A detailed description about the ICT industry in Albania

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that fit your needs. Learn more here: http://elioplus.com
An overview of the ICT industry in
Albania
Starting our weekly series of presenting the structure of the ICT sector in
various countries around the world , we begin with Albania. We’ll point out
some key facts and elements so you can assess if it’s making sense for your
company to invest into recruiting resellers, VARs, distributors etc. from the
local Albanian market.
First of all, the key facts:
 With population little over 3 million people and a GDP of $14B it is a market that
you would consider relatively small.
 The IT market is estimated about $190 million, with $66 spending per capita and
market growth of 1.4%
 The ICT Development Index in the previous years, between 2002 – 2010, recorded
an extremely high growth of 88%.
 There are more than 1800 companies and over 8000 professionals that operate in
the IT industry.

2. The ICT industry
The recent world economic crisis didn’t affect much the economic
development of the country and its future development is positively evaluated.
The financial sector was stable and the small decline from investment
withdrawals was balanced from the inflow of savings from returning migrants
back to Albania.
The Albanian ICT sector has improved significant in the last 6 years due to the
efforts from the local government, donors and businesses. Furthermore, the
annual report indicates that the ICT is one of the main development
opportunities when doing business in Albania. On the other hand, access to
finance, corruption, tax rates and regulation are the main disadvantages when
considering in investing in the domestic market and some hurdles you should
take under serious thought before engaging in trade with a local
representative.
For telecommunication and mobile companies, the advancements over the
last years in ICT infrastructure are a great improvement. There are 4 mobile
operators with 2 of them offering 3G to their customers and currently
operators are preparing to introduce 4G. A couple of years ago the mobile
penetration was close to 90% and now it is expected tohave surpassed it,
being one of the highest rates in the region.
More than half of the population is using the internet and also the e-services
offered by the government is quickly growing. Almost 80% of the
central government services are accessible online.
Most of the companies working in the ICT sector in Albania are not specialized
in a particular market segment but have two or more activities in their
portfolio and operate in a number of sectors and categories. Very few
companies are specialized in software development, system integration or
hardware distribution alone. There are twomain factors why this happens:
first, mist companies operate only in the domestic market which brings us to
the second factor that it is a small market and so the IT businesses must have
a wide range of services or products in order to have strong revenues and be
profitable.
Most of the companies decide what products to resell or develop based on
their customers’ requirements and they do it often for different fields. These
companies within the ICT sector show strong desire for further development
and progress. The majority of the businesses specialize in installation,
maintenance and IT supplying, internet services and software designing. As it
was stated above, they offer a variety of services for different industries, so a
company can have customers from the Travel Industry and the Construction

3. at the same time. That means that they have a significant part of the general
development and market growth in Albanian economy.
Most of the ICT companies are SMEs that in a great percentage work only with
local customers with few having exposure to some EU markets. Their quest for
new markets will drive the development for new technologies, larger
investments in R&D and will also have a positive effect in the management
and marketing skills of local talent and will be a driving force for local
competition.
The companies
There are about 1800 registered companies that indicate in their
incorporation that at least one of their business purpose is IT services. They
represent almost 2% of the country’s total number of companies, somewhat
101,000. The vast majority of these IT companies are sole-proprietorships,
1600, and only a small number of them, 190, are registered as limited liability
companies and just 7 as joint stock companies. 50% of all companies are
located in the capital district of Tirana.

4. A significant 47% has commenced operation in the last 5 years, with about half
of them being in business less than 3 years. So, this high rate of new
businesses entering the market indicate that the IT sector is not only young
but also expanding and this growth in comparison with the overall new
business growth, which has varied between negative 2% and 2% in the past 5
years, in the country is also higher.
Industry analysis
As we noted above, most IT companies operate across different sectors and
sometimes there exist companies that are involved in almost every sector.
What is especially interesting is that the telecommunication sector followed by
public administration and education is the most served sector.
The vast majority of these companies are resellers, VARs, distributors etc., so
they import their products from abroad and don’t create proprietary
technology. However, they do a lot of localization and customization in order
to adapt those products to the local needs, for example, translate into
Albanian, use local currency etc. Local small and medium enterprises have
already a variety of equipment and programs to choose from that are also
affordable. The average annual investment in ICT is about 2.5-3 million USD
and all ICT revenues total about 20 million USD. The main projects that
currently undergo in the country and the vertical that the local government is
focused are e-government, e-health, e-learning and infrastructure initiatives.

