Boston, MA -- (ReleaseWire) -- 06/06/2014 -- 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 the software and services segments outperforming hardware sales. We forecast IT spending to continue growing throughout our five-year forecast period to 2018, accelerating in the later years as GDP and private consumption growth recover from government austerity measures imposed in 2013. 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.
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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.
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 April 2014, IBM announced the launch of its Alpha Zone technology accelerator in Tel Aviv, which will recruit start-ups to grow technologies across several areas, including big data, cloud, mobile, security and the Internet of Things. Meanwhile, in the month before US-based Palo Alto Networks confirmed the acquisition of privately held, Tel Aviv-based cyber security firm Cyvera. The financial terms of the acquisition were not confirmed, but industry experts expect the total value of the transaction was around USD200mn.
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