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Colombia Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 51
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.
Colombian IT spending is projected to grow at a CAGR of 13% over the 2010-2014 period as the market continues to mature. In H110, vendors reported that demand was up in both consumer and large company segments. The retail PC market surged in H110, with sales of computers up 34.6% in June 2010, based on data from Colombia's statistics bureau, compared with the same period of the previous year.
IT spending is projected to grow 18% in 2010, with growth areas in both consumer and business segments. The election in 2010 of perceived business-friendly Juan Manuel Santos should boost business confidence and IT investment. Moreover private credit growth has started to pick-up, and this could mean an incresingly bright outlook for household consumption.
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$48 in 2010 to US$74 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 ICT (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, including boosting the 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 had been working on a general software law that was 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 programme has piloted Microsoft Windows XP versions of the One Laptop Per Child (OLPC) XO laptop.
Competitive Landscape
One significant local market growth area is SAP-related consulting. In April 2010, Chilean IT consultancy ActualiSAP announced that it was expanding into the Colombian market and would open a Colombian office this year. Meanwhile, HP has partnered with SAP on its online solution 'Business All in-One Fast-Start', while Neoris has expanded its operations by establishing a new unit in Colombia that offers IT consulting, systems integration, business operations and outsourcing services.
Colombia has a growing domestic software sector, and software firms have strengths in a number of areas including financial applications, digital animation and mobile and web applications. Major local vendor Productura de Software Latin America (PSL) counts among its key clients Colombia's state oil company Ecopetrol, cosmetics company Avon, and Colombia's largest bank Bancocolombia.
In H110, US vendor Citrix Systems was one vendor to report growing interest in virtualisation from Colombia's public sector and launched a new subsidiary in the country to take advantage of the potential opportunity. Meanwhile, the official launch of Indian IT firm Tata Consultancy Services (TCS)'s new Colombia office highlighted the growing opportunities in the local financial services sector, which accounts for around 50% of TCS's regional revenues.
Computer Sales
PC sales are projected at US$980mn in 2010, following strong growth in the first half of the year, and should reach US$1.5bn by 2014. Retail PC sales surged in January 2010, according to official data, supporting projections of a market bounce-back in 2010 in line with private consumption. Businesses are expected to maintain a cautious attitude to IT investments in 2010, however.
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. Notebook sales drove significant growth in 2009 and accounted for over 50% of PC shipments for the first time.
Software
Colombia's software market is projected to be worth US$380mn in 2010 and software CAGR for 2010- 2014 is forecast at around 13%. Software has opportunities for growth over the next few years although, 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.
Vendors reported strong business software demand growth in H110, particularly among larger and medium companies. 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$787mn in 2010, with 18% 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.
In Colombia, several sectors have particular potential, including financial services and utilities, with Isagen and Empresa de Energia de Cundinamarca awarding some large tenders. In the last year or two, there has been a trend towards bigger managed service and outsourcing deals.
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