5. Organizational Structure and management
There is something worth noting in the case of internal structure, the different
roles between administrative staff ant technical staff who is involved in the
creation and delivery of service and products. Larger companies in general,
have a lower percentage of technical staff than micro and small companies,
which in turn lack the existence of administrative staff.
About 58% of companies have a marketing department but often they are
assigned other responsibilities as well and marketing isn’t their only duty
within the company. Of course, small companies don’t even have a marketing
department and referrals and networking is their source of new deal
registration and clients.
Domestic market coverage
The main business activity is located in the greater area of the capital city,
Tirana, and 47% of companies report activity only where their headquarters
are and furthermore 70% of the total companies are active in just a few cities.
Just 14% operate in national scale and cover the entire country. This
phenomenon has its routes mainly in the general domestic economic activity
and not due to the weakness of IT companies. 60% of the economic activity or
more takes place in the district of Tirana and in the IT sector this number is

6. possibly higher as the IT demand in rural districts is very low. In some fields,
such as IT consulting, the demand outside Tirana is insignificant.
Partnerships with foreign companies
About 68% of companies indicate that they have had in the past or still have
partnership relation with a foreign company that has no direct end customers
there, so they have established a reseller, VAR, distributor etc. partnership. It
is common that this type of cooperation happens for specific projects and the
distributor type of partnership follows along with local sales partner.

7. Clients
IT companies sell mostly to other businesses, B2B, at a percentage of 57%, and
then the public sector follows with about 27%. Non-for-profit companies are
insignificant as clients and consumers represent about 14%. Due to this
structure, the local government has taken some important steps to indicate
the importance of the development of the ICT sector in the country, which in
turn will drive the economic growth and have as a result higher living
standards for the population.

8. Exhibitions, Conferences and Events
Below are some noteworthy events that occur yearly and are of interest for ICT
companies that want to engage with local businesses, distributors,
organizations etc.
 The International Conference on Network-Based Information Systems
 ICT Regional Conference and B2B meetings
 Tech Thursday
 Albanian ICT Awards
IT News: Sources of Information
“PC World” – no English version available http://www.pcworld.al/
International Standards
The most important factor that creates a strong barrier for local companies to
export their technology is international quality standards. They face many
challenges in order to comply with international standards or EU technical
requirements that have to be implemented if they want to export their
products and increase their position in the international markets. Along with
standards, local companies need to recruit more and more specialized and
qualified workforce that will lead the efforts to close this gap. Finally, the re-
education and continuous training plays a vital role in adapting the latest
technologies available and also devoting a large part of resources to that
purpose is something Albanian companies have taken in serious
consideration.
The SWOT analysis of Albanian ICT sector
We’ll conclude this article with a short analysis of the ICT environment, so
companies that are interested in entering the local market can have a concise
pros and cons image as well as future possibilities to take into consideration.
Strengths:
– ICT government agencies and associations exist

9. – IT companies are aware of the fact that they need to implement the
international standards and quality metrics for their products
– Labor costs are significantly lower that other countries, especially Western
Europe.
– Due to the location, IT companies have a key role and knowledge of the
Balknan and Eastern Europe markets.
– The Government has already realized the need of faster ICT development in
all sectors of the country and investments are increasing.
Weaknesses:
- It’s not a country that supplies and exports IT products or services
– Most products and services are outdated
– In the telecommunication field, there is a monopoly that leads to high prices
with low quality services
– IT companies are not specialized in certain field or vertical but rather have a
dispersed clientele
– There is lack of marketing talent and expertise and international strategy
– The size of most companies, sole proprietorship, is a disadvantage for them
to expand internationally and so is their budget
– There is a gap in project management skills and production of software
– The available capital to invest in initiatives that will make local products to
comply with international standards is very limited
– The accessibility of digital content and the extent of internet usage for
business is not as it should be as in other more advanced countries.
Opportunities:
– There is an increased understanding for world standard practices and
methodologies

10. – IT companies are more and more competing with regional and international
businesses
– The prospect of joining the European Union gives great market potential
– The exposure to foreign IT vendor partners will help the ICT companies to
gain in expertise and organizational structure to meet the global standards
– The ICT industry will drive the entire economy and lead into higher living
standards; Albania is among the youngest nations in Europe
– The strategic alliances established with foreign companies will increase
exports
Threats:
– There is a fragmentation in representing IT within different industries
– The relatively small market doesn’t allow for great industry development
and specialization
– “Brain Drain” of IT specialists in search of higher salaries abroad
Summary
Overall, the Albanian ICT industry is a dynamic and growing sector with
important leaps in the recent past. It’s a market that is opening fast, more and
more to foreign influence and the potential for international vendors to enter
is great. Already, the local market is consisted of resellers, VARs, distributors
etc. and the cooperation with foreign vendors is a successful business model.
Lastly, the hardware products represent 75% of the local market, the packaged
IT 10% and the IT services about 15%.

11. Sources:
http://www.rciproject.com/itprofiles_files/ICT_Country_Profile_Albania_2
013_1.0.pdf
http://www.bsec-itwg.com/eng/member_states/albania/
http://aita-al.org/
http://epoka.edu.al/new/icbs/14.pdf
http://ambasadat.gov.al/germany/en/investing-albania
http://www.intpow.no/index.php?id=1028&download=1
http://www.developingmarkets.com/sites/default/files/session-3-endri-
mataj.pdf
http://www.itu.int/ITU-D/treg/publications/BBD_MDG_Albania_Final.pdf
http://www.genderit.org/sites/default/upload/Albania_ICTstrategy_en.pdf