Egypt's IT spending is expected to increase from US$1.6bn in 2011 to US$3.0bn by 2015. BMI forecasts that Egyptian IT market growth will grow at a double-digit rate in 2011, despite increased uncertainty following the events of February 2011. The political disturbances caused disruption to IT supply networks and led to delays in some IT projects.
Over BMI's five-year forecast period, Egypt will benefit from youthful demographics and improving information and communication technology (ICT) infrastructure, despite several constraints and a suboptimal distribution network outside Cairo. The Egyptian market is one of the most resilient in the region, but prolonged instability could have an impact on the country's outsourcing sector.
Spending should increase in 2011 as the external and public sectors lift the Egyptian economy, although a weak external demand picture and elevated borrowing costs represent downside risks. Businesses and consumers will remain cautious, despite a continued government stimulus ahead of September 2011 elections.
The temporary Egyptian government appointed following the political events of February 2011 has pledged its continued commitment to a national IT strategy led by the ITIDA. The events of February 2011 had a disruptive impact on Egypt's emerging outsourcing industry, with leading telecoms company Telecom Egypt temporarily shutting down, and forcing call centres and service providers to seek access to alternative internet and telecoms infrastructure.
The new Egyptian government has said it will continue to support initiatives to raise levels of IT use in schools and promote computer literacy. In April 2011, the government announced that it would spend up to EGP150bn over the next five years to build new schools. Information technology is expected to form a significant component of the spending, with around 25% of Egypt's schools not equipped with computers.
In April 2011, Egyptian leader Raya Technology reported a 2.4% rise in 2010 net profit to EGP42.3mn (US$7.1mn). The company, which provides outsourced IT services and runs call centres, had made a net profit of EGP41.3mn in 2009. However, the 2010 profits performance fell short of the company's earlier projections of 10% growth.
In November 2010, HP signalled its intent for the Egyptian market by signing an agreement with its former distributor Mantrac to distribute its computing and storage products. Mantrac, one of the largest IT distributors in Egypt, had previously been an HP distributor for nine years, but its contract was terminated in 2008. Meanwhile, HP also plans to roll out new retail stores in Egypt in an attempt to tap into the growing retail segment.
With the launch of a new school building programme, vendors continue to target computers for schools procurement opportunities. In July 2010, chipmaker AMD announced it was implementing a tender from Egypt's Ministry of Education to deploy computers for schools based on its Phenom II X2 processors and AMD780 chipsets. In 2009, Fujitsu Technology Solutions was the winner in a 10,000-notebook procurement by the MCIT.
Egypt's computer hardware sales are projected at US$991mn in 2011 and are forecast to reach around US$1.8bn in 2015. However, computer penetration is forecast to rise from 10% now to above 20% by 2015, and annual computer sales could increase to around 500,000 by the end of BMI's forecast period.
Egypt's IT market will stay hardware dominated, with spending on PCs sustained by initiatives such as the 'Computer For Every Student' and 'PC for Every Home' programmes. Hardware accounted for an estimated 62% of Egypt's IT spending in 2010. Households are responsible for 20-25% of unit sales, with 1.0-1.5mn households said to possess a computer at present.
The Egyptian software market is expected to grow at a CAGR of 15% over the forecast period until end- 2015. Access to credit remains a barrier for smaller Egyptian companies, but initiatives such as that launched by the Bank of Alexandria in 2010 will help smaller Egyptian companies invest in IT. Overall spending on software remains rather low, with the estimated 14% share of total Egyptian IT spending on software reflecting the relative immaturity of Egypt's IT market.
While large corporations have long understood the business case for deploying technology, SMEs are increasingly beginning to see such investments as important if they are to avoid being overtaken by more tech-competent competitors.
IT services revenues are forecast at around US$390mn in 2011, accounting for about 25% of Egypt's total spending on IT. A market CAGR of 18% is projected for the forecast period through 2015. The Egyptian IT services market is dominated by demand from government, finance and telecoms sectors, which account for more than half of total spending.
Vulnerable sectors include construction and real estate. Government spending, the largest segment, is projected to be maintained, or even increased, as a countercyclical stimulus to flagging domestic demand. One key driver is likely to be the continued expansion of Egypt as an international outsourcing destination.
Egypt has continued to liberalise its telecoms market with the award of a second national fixed licence, and 3G licences to three mobile telecoms service providers. As well as generating additional spending on IT products and services from the telecoms sector, the spread of internet should provide a boost to the PC market over the next few years.