Indonesia Information Technology Report Q4 2009 - New Report Published

New report provides detailed analysis of the Information Technology market

Companiesandmarkets.com and OfficialWire, by Press Office, Published on November 20, 2009

The Indonesian IT market should grow at a compound annual growth rate (CAGR) of around 13% over 2009-2013 despite a deceleration in 2009, with demand in key segments affected by the global economic crisis. In H109, some manufacturing organisations deferred IT procurements, but there was continued spending in the financial sector, which had previously accounted for as much as 30% of total spending.

Demand is expected to pick up in 2010, and return to double-digit territory by 2011.

Government spending is expected to increase this year, and some fundamental drivers, including low computer penetration and growing affordability, should ensure that the market remains in positive growth territory. Indeed, Indonesia is projected to be one of the best regional IT market growth prospects over BMI's five-year forecast period. 2009 has undoubtedly brought more caution, however, with pressure for cutbacks as companies focus more on the bottom line and immediate needs.

By 2013, Indonesia's hardware-dominated IT market is projected to reach a value of US$5.7bn, displaying faster growth than many Association of South East Asian Nations (ASEAN) neighbours. With information and communication technologies (ICT) penetration of only around 20% and development restricted to richer areas such as Java, the market has much latent growth potential. However, the country's uneven development, and resultant digital divide, is a major barrier to faster growth within this potentially huge IT market.

Industry Developments

In H109 a ministerial decree directed that local government offices across Indonesia must adopt open source software (OSS) by 2011. The mayor of Surabaya revealed in July 2009 that his city had launched a pilot project for OSS applications. According to the mayor, all Surabaya municipal offices were now using the software, and civil servants had been given relevant training. The local government hoped that the municipality could save between 20% and 25% of its budget.

E-government is expected to emerge as an area of growing opportunity for IT vendors over the next couple of years. Currently, several ministries at both federal and province level are planning to implement projects. In 2008, a number of projects were launched, including an e-procurement system by the State Ministry for State Enterprise, which covered 25 state-owned enterprises, including state oil and gas company Pertamina and state electricity company Perusahaan Listrik Negara (PLN).

The government is also rolling out new e-learning initiatives, which could see education's share of the local IT spending rise from its estimated level of around 4%. The current ratio of PCs to students in public schools is around 1:3,200, and the government wants to increase this to 1:20. As there are 53mn students in Indonesia's schools system, this would require at least 2.5mn computers.

Indonesia Information Technology Report Q4 2009 © Business Monitor International Ltd Page 6 Competitive Landscape Multinational vendors dominate the Indonesian brand PC market leaders, with Acer currently boasting the edge in both notebook and desktop segments. In addition to HP and Acer, the rest of the top five comprises of Dell, Lenovo and Zyrex. While locally assembled 'white boxes' still claim up to 60% of the local PC market, a number of local PC and notebooks brands also enjoy increasing success, including Zyrex and Ion.

Acer is thought to have a market share of more than 40% for notebooks. In 2009 the Taiwanese vendor continued to expand its presence across both notebook and desktop segments with more product releases.

Meanwhile, HP has pledged to reclaim top spot in the Indonesian market from Acer at some point in H110 and has been aggressive in launching new notebook and netbook series.

IT services vendors have reported a growing demand in the telecoms, manufacturing and banking sectors.

Oracle has an agreement with local IT solutions provider PT Sigma Cipta Caraka (Sigma) to provide outsourcing services. Meanwhile, e-government is also being eyed by IT services vendors as a potential growth area. Tata Consultancy Services (TCS) said that it had targeted the government as a future growth driver in the Indonesian market. Currently, TCS's 15 local clients are principally from sectors such as banking and financial services, telecoms and media.

Hardware

The report forecasts 2009 Indonesia computer hardware spending of around US$2.5bn, up from US$2.4bn last year. Growth decelerated in 2009 and is forecast to be in low single digits this year before ticking up again in 2010. Double-digit growth is expected to resume in 2011, with the market rising to a value of nearly US$4.0bn by 2013.

Early results for 2009 were encouraging, due largely to notebook sales, which surged thanks to the popularity of netbooks; notebook sales grew faster than desktops in H109. In the current environment, the most promising growth driver is perhaps the consumer segment, which accounts for around 25% of computer demand. The main drivers are growing affordability and more credit availability.

Software

For 2009, software sales are projected at US$402mn, up from an estimated US$377mn in 2008, despite the current economic slowdown. There were signs in H109 that many firms planned to increase software spending. One market inhibitor is the continuing software piracy problem, which, by the local government's own figures, loses Indonesian software companies alone more than US$100mn a year.

Over the forecast period, enterprise resource planning (ERP) software continues to be of most interest to the small and medium-sized enterprises (SMEs) market as currently only around 20% of Indonesian SMEs are estimated to make use of IT.

IT Services

Indonesia's IT services market is projected to be worth US$589mn in 2009, recording year-on-year (y-oy) growth of 4% from US$564mn in 2008. Currently, IT services account for only 17% of the country's hardware-centric IT market sales. Hardware deployment services remain the largest Indonesian IT services category, with approximately a 20% share.

In 2009, the banking sector continued to provide opportunities for IT vendors, despite the fallout from the global financial crisis. Banks continued with transformation strategies driven by factors such as new technologies & services and regulatory compliance. However, most opportunities are currently in fundamental service areas such as system integration, support systems, training, professional services, outsourcing and internet services.

E-Readiness

Low telephone line density, high charges and low PC penetration are all significant obstacles to higher internet penetration. However, the picture is not all bad as there are signs of faster growth in user numbers, and recent surveys have shown that, among a very small elite, there is fast adoption, by regional standards, of broadband and a willingness to pay for video conferencing, security and other additional features. The government is encouraging fixed wireless deployments, including WiMAX, to bring the internet to more remote areas.

The government is also rolling out an internet-based National Education Network, which involves 1,000 network points in five clusters nationwide, designed to facilitate the use of the internet in schools. Despite some advances in e-education, constraints remain due to poor infrastructure and lack of public awareness in a country where only 20mn people own fixed-line telephones.