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Chile Information Technology Report Q3 2010
Business Monitor International, July 2010, Pages: 60
The Chile 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 Chile's information technology industry.
Market Overview:
Chilean IT spending is expected to grow around 10% in 2010 with sales of US$2.3bn, which will increase to around U$3.4bn by 2014. Chile’s IT market is one of the most developed in Latin America and, with many indicators now turning positive, is projected to grow at a compound annual growth rate (CAGR) of 11% over the 2010-2014 period.
It is still too early to assess how the Chilean earthquake and subsequent reconstruction efforts will impact on the local IT sector, but rebuilding is expected to begin apace in H210. Organisations in government and other sectors, which are in need of updating of services and IT infrastructure, may take advantage of the opportunities presented by reconstruction to advance this agenda.
Chile retains some strong IT market fundamentals, including consumer affluence and a relatively favourable business environment. Chile’s development as an offshoring location will attract more investment in IT services, with sectors like retail, distribution, financial services, telecoms and healthcare all offering opportunities.
Industry Developments:
Chilean President Sebastián Piñera has set out a number of proposals for the domestic IT sector, including tax breaks for IT companies that invest in Chile as an IT services hub. Some other proposals in Piñera’s plan have positive implications for the domestic IT market. They include increased use of IT in classrooms and expanding digitalisation of public entities beyond traditional flagship projects. Leaving aside potential reconstruction-driven investment, government spending on IT projects was expected to rise in 2010, with Q110 seeing the launch of a number of new projects. In early 2010, some significant public sector software tenders were announced, including an US$80mn tender from Chile’s National Registry. Meanwhile, the Civil Registry was analysing bids for a separate US$300mn tender to supply e-ID cards and passports.
Among major projects launched in 2009 was the Enlaces programme to provide IT for schools. The programme, led by Chile’s education ministry, involved the set-up of a US$3.7mn fund to subsidise IT purchases for more than 2,000 schools throughout the country. Schools will be able to use the fund to acquire education software and devices, with standards and prices established by the ministry.
Competitive Landscape:
HP has predicted double-digit growth in Chilean sales in the next few years. The company has an agreement with Chilean telecoms company Entel by which Entel will sell HP 3G laptops bundled with its own 3G services. Meanwhile, Chilean contender Libesa is known for its school and office supplies brands, but has spent around US$10mn over the past five years on moving into the notebook market, where it claims a 35% share. The company is now targeting the university notebook sector and is adding capacity with an eye to exporting notebooks to Mexico and the US.
In May 2010, Microsoft launched the Chilean branch of its international partner association to help local partners to generate more business. Microsoft hopes that the new channel organisation will provide an infrastructure that will help guide local clients to transfer to cloud computing. The company is targeting both consumer and business segments with its online solutions. In the business segment, Microsoft offers online versions of Exchange, Sharepoint and other collaboration tools.
IBM enjoyed more success in the Chilean market in Q110 with an agreement with Chile’s LAN Airlines to administer its technology platform for the next five years. Under the terms of the estimated US$15mn contract, IBM will provide administration, operation and control of the platform. In 2009, IBM signed an agreement with Chilean systems integrator Synapsis to jointly offer solutions in Chile and a number of other regional markets.
Hardware:
The report forecasts that Chile’s computer and accessories market will have a CAGR of around 8% over the 2010-2014 period. Computer hardware sales in 2010 are forecast at US$1.0bn, up from US$897mn in 2009, when the market suffered a sharp deceleration. However, spending should approach around US$1.4bn by 2014.
Chilean business segment PC demand is expected to recover in 2010, after there were signs of improvement in H209 due to restocking following a rundown of inventories. There could be a boost, particularly in the second half of the year, from computer hardware tenders delayed from 2009.
Software:
Chile’s software market is projected to be worth US$354mn in 2010, with high single-digit growth compared with 2009. Software CAGR for 2010-2014 is projected at around 11%. The recession led some companies to review IT budgets or look to defer systems updates, but other companies viewed software investments as a means of achieving greater efficiencies in difficult times. In early 2010, some significant public sector software tenders were announced, including an US$80mn tender from Chile’s National Registry. Piracy was estimated to account for 68% of software in 2008, up 1% on the 2007 level, despite a sustained government campaign to reduce this.
IT Services Chile’s IT services market is projected at around US$901mn in 2010 and is expected to grow at a 14% CAGR over the 2010-2014 forecast period. The percentage of IT market revenues generated by services is currently around 37%, high by emerging market standards but similar to other countries in the region, such as Brazil. The majority of demand, around 75%, still comes from the large company sector, but smaller companies are now becoming more sophisticated in their demand.
Q110 saw a number of significant IT projects launched in sectors ranging from local government to transport. Led by the financial, telecoms and retail sectors in particular, there is a trend towards bigger managed service and outsourcing deals in the local market. Healthcare IT is underdeveloped in Chile and therefore represents a significant opportunity.
E-Readiness:
The government is planning to increase Chile’s broadband options by auctioning 3G mobile and WiMAX. For 2008-2009, the government allocated US$80mn to support projects aimed at boosting internet coverage. The telecommunications regulator, Subtel, also launched a new universal access fund in 2008.
In general, Chile enjoys some of the best telecommunications infrastructure in South America. In a recent survey, the World Economic Forum ranked Chile 31st in the world in the category of ‘degree of preparation to participate in and benefit from information and communications technology’, the highest ranking in the Latin American region. However, the report concluded that Chile’s e-development was held back by some familiar failings, including an inefficient government bureaucracy and over-regulation
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