SMBs to drive Indonesia ICT spend

By Lynn Tan, ZDNet Asia, Monday, January 28 2008 08:21 PM

Small and midsize businesses (SMBs) in Indonesia are projected to spend about US$7.2 billion on infocomm technologies (ICT) in 2008, according to a new market report.

In its study released Monday, AMI-Partners said Indonesian SMBs are projected to grow their ICT expenditure by some 11.2 percent over last year, fueled by a boom in the overall economy and a surge in the number of small-sized businesses.

Prasannavadan Gaitonde, a Singapore-based research manager at AMI-Partners, said in a statement: "In Indonesia, more than 99 percent of SMBs are [small-sized businesses], and they account for about 78 percent of the total ICT spend."

Gaitonde noted that approximately 80 percent of these small-sized businesses--defined as having fewer than 100 employees--are startups, or are staffed with between one and four employees. He added that these companies will account for 50 percent of the overall small-sized business expenditure in 2008.

According to AMI-Partners, Indonesia has a "young and dynamic" business environment. The average age of business owners and managers is 33 years, and over 66 percent of these professionals have a graduate degree or higher education qualifications.

Gaitonde said this pool of young decision makers, along with a burgeoning domestic demand, has resulted in a "positive" environment with over 40 percent of SMBs expecting growth of between 15 percent and 20 percent in 2008.

"This optimism is also prodding more SMBs to consider hiring more people, [and] that will help relieve pressure on an otherwise high unemployment rate in Indonesia," he said. "The wage pressures are expected to remain flat through 2008."

Growth potential is also encouraging Indonesian SMBs to increase branch locations, where over 25 percent plan to add one to two branches this year, AMI-Partners noted.

As such, connectivity between branch offices and remote locations will be a top priority for SMB IT decision makers this year, the research house said. It added that the highest growth is expected in data security deployments at 33 percent, followed by data storage at 26 percent and Internet-related implementations at 24 percent.

Gaitonde said Indonesian SMBs will depend more on the Internet in 2008, adding that this increase in online usage will prod more SMBs to invest in basic security tools.

Mobility is another "hot" area because Indonesian SMBs are at the "cusp" of broader adoption of mobility-enabled devices, AMI-Partners said, driven by a desire to improve productivity of their mobile workforce.

For instance, the awareness of WiMax in Indonesia is "very high" and uptake of the technology could accelerate rapidly if the "right" products are offered at the "right" price points, AMI-Partners said.

The analyst company added that VoIP (voice over Internet protocol) and IP telephony tools are still "attractive" alternatives to reduce calling costs.

"Indonesian SMBs expect telecom service providers to play a stronger role in offering them various bundled solutions especially for voice-related services, [and] it is important that service providers rise to fulfill this need of a growing market," Gaitonde said.

Lynn Tan is a freelance IT writer based in Singapore.