Sign in to our library of over $5 million worth of researchclose

Two Quick Steps

* Required Fields

Click Your Industry



Registered Customers

If you have an account with us, please log in.

* Required Fields



Subscribe today
Sign in to our library of over $5 million worth of researchclose

Two Quick Steps

* Required Fields

Click Your Industry



Registered Customers

If you have an account with us, please log in.

* Required Fields



Subscribe today

We deliver Mobile Wallet Market Research and SWOT Analysis from Alternative Energy to Pharmaceuticals and Healthcare Market Research Reports to Digital Media.

Skip to Main Content »

Search Site
Researchers Currently Online:810

Israel Information Technology Report Q2 2011


Israel Information Technology Report Q2 2011

Double click on above image to view full picture

Zoom Out
Zoom In
Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Apr 15, 2011
Quick Overview
Market Overview BMI projects that Israeli IT spending will grow to a value of US$5.2bn in 2011, consolidating a recovery in 2010. The market should gain enough momentum from key sectors to expand at a compound annual growth rate (CAGR) of 7% over BMI’s 2011-2015 forecast period, thanks to stable demand from defence and government sectors as well as opportunities in verticals like financial services and small and mediumsized enterprises (SMEs).
Spending is expected to record single-digit growth in 2011, after PC sales bounced back in 2010 with modest single-digit year-on-year (y-o-y) growth. 2010 also saw vendors winning projects across a range of sectors from government to telecoms, healthcare and utilities. Vendors also reported a revival in demand in the key financial services vertical, where new projects included an US$11mn IT outsourcing tender by the First International Bank of Israel.
The Israeli IT market has strong fundamentals that should keep it in positive territory during BMI’s fiveyear forecast period. Household computer penetration of around 75% offers potential for further growth. High internet penetration, including growing broadband penetration, are drivers for the retail segment, while the financial services sector accounts for about 15% of Israeli IT spending. However with Israel’s growth prospects continuing to be constrained by lacklustre growth in consumption there were concerns about lower domestic demand.
Industry Developments In May 2010, the Israeli Ministry of Finance launched a programme called “Relative Advantage” to boost Israel’s high-tech sector. During the economic downturn, Israel’s high-tech sector suffered as demand for high-tech exports dropped by at least 10-15%, with as many as 10,000 sector jobs feared to be at risk. This represented a major concern for the Israeli government given that high-tech accounted for around 10% of Israel’s economy, with annual sales estimated at around US$25bn.
As part of its modernisation agenda, the government is pressing ahead with various other strands of its egovernment project. Among other initiatives, there has been spending on computers in healthcare and the nationwide paperless court initiative. The e-government programme is leading to increased demand for computers, with the Israeli government reaching supply agreements with vendors like Dell and HP.
Competitive Landscape The Israeli IT services market is competitive, with leading multinational competitors IBM and HP (following its merger with EDS) both estimated to have Israeli IT services market shares of around 10%. HP Israel’s software division hosts HP’s biggest research and development (R&D) centre worldwide, and the company also has significant production facilities in Israel.
Leading IT services vendors, including Israeli companies Ness Technologies and Matrix, reported improved results in 2010 after experiencing mixed fortunes in the Israeli market in 2009. Ness Israel reported that revenues and earnings were up 16% in the final quarter of 2010, with software product engineering and systems integration divisions performing well.
2010 saw Israeli vendors winning contracts to implement or update SAP solutions as spending recovered from the economic slowdown. In September 2010, Ness won a US$3.7mn, five-year SAP ERP system contract from Israel’s Meitav Regional Water and Sewage Corporation, and in October 2010 a contract from Israel Direct Insurance (IDI) to implement a commpany-wide, SAP-based ERP system.
Computer Sales The Israeli computer hardware market, including desktops, notebooks, servers and accessories, is forecast at US$2.3bn in 2011, up from US$2.2bn in 2010. The market is expected to grow at a CAGR of 6% over the forecast period to reach US$2.9bn in 2015. In 2010, Israeli computer shipments recorded a modest recovery compared to the same period of 2009. Household consumption moved into negative territory in 2009 and although there was a slight recovery in H209, trading conditions remained tough.
Software Israeli software spending is projected to reach US$1.1bn in 2011, up from US$1.0bn in 2010. The packaged software segment is expected to grow at a CAGR of around 8% over the forecast period. Businesses are expected to remain cautious, deferring investments or looking for ‘good enough’ solutions to immediate problems. However, there should still be several growth areas.
Software spending is shifting towards the SME segment, which forms the mainstay of the Israeli business sector. Spending on enterprise solutions has grown since 2007, with reviving or emerging areas of opportunity including security, customer relationship management (CRM) solutions and business intelligence. In terms of verticals, the financial sector has been a mainstay of demand, with other key opportunities including defence and healthcare.
IT Services The IT services segment is estimated at US$1.7bn in 2011 and this is expected to grow at a CAGR of 9% over the forecast period to reach US$2.4bn in 2015. In H110, there were reports of a pick-up in the flow of projects, and as a result growth is expected to reach a higher trajectory in the second half of our fiveyear forecast period.
Government and defence are two key sectors likely to be a continued source of opportunities, with the Ministry of Defense awarding a US$6mn contract in Q410. Other areas of opportunity include healthcare IT and Utilities. Despite failing to capitalise in the past, Israel is starting to emerge as a desirable location for packaged applications and localisation services.
E-Readiness Israel’s relatively high PC penetration and the growing availability of broadband access mean internet penetration is likely to continue its upward trajectory. The government has announced it intends to make a big effort to narrow the digital gaps that manifest themselves across various demographic lines. Israel’s strong broadband growth has long relied on a handful of developments across the market. These include the competition between Bezeq and the cable companies, with five major internet service providers (ISPs) vying for market share from both the corporate and residential markets, which enjoy high PC penetration rates, advanced telecoms infrastructure and minimal regulatory intervention. Another development likely to stimulate growth is the introduction of local loop unbundling (LLU), which will give alternative operators access to Bezeq’s network and stimulate much greater competition.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 8
Israeli IT Sector SWOT ......................................................................................................................................................................................... 8
