Market Overview
The size of the strategically located Turkish IT market is forecast to increase from US$7.6bn in 2011 to US$13.0bn by 2015, making it one of the fastest growing in emerging Europe. A cultural and geographical position as a hub between Europe and the Middle East only accentuates the significance of the country's large market size for IT vendors.
Turkish IT spending is expected to strengthen throughout 2011, buoyed by a recovery in industrial production and domestic lending growth. The IT market will grow alongside other sectors as the government implements its programme of privatisation and reform.
The Turkish IT market is projected to achieve a compound annual growth rate (CAGR) of 12% during 2011-2015. Computer penetration should rise to around 50% by 2015, while small and medium-sized enterprises (SMEs) also represent a large potential market. In recent years, PC sales have received new momentum as the focus of demand shifts towards the Anatolia region and this is expected to continue as the rate of PC penetration rises.
Industry Developments
The government has continued to implement its E-Gateway portal project, which is central to its target of using IT to create a citizen-centric government. In the second phase, health, justice, security and other applications were rolled out in 2010, the deadline for completing the project.
Healthcare should be a significant area of opportunity for IT vendors over the next few years as organisations seek efficiency improvements and better quality services. The Health Transformation Project, launched by the Ministry of Health, has driven an increase in outsourcing of hospital functions. Other government departments have continued to launch tenders, including a data warehouse for the Social Security Institute and an upgrade of the statistical system for the Ministry of Labour and Social Security. As with many other government IT projects, the statistics project was driven by an aim for compliance with EU standards, with the union providing 75% of the funding from its general budget.
Competitive Landscape
In 2010, Turkish PC market leader HP said it sold more than 500,000 computers, and estimated its local market share at about 20%. HP's electronics manufacturing service (EMS) partner Foxconn started building desktops for HP at its new plant in Corlu, in the north eastern province of Tekirdag, in January 2011.
Business software leader Oracle reported strong results for the Turkish market in the first half of its 2011 fiscal year. The company reported a number of success stories with local clients such as Turkcell, Aegon, Tekstilbank, Yapi Kredi Bankasi, Petrol Ofisi, Enka and Hisar Scholl Kemerkoy.
This local cloud computer market is relatively small, but vendors and services providers see it as a promising way to target the huge SME segment. Turkcell has launched an internet-based platform for SMEs, which provides customer relationship management (CRM) and enterprise resource planning (ERP) applications, as well as basics such as email and website services. Meanwhile, in Q111, leading private telecoms service provider Koc set a target of reaching 25% of Turkish SMEs with a new hosted CRM service.
Hardware
Turkey's computer hardware sales are forecast at US$5.4bn in 2011 and are expected to reach around US$9.5bn in 2015. The PC market is forecast to achieved positive growth in 2011, with revenues then growing at a CAGR of 15% in 2011-2015. The notebook segment was the main growth driver in 2010, while desktops sales declined as companies remained cautious about IT spending.
The market fundamentals remain promising, with computer penetration low at about 10%. Until a few years ago, demand for computers was mainly confined to large cities such as Istanbul, Izmir and Ankara.
Now, the fastest growth in sales is coming from Anatolia. Demand for laptops is expected to be the strongest growth area over our forecast period but desktops remain popular with businesses.
Software
The software market in Turkey is projected at US$913mn in 2011 and is forecast to reach US$1.4bn in 2015, a CAGR of 12%. However, much will depend on the success in bringing down the use of illegal software, which at 65% is nearly twice the global average. The global economic crisis may have provided a boost to hosted software and outsourcing solutions, which have grown in popularity.
There is considerable potential for software market growth but lack of access to credit limits Turkish SMEs' willingness to spend on applications and solutions that often must be financed from operational budgets.
IT Services
Turkish spending on all categories of IT services is projected at US$1.3bn in 2011, with double-digit growth as business confidence recovers following the economic contraction in 2009. An increased business focus on internal savings as a result of the economic situation could ultimately drive higher spending on external IT suppliers such as systems integrators and managed services providers.
The Turkish IT services market is expected to grow at a 13% CAGR over 2011-2015. While support remains the largest services category, other groups, including outsourcing on non-core functions and training services, are growing particularly fast. A pick-up in large projects in key verticals such as telecoms, manufacturing and finance should provide new corporate sector opportunities in outsourcing, systems integration and application customisation.
E-Readiness
Data indicate that Turkey's e-commerce transactions level doubled in 2007 to 54.1mn transactions, up from 21.7mn the previous year.
Although other operators in Turkey are providing ADSL services, they are reliant on the incumbent Türk Telekom's wholesale ADSL product. Wholesale connections are included in its reported total. The Telecommunications Authority is keen to foster the growth of alternative broadband operators by allowing them to co-locate on Türk Telekom's network, in addition to reselling Türk Telekom's wholesale ADSL product. Competing against Türk Telekom remains difficult given that it owns the bulk of Turkey's fixed-line network infrastructure and is determined to compete aggressively on price.
In 2007, the OECD called for more initiatives to increase public use of ICT, with research from Eurostat showing that Turkey is among the countries in which internet access is very low. The research found that only 39% of Turks had computers at home and that Turkey was below the EU average in terms of computers per household and internet access.
Turkey lags behind its EU neighbours on many indicators but not e-government, where much progress has been made. In 2005, the Information Society Department, responsible for the overall coordination of ICT projects, was established within the State Planning Organisation. To increase participation and the level of success, an advisory board with 41 members has also been established. This consulting body gathers representatives from public institutions, non-governmental organisations and universities.
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