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Australia Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 54
Australia 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 Australia's information technology industry.
Market Overview
Australia's IT market should continue to provide opportunities in consumer, government and business sectors in 2010, following a relatively robust performance in 2009. The total size of the domestic IT market is projected by BMI to increase from US$19.2bn in 2010 to US$23.9bn in 2014.
After the narrow victory of the Labour party-led coalition in Australia's 2010 elections, a decision on the future of the National Broadband Network (NBN) could have implications for the future development of the IT market. IT spending in 2010 should receive a boost from systems upgrades deferred from last year, although much will depend on business confidence. In H110, vendors reported a pick-up in demand with the revival of IT projects that had been shelved in 2009. Australian organisations implementing major IT projects included retail giant Harvey Norman.
Several factors underpin our forecast of a 6% 2010-2014 CAGR for the Australian IT market. Government tenders will drive considerable spending in years to come. Banks will continue to need to spend on regulatory compliance, and intense competition in the retail sector is spurring spending on customer relationship management (CRM) and back-office systems. Competition and new service platforms in the telecoms sector are driving that key IT spending segment.
Industry Developments
As of August 2010, the Australian ICT industry was waiting for the coalition government to clarify its broadband policy. The former Rudd administration's ambitious National Broadband Network (NBN) policy had attracted criticism, which led to speculation that the government may cut the project. However, the need to ensure support from independent MPs representing rural areas could induce the government to maintain support for the NBN, or something that provides similar outcomes.
Government IT spending was estimated at more than US$4bn in FY2008/09. In 2010, government projects in sectors such as e-government, healthcare and education will drive significant opportunities for IT vendors. In mid-2010, the Australian government is expected to launch a standardised reporting system scheme. The National E-Health Transition Authority has the goal to create a paperless environment in Australia's health sector, including public hospitals.
In 2010, national and state governments will continue to roll out new initiatives, with the Victoria government investing more than US$150mn in IT in schools. Around 1,400 high schools were expected to benefit from the second phase of the government's computers for schools project, announced in 2009. By the end of 2009, the programme was to have provided almost AUD260mn of computers.
Company News
In 2010, the release of Apple's iPad was expected to open a new competitive battleground in tablet notebooks, with rival vendors such as Dell, Lenovo, Samsung, and HP planning to release their own rival products. The iPad was officially launched in Australia in May 2010, with local telecoms companies Telstra and Optus offering what were claimed to be some of the cheapest data rates in the world for iPad users. Meanwhile in Q310 more specialist e-reader devices arrived on the Australian market, including one Sony launched in time for Father's Day.
In February 2010, Microsoft Australia received a boost when Qantas, one of the largest corporate users of Lotus Notes in Australia, announced it had dumped the IBM email system in favour of Microsoft Outlook. A long-time user of Notes, Qantas announced that it would migrate 20,000 workers to Outlook by the end of 2010, with the project being managed by Fujitsu.
Vendors in the Australian market are investing in infrastructure to provide cloud computing services locally. IT services group CSC Australia planned to launch both infrastructure-as-a-service (IaaS) and a range of Microsoft software-as-a-service (SaaS) from its local data centres. Meanwhile, Japanese IT giant Fujitsu announced in April that it would deploy a second IaaS offering from an Australian data centre.
Computer Sales
Australian computer hardware sales are projected at US$8.6bn in 2010 and, following the deceleration in 2009, are forecast to grow at a 2010-2014 CAGR of around 3% to reach US$9.6bn by 2014. The main drivers of growth in the PC market will be government programmes, growing broadband penetration and greater affordability. The fastest-growing segment is notebooks, which already account for more than 50% of the market by value.
The main drivers of growth in the PC segment will be government programmes, growing broadband penetration and greater affordability. More than 90% of Australian households now have a PC, but consumers appear willing to spend on upgrading their notebook computers; it is also becoming more popular to purchase a second household PC. Small business comprise more than 99% of all Australian businesses and slightly more than 50% of business PC sales.
Software
Software is expected to account for about 18% of the Australian IT market in 2010, with estimated spending of US$3.3bn. As the focus moves from hardware to services and solutions, the share of the market accounted for by software is forecast to rise to 20% by 2014, with businesses seeking greater leverage from their investments. Software sales are forecast to have a CAGR of around 8%, rising to US$4.4bn by 2014.
Given many businesses' focus on controlling costs, cloud computing models have also grown in popularity and spread beyond initial core application areas. Over the forecast period, enterprise resource planning (ERP), CRM and other e-business products will be increasingly popular with the small and medium-sized enterprise (SME) market, as companies look to enhance productivity through automating essential functions.
IT Services
IT services are expected to account for about 40% of the domestic IT market in 2010, with spending of US$7.4bn, up from US$7.2bn in 2009. CAGR for the segment is estimated at 8% over 2010-2014. IT services are forecast to be one of the most dynamic sectors of the Australian IT market.
In 2010, sectors such as government, telecoms, healthcare and banking should continue to supply demand for implementation, consulting and managed services. Regulatory compliance will continue to require spending by banks and intense competition in the retail sector is spurring spending on CRM and backoffice systems.
E-Readiness
Many alternative Australian internet service providers (ISPs) are in the process of expanding the coverage of their ADSL networks. Other broadband service providers, including Unwired, are rolling out WiMAX networks, which will help to ensure greater choice and flexibility in the type of broadband connection available. Australia is above the OECD average in terms of businesses purchasing online (49% versus 33%) and selling online (27% versus 17%).
The central component of the Rudd government's ICT strategy and overall domestic economic policy is the construction of a National Broadband Network. The programme is expected to drive economic growth and foster the creation of a digital economy. The government has projected GDP gains of 1.4% after five years from the broadband project. Tenders for the construction of the network were lodged in November 2008.
Despite these investment commitments, our outlook for Australian broadband growth continues to be cautious. This is based partly on delays that have characterised government and operator efforts to address the problem of low broadband coverage in rural parts of Australia. Meanwhile, fixed penetration rates in urban areas are already very high. Our newly revised broadband forecast envisages broadband penetration rising to just over 37% at the end of 2009.
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