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Colombia Information Technology Report Q1 2010
Business Monitor International, Jan 2010, Pages: 50
The Colombia Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Colombia's information technology industry.
The Colombian IT market is one of the least developed in the Latin America region, but is projected to grow at a compound annual growth rate (CAGR) of 12% over the 2010-2014 period. The market continued to grow in 2009, although there was a sharp deceleration compared with the previous year. The consumer-driven economic boom of recent years may have come to an end, but government programmes and growing computer affordability will support spending on IT products and services.
The economic outlook in 2010 remains problematic for the IT market, as Colombia increasingly feels the brunt of economic uncertainty as well as a subdued growth and investment outlook. Despite these factors, Colombian domestic spending on IT products and services should reach a value of US$3.3bn by 2014. The government sees increased information and communication technology (ICT) spending as a key means to advance its central strategic goal of helping the country reintegrate disaffected groups. Per capita IT spend is projected to rise by 43% from US$44 in 2010 to US$63 by 2014, while PC penetration has exceeded expectations and could reach 20% within our forecast period.
Industry Developments
The Ministry of Communications assigned a COP1.5bn budget for the National Plan for ITC (PNTIC) for the 2008-2010 period, with the money channelled through the Communications Fund. The 2008-2010 PNTIC sets out a number of targets for 2010. These include percentage of municipalities with broadband access to 70% and increasing the number of households with broadband access to 40%. In early 2009, local Colombian software developers association Fedesoft said that it expected further action from the national government during that year to support the domestic software industry. The government is currently working on a general software law that is on track to be approved by the end of 2009 or early 2010. The law is expected to include measures such as allowing investments in software to be amortised and depreciated like other capital investments.
The government is pressing ahead with its computers for education (Computadores para Educar) programme, which has delivered 161,300 computers to schools since 2001, according to government data. The program has piloted Windows XP versions of the One Laptop Per Child (OLPC) XO laptop.
Competitive Landscape
In October 2009, Lenovo stepped up its campaign to penetrate Colombia’s retail PC segment. The company launched a new line of desktops and laptops targeted at small and medium-sized enterprises (SMEs) and households. Lenovo planned to expand its retail sector presence through increasing channel partnerships, and the new desktop and laptop series will be distributed through the companies MPS, Quorum, SED, Cubix and Makrocomputo. In Colombia, the business segment reportedly accounts for 80% of Lenovo’s local sales.
Fiscal year 2009 brought some changes in the structure of Microsoft Latin America, which involved establishment of some new country subsidiaries including Microsoft Colombia. Microsoft hopes that the launch of its Windows 7 operating system in October 2009 will boost its local sales. Meanwhile, Colombia was Microsoft’s second country to pilot the use of a Windows XP version of the OLPC XO laptop.
In August 2009, SAP completed a major enterprise resource planning (ERP) implementation for Banco de Credito Colombia, part of the Helm Financial Services Group. Colombia is also one of four regional markets selected by SAP as prospects for its sustainability portfolio, which includes governance and risk and compliance solutions, partnering with Everis to develop this market in Colombia.
Computer Sales
PC sales in 2010 are projected at US$889mn and, despite a sharp deceleration in market growth in 2009, should pass the US$1.3bn mark by 2014. Colombian PC penetration reached 12.8% as of mid-2009, surpassing the government’s previous 2010 target of 10.8%. The main long-term drivers of growth in the Colombian PC segment are lower prices and greater affordability.
PC shipments remained in positive growth territory in H109, but the weakening economy and peso devaluation contributed to a slowdown. According to government statistics, 698,960 computes were imported in the first six months of 2009, up 2% from 685,317 in the same period of 2008. Notebook sales drove this growth and in H109 accounted for above 50% of PC shipments for the first time.
Software
Colombia’s software market is projected to be worth US$345mn in 2010 and software CAGR for 2010- 2014 is forecast at around 11%. Software has opportunities for growth over the next few years but, in the near term, strong economic headwinds will lead some companies to defer system updates. Software piracy was estimated to account for 56% of software in 2008, down considerably from the rate a few years ago.
Business sentiment showed signs of a sharp decline in H109, but spending on software may receive a boost from government measures to stimulate the software sector. Most demand in the near term will be for basic solutions, such as enterprise risk management (ERM) and supply chain management systems.
IT Services
Colombia’s IT services spending is projected at around US$714mn in 2010, with single-digit growth compared with 2009. The percentage of IT market revenues generated by services is currently around 39%, high by emerging market standards and above the regional average. The majority of demand, around 75%, still comes from the large company sector.
The economic situation, and credit tightening, had an impact on spending in some key IT spending verticals such as manufacturing, construction and oil. However, the global economic slowdown could increase demand for outsourcing from some US organisations. In the last year or two, there has been a trend towards bigger managed service and outsourcing deals.
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