 and are forecast to reach around US$1.3bn in 2014. Annual computer sales could increase to nearly 470,000 by the end of BMI's forecast period. The launch of the Windows 7 operating system has the potential to help trigger a new cycle of hardware upgrades in 2010, although much will depend on business and consumer confidence. 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. Hardware accounted for an estimated 62% of Egypt's IT spending last year. Households account for 20-25% of unit sales, with almost 1-1.5mn households said to possess a computer at present. Software Ove

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