Boston, MA -- (ReleaseWire) -- 03/10/2014 -- Israel's IT market is the most developed in the Middle East with a rich ecosystem of major global investors, start-ups and universities engaged in cutting edge research. These features compensate for the relatively small and mature market that drags growth rates below those of many other MEA markets. We forecast IT spending to reach ILS23.4bn in 2014, with relatively stronger growth in software and services. We believe IT spending will remain on a positive trajectory throughout our five-year forecast period to 2018, accelerating over the long term in line with rising GDP and private consumption growth. The market will increasingly be driven by software and services in key sectors such as government, defence and financial services - resulting in IT services accounting for 36.8% of overall market spending by 2018.
Headline Expenditure Projections
Computer Hardware Sales: ILS9.55bn in 2013, rising 2% in local currency terms to ILS9.75bn in 2014.. We expect a return to growth in 2014 to be driven by the launch of 4G mobile networks and ongoing migration to the Windows 8 OS.
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Software Sales: ILS5.1bn in 2013, increasing 4.5% y-o-y to ILS5.3bn in 2014. Enterprise software spending will be the main growth driver as device and data proliferation will result in increased spending on customer relationship management (CRM), databases and business intelligence.
IT Services Sales: We expect IT services sales will continue to outperform the rest of the IT market, increasing from ILS7.9bn in 2013 to ILS8.3bn in 2014. Cyber security services will outperform in terms of growth, but it will be stable sectors such as government and defence that continue to account for the majority of spending.
Key Trends And Developments
- The growing emphasis of many multinational IT vendors on software and services revenues has led several of them to direct more investment in R&D at the Israeli market. Israel's strong reputation as a hotbed for innovative software development has made Israeli companies popular takeover targets for multinationals. In June 2013 Google acquired crowd-supported mapping start-up Waze and in September IBM completed its acquisition of Israeli-US enterprise security firm Trusteer.
- Israel's PC market has been negatively impacted by the country's weak economic environment, which we expect to persist in 2014. Israeli consumers have also been fairly slow to embrace the shift from laptops and notebooks to tablets, which has limited growth opportunities for vendors. However, the ever broadening availability of affordable devices and the expected launch of 4G-LTE networks should boost the hardware market in 2014.
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