The Information and Communication Technologies (ICT) industry is widely recognised as one of key driving forces of contemporary competitiveness. Inside the European Union, ICT are not only seen as a strategic sector, but also as a means to create positive spillovers to other economic sectors and achieve cross-innovation. Under this objective, the European Union supports the enhancement of the ICT industry potential in the Western Balkans, which was recently underlined with the adoption of the Digital Agenda for the Western Balkans. Within this region, Serbia has recorded the strongest growth. The Serbian government recognised digitalisation as priority. However, the environment of the ICT industry in Serbia, mostly referring to regulatory, political and educational frameworks, still needs to be improved. This paper analyses the status quo of the ICT industry in the Western Balkans with a focus on Serbia. It discusses the main challenges and proposes development paths with specific measures to be taken.