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Chile Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 62
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 about 10% in 2010, with sales of US$2.3bn. This will increase to about 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.
Unplanned spending on hardware infrastructure in the wake of the earthquake provided a boost to enterprise spending. However the rate of growth of enterprise spending may slow in H210 because budgets were spent earlier in the year. Organisations in government and other sectors, which need to update 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. Sectors such as retail, distribution, financial services, telecoms and healthcare all offer opportunities.
Industry Developments
Chilean President Sebastián Piñera 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.
Setting aside potential investment for reconstruction, government spending on IT projects was expected to rise in 2010, following the launch of a number of projects in H110. 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 focusing on IT at schools. The programme, led by Chile's education ministry, involved the launch of a US$3.7mn fund to subsidise IT purchases for more than 2,000 schools countrywide. Schools will be able to use the fund to acquire educational software and devices, with standards and prices established by the ministry.
Competitive Landscape
In 2010 HP aimed to enhance its retail presence in Latin American, including Chile. The company said it will take on at least another 100 sales staff in the region druing the next 12 months, and double the number of experience stores from 172 to 350. Meanwhile HP will also focus on SMEs, which already account for 25% of HP Personal Systems Group (PSG) unit's revenues in Chile.
In May 2010 Microsoft launched the Chilean branch of its international partner association to help local partners generate more business. Microsoft hopes the channel organisation will provide infrastructure that will guide local clients to transfer to cloud computing. The company is targeting 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 H110 following an agreement with Chile's LAN Airlines to administer its technology platform for the next five years. According to the terms of the contract, estimated at US$15mn, 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 other regional markets.
Hardware
BMI forecasts Chile's computer and accessories market will have a CAGR of about 9% 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 decline. With leading indicators pointing to a positive market outlook, spending should approach US$1.5bn 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 about 12%. The recession resulted in some companies reviewing IT budgets or aiming to defer systems updates. However, other companies viewed software investments as a means of achieving greater efficiencies in difficult times.
In H110, 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 to be about US$896mn in 2010 and expected to grow at a 12% CAGR over the 2010-2014 forecast period.The percentage of IT market revenues generated by services is about 37%, high by emerging market standards but similar to other countries in the region such as Brazil. The majority of demand, about 75%, still comes from the large company sector, but smaller companies are becoming more sophisticated when it comes to demand.
In H110 a number of significant IT projects were 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 offers significant opportunities.
E-Readiness
The government plans 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 telecoms regulator, Subtel, also launched a new universal access fund in 2008.
In general, Chile enjoys some of the best telecoms 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 inefficient government bureaucracy and over-regulation.
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