Israel Telecommunications Sector SWOT ............................................................................................................................................................. 9
Israel Political SWOT ......................................................................................................................................................................................... 10
Israel Economic SWOT ....................................................................................................................................................................................... 11
Israel Business Environment SWOT ................................................................................................................................................................... 12
IT Business Environment Ratings ................................................................................................................ 13
Middle East & Africa .......................................................................................................................................................................................... 13
Table: Regional IT Business Environment Ratings ............................................................................................................................................. 16
Middle East & Africa IT Markets Overview................................................................................................... 17
Israel Market Overview ................................................................................................................................. 22
Government Authority ......................................................................................................................................................................................... 22
Background ......................................................................................................................................................................................................... 22
Government Initiatives ........................................................................................................................................................................................ 23
Hardware ............................................................................................................................................................................................................ 24
Software .............................................................................................................................................................................................................. 25
Services ............................................................................................................................................................................................................... 27
Outsourcing ........................................................................................................................................................................................................ 29
Industry Developments ....................................................................................................................................................................................... 29
Industry Forecast Scenario ........................................................................................................................... 32
Table: Israeli IT Industry – Historical Data & Forecasts (US$mn, Unless Otherwise Stated) ............................................................................ 34
Country Context .................................................................................................................................................................................................. 35
Consumer Expenditure, 2000-2012 (US$) .......................................................................................................................................................... 35
Rural/Urban Breakdown, 2005-2030 .................................................................................................................................................................. 35
Internet ............................................................................................................................................................................................................... 36
Table: Internet Data & Forecasts ....................................................................................................................................................................... 36
Macroeconomic Forecast ................................................................................................................................................................................... 38
Table: Israel – Economic Activity, 2008-2015 .................................................................................................................................................... 40
Competitive Landscape ................................................................................................................................ 41
Internet Competitive Landscape ......................................................................................................................................................................... 44
Company Profiles .......................................................................................................................................... 45
Ness .................................................................................................................................................................................................................... 45
IBM ..................................................................................................................................................................................................................... 48
HP....................................................................................................................................................................................................................... 49
Matrix ................................................................................................................................................................................................................. 51
Microsoft............................................................................................................................................................................................................. 53
Country Snapshot: Israel 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, 2005-2030 ....................................................................................................................................................................... 56
Section 3: Labour Market And Spending Power ................................................................................................................................................. 57
Table: Employment Indicators, 2001-2006 ......................................................................................................................................................... 57
Table: Consumer Expenditure, 2000-2012 (US$) ............................................................................................................................................... 58
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




...