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Philippines Information Technology Report Q3 2010
Business Monitor International, July 2010, Pages: 62
Philippines 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 the Philippines' information technology industry.
The authors expect the Philippine IT market to attain regional outperformer status during its five-year forecast period, growing from a projected US$2.5bn in 2010 to around US$3.9bn in 2014. The Philippines has lower PC penetration than many other Asian countries, and thus offers correspondingly high growth potential over the forecast period, particularly with support from government digital divide and other ICT programmes.
Wage rises for civil servants in the 2010 budget should support consumer spending, already boosted by strong remittances, while enterprise spending should benefit from upgrades delayed from 2009. The business process outsourcing (BPO) industry, which accounts for around 30% of IT spending, continues to grow. Surveys in 2009 indicated that many of the Philippines’ business process outsourcing (BPO) executives felt that the impact of the global economic crisis had not significantly slowed expansion. The Philippines market appears better placed than others in the region to recover as consumer spending remains strong and the key BPO industry continues to grow. The authors estimate IT spending compound annual growth rate (CAGR) at 12% for 2010-2014, driven by rising incomes and PC penetration. Per capita IT spend was estimated at just US$25 in 2009, far lower than in other Asian countries such as Malaysia and China.
Industry Developments
In Q110, the Philippines Department of Trade and Industry (DTI) continued to expand its Personal Computers for Public Schools (PCPS) programme, with a project to provide 425 public schools in Mindanao with desktop computers. So far, the PCPS project has provided 3,714 public high schools with 47,100 computer packages. According to government figures, this has reduced the deficit in terms of computers in public high schools from 75% to 37%.
In 2009, despite the economic crisis, various government organisations proceeded with projects designed to facilitate delivery of e-services. The Bureau of Customs announced in September 2009 that its Electronic-to-Mobile (e2m) project – to introduce paperless transactions for processing imports documents – will have been implemented in nine ports by the end of the year. The e2m project is just one part of the PHP500mn computerisation programme being undertaken by the bureau, which accounts for around 25% of the government’s tax revenues.
Company News
Acer forecast that its notebooks turnover would grow by 30-40% in 2010. The company claimed to have largely escaped any local market impact from the global economic crisis and said that it was targeting the top spot in the market in 2010. Meanwhile, US PC leader Dell has also expressed optimism about its growth prospects in the Philippine market. In May 2010, the company signed a distribution deal with the National Bookstore, as it targeted the market for office and school supplies.
Multinational PC vendors in the Philippine market now increasingly look to drive growth through expansion outside Metropolitan Manila. In 2010, Lenovo Philippines announced that it was going to launch a more aggressive marketing campaign in Cebu, based around its latest Idea laptops and all-in-one desktop. Meanwhile, Japanese company Toshiba has also recently opened its first concept store in Cebu, its third in the country, with the other two being in Manila.
Despite the global economic slowdown, many companies continued to invest in software in 2009. SAP Philippines said that 2009 was a good year for the company, with 147% growth, which exceeded the business software company’s original target by 30%. In Q110, blue chip Ortigas & Co launched a PHP81bn programme of investment in an enterprise resource planning (ERP) system based on SAP’s platform.
Computer Sales
The authors forecast 2010 Philippine computer hardware spending of around US$1.6bn, which is expected to rise to US$2.5bn by 2014. Spending on computer hardware is forecast to grow around 9% in 2010, with a boost in the second half of the year from procurements delayed from 2009. Jobs in the IT industry, particularly the BPO sector, are projected to grow by 20-25%, thus driving demand for hardware. Government procurements are also providing relief with a number of e-government and public sector computerisation programmes. Education initiatives such as the Department of Education’s new Laptop for Teachers programme will help to sustain spending in this segment.
Software
The authors estimate that the addressable Philippine software market will increase to US$269mn in 2010. Growth should be maintained over the next few years, as The authors project a CAGR for the software sector over 2010-2014 of 12%. Software accounted for about 11% of IT spending in 2009 by the authors estimate, and sales will grow as higher PC ownership and internet penetration fuel demand for software. Vendors are exploring new channels to reach the small and medium-sized enterprise (SME) segment, such as Saleforce.com and Intel’s current cooperation with telecoms company PLDT. Much will depend on success in combating the software piracy rate, which was put by the Business Software Alliance at 69% in 2009. Open-source software is on the rise and is being pre-installed in PCs to be sold under the PC4ALL programme.
Services
Growth in the IT services sector continues to be driven by the IT-enabled services sector, particularly BPO and call centre services. The authors forecast a value of US$644mn in 2010, up from US$602mn in 2009. Due to evolving demand, vendors have to pay more attention to value-added services such as technical support and product troubleshooting, or basic IT and hardware consulting. Call centres are, unsurprisingly, projected to be the biggest single source of earnings for IT service providers, accounting for around 25% of revenues. After call centres, telecommunications, financial services and manufacturing are the next most important sectors.
E-Readiness
The overall number of local internet users has grown steadily over the last five years. Falling prices of PCs and internet subscription rates, partly as a result of greater market competition, have driven this growth. However, low PC and internet penetration rates, along with low telephone density and security concerns, still hold back the development of e-commerce.
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