Five counties in Romania generate 90 pct of IT industry revenues, study finds

Anca Alexe 25/09/2019 | 14:40

The Romanian IT industry, one of the main pillars of economy, currently has 5 relevant centers in terms of financial results, according to a study conducted by Termene.ro, a platform that offers real-time updated information about Romanian companies.

Almost 90 percent of the revenues generated by the IT services industry are concentrated in centers formed around 5 counties in Romania, while the remaining 37 counties generate less than 11 percent of the value in the entire sector.

The most important IT center in Romania is the one formed around the Bucharest-Ilfov region, which generates over half of total revenues, followed by the one in Cluj county, with almost 20 percent of revenues. Three other relevant IT centers are found in the Timis and Iasi counties, with 5 percent of industry revenues, and in Brasov county, with 3 percent of revenues.

Percentage-wise, IT companies headquartered in Cluj county registered an increase of over 63 percent in 2018 compared to 2016, and those in Iasi county grew over 66 percent in the same timeframe, but the Bucharest-Ilfov region, with only 16 percent increase in revenues, continues to slightly increase its discrepancy from the other regions.

The value increase registered by companies from the Bucharest – Ilfov region in the last two years was over RON 1.8 billion, being higher than that of Cluj county – RON 1.6 billion and incomparably higher than that of the other developed counties: Iasi with RON 449 million, Timis with RON 392 million and Brasov with RON 109 million.

“As an entrepreneur and founder of a SaaS (software as a service) company, I am looking to measure the impact of Romanian and multinational technology companies. The domestic technology industry has become a driver for economic growth and represents a central point of the business environment: according to our data, we have on the Romanian market more than 16,000 software companies, which record an accelerated growth compared to previous years,” said Adrian Dragomir, the CEO of Termene.ro.

Despite the growth of IT companies, the risk of some of them going into insolvency is real and must be taken into account by any supplier in the industry looking to have a profitable business. In terms of insolvency risk, the county with the fewest companies in this situation is Cluj, where only about 28 percent of companies are at risk, while companies from the Bucharest-Ilfov region are at the opposite side of the spectrum, with about 32.7 percent having an insolvency risk. The 3 other counties are in between these values: 30.7 percent in Timis, 31.6 percent in Iasi and 32.2 percent in Brasov.

Foreign companies dominate IT industry

Another important element that the Termene.ro study highlighted is the fact that only one out of the top 25 companies in the IT field by turnover has majority Romanian capital, and the remaining 24 are owned by foreign companies or individuals.

Most of the top companies in Romania have majority US capital (6), in second place are those with majority Dutch capital (5), and the 3rd place is divided between those with majority British, French and German capital (three each).

The top 25 companies in the IT industry generate almost one third of the revenues of the entire industry, while the rest – over 16,500 entities – generate the remaining two thirds of revenues.

Many new entrepreneurs in IT

In terms of trends, the IT industry has been growing strongly in Romania since 2004, the first year in which over 600 entities were set up. After a brief decline caused by the financial crisis from 2009 to 2010, the industry reached its peak in 2017, when over 2,600 such companies were set up.

The second year by the number of established companies was 2018, with approximately 2,200 companies, and the third was 2016 with approximately 1,600 companies.

In short, of the approximately 16,600 IT companies currently operating in Romania, over one third have been established in the last 3 years.

Although the number of companies in the IT industry has increased rapidly, the most competitive companies are still those established before 1997, according to the study.

A company established between 1991 and 1997 has an average turnover of over RON 6 million, while one established in the pre-NATO accession period (1998 – 2004) has approximately RON 3.2 million in turnover. Companies established between 2005 and 2011 have average turnover of about RON 1.4 million, while those less than 7 years old (2012 – 2018) have an average turnover of just over RON 0.5 million.

As for profitability, the situation is diametrically opposed, as newly-established companies have a profitability average of 16.8 percent, while those established between 1998 and 2004 have only half – 8 percent. Firms established between 1991 and 1997 have the lowest profitability, 7 percent, and those established between 2005 and 2011 have a profitability of about 12 percent.

 

Photo: Dreamstime.com

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