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Egypt Information Technology Report Q2 2011


Egypt Information Technology Report Q2 2011

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Price $530.00
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Publisher Business Monitor International
Date of Report Apr 15, 2011
Quick Overview
Market Overview Egypt’s IT spending is expected to increase from US$1.6bn in 2011 to US$3.0bn by 2015, as economic recovery, tenders previously delayed because of the economic situation, and higher incomes boosted by pay rises for civil servants and other groups keep sales on an upward trajectory.
Over BMI’s five-year forecast period, Egypt will also 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 it is too early to assess the effect of recent political upheavals on the IT market, although BMI has downwardly revised its economic growth forecast.
Growth is expected to bounce back in 2011 as the external and public sectors lift the Egyptian economy, although a weak external demand picture and elevated borrowing costs are potential constraints. However, businesses and consumers will remain cautious, despite a continued government stimulus.
Industry Developments In April 2010, the Bank of Alexandria signed an agreement with the International Finance Corporation (IFC) arm of the World Bank to support Egyptian small and medium-sized enterprise (SME) informatisation. Under the agreement, the Bank of Alexandria will launch a localised and freely available version of the IFC’s SME Toolkit web platform in both English and Arabic. The SME Toolkit offers online business management information and other interactive tools and educational resources. Meanwhile, in March 2010, Egypt’s Minister for Communications, Information and Technology Tarek Kamel, announced the launch of a new innovation strategy. The strategy mirrors initiatives such as the recently established entrepreneurship and innovation centre in Smart Village, as well as the Technology Cluster and Business Park. The aim behind the strategy is for Egypt to move up the value chain from basic business process outsourcing (BPO) and call centre services.
In 2010, the Egyptian government continued to award tenders to raise the levels of IT use in schools and promote computer literacy, after the Ministry of Communications and Information Technology (MCIT) announced plans in 2009 to purchase 10,000 computers to distribute to students and teachers, in what was described as the largest procurement tender by a government body in Egypt. MCIT has since pledged further initiatives to promote the use of technology in education.
Competitive Landscape In November 2010, HP signalled its intent for the Egypt 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.
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.
In June 2010, Raya announced that it had implemented a Windows 7 Upgrade Project for Banque du Caire, one of the oldest banks in Egypt. Raya upgraded the bank’s desktop operating system on computers in its head office and supplied services including application compatibility testing for the bank’s existing applications with Windows 7.
Computer Sales 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 like 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.
Software 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. However, the domestic 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.
One market driver has been a significant fall in software piracy, with the illegal software usage rate, as measured by the Business Software Association, falling a further 1% to 59% in 2008. 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 techcompetent competitors.
Services 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.
E-Readiness 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.
A similar story could be told about broadband, although cost remains a major barrier to broadband subscription in Egypt. It has been well documented that private broadband subscribers often club together with two or three neighbouring families to get a shared broadband subscription and Wi-Fi router. More competition in the market should hopefully bring prices down and lead to subscriber growth.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 8
Egypt IT Sector SWOT .......................................................................................................................................................................................... 8
Egypt Telecommunications Sector SWOT ............................................................................................................................................................. 8
Egypt Political SWOT ........................................................................................................................................................................................... 9
Egypt Economic SWOT ....................................................................................................................................................................................... 10
Egypt Business Environment SWOT ................................................................................................................................................................... 11
IT Business Environment Ratings ................................................................................................................ 12
Middle East & Africa .......................................................................................................................................................................................... 12
Table: Regional IT Business Environment Ratings ............................................................................................................................................. 15
Middle East & Africa IT Markets Overview................................................................................................... 16
Egypt Market Overview ................................................................................................................................. 21
Government Authority (until February 2011) ..................................................................................................................................................... 21
Background ......................................................................................................................................................................................................... 21
Hardware ............................................................................................................................................................................................................ 22
Software .............................................................................................................................................................................................................. 24
Services ............................................................................................................................................................................................................... 26
End-User Analysis .............................................................................................................................................................................................. 28
Industry Developments ....................................................................................................................................................................................... 29
Industry Forecast Scenario ........................................................................................................................... 33
Table: Egypt’s IT Sector – Historical Data & Forecasts (US$mn unless otherwise stated) ................................................................................ 35
Country Context .................................................................................................................................................................................................. 36
Table: Consumer Expenditure, 2000-2012 (US$) ............................................................................................................................................... 36
Table: Rural/Urban Breakdown, 2005-2030 ...................................................................................................................................................... 36
Internet ............................................................................................................................................................................................................... 37
Table: Telecoms Sector – Internet – Historical Data & Forecasts ...................................................................................................................... 37
Macroeconomic Forecast ................................................................................................................................................................................... 39
Table: Egypt – Economic Activity, 2008-2015 .................................................................................................................................................... 41
Competitive Landscape ................................................................................................................................ 42
Hardware ............................................................................................................................................................................................................ 42
Software .............................................................................................................................................................................................................. 43
IT Services .......................................................................................................................................................................................................... 44
Internet Competitive Landscape ......................................................................................................................................................................... 46
Table: Egypt’s Internet Sector – Key Indicators ................................................................................................................................................. 48
Company Profiles .......................................................................................................................................... 49
IBM Egypt ........................................................................................................................................................................................................... 49
Raya Holdings .................................................................................................................................................................................................... 50
Oracle ................................................................................................................................................................................................................. 52
HP....................................................................................................................................................................................................................... 53
Microsoft............................................................................................................................................................................................................. 54
Country Snapshot: Egypt Demographic Data ............................................................................................. 55
Section 1: Population .......................................................................................................................................................................................... 55
Table: Demographic Indicators, 2005-2030 ....................................................................................................................................................... 55
Table: Rural/Urban Breakdown, 2005-2030 ...................................................................................................................................................... 56
Section 2: Education And Healthcare ................................................................................................................................................................. 56
Table: Education, 2002-2005 ............................................................................................................................................................................. 56
Table: Vital Statistics, 2005-2010 ....................................................................................................................................................................... 56
Section 3: Labour Market And Spending Power ................................................................................................................................................. 57
Table: Employment Indicators, 2001-2006 ......................................................................................................................................................... 57
Table: Consumer Expenditure, 2000-2012 (US$) ............................................................................................................................................... 57
Table: Average Annual Wages, 2000-2012 ......................................................................................................................................................... 58
BMI Methodology .......................................................................................................................................... 59
How We Generate Our Industry Forecasts ......................................................................................................................................................... 59
IT Industry .......................................................................................................................................................................................................... 59
IT Ratings – Methodology ................................................................................................................................................................................... 60
Table: IT Business Environment Indicators ........................................................................................................................................................ 61
Weighting ............................................................................................................................................................................................................ 62
Table: Weighting Of Components ....................................................................................................................................................................... 62
Sources ............................................................................................................................................................................................................... 62




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