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Philippines Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 58
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.
Market Overview
BMI expects the Philippine IT market to resume growth in 2010 and achieve regional outperformer status, growing from a projected US$2.6bn in 2010 to around US$4.3bn 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 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 many of the Philippines' business process outsourcing (BPO) executives felt the impact of the global economic crisis had not significantly slowed expansion.
The Philippines market appears better placed than others in the region for recovery, as consumer spending remains strong and the key BPO industry continues to grow. BMI estimates the IT spending CAGR at 14% for 2010-2014, driven by rising incomes and PC penetration. Per capita IT spend was estimated at just US$26 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 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 25% of the government's tax revenues.
Company News
Multinational PC vendors in the Philippine market are looking to drive growth through expansion outside Metropolitan Manila. In 2010, Lenovo Philippines announced it was going to launch a more aggressive marketing campaign in Cebu, based around its latest Idea laptops and all-in-one desktop. HP is also expanding in Mindanao, which is home to a large number of manufacturing plants and SMEs, and has targeted the Davao region. Meanwhile, Japanese company Toshiba has also recently opened its first concept store in Cebu.
Microsoft reported its H110 market revenues growth for the Philippines surpassed that of the same period of the previous year. Microsoft Philippines' 2009 revenues were estimated at US$99mn. The company has said it continues to see growth in the Philippines market, particularly through cooperation with local original equipment manufacturers, which bundle Windows 7 and other Microsoft products together with their PCs.
Vendors in the Philippines market are increasingly focused on the cloud computing opportunity. In August 2010, leading local telecom PLDT launched what were promoted as the first cloud computing services in the Philippines under its AppFarm brand. The company will offer its customers services such as document management, with relevant documents and files being secured in the cloud. Web security is another application where cloud solutions could prove popular.
Computer Sales
BMI forecasts 2010 Philippine computer hardware spending of around US$1.7bn, which is expected to rise to US$2.7bn by 2014. Spending on computer hardware is forecast to grow 16% 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%, driving demand for hardware. Government procurements are also providing relief with e-government and public sector computerisation programmes. Education initiatives such as the department of education's Laptop for Teachers programme will help to sustain spending in this segment.
Software
BMI estimates the addressable Philippine software market will increase to US$284mn in 2010. Growth should be maintained over the next few years, as BMI projects a CAGR for the software sector over 2010-2014 of 13%. Software accounted for about 11% of IT spending in 2009 by BMI estimates, 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 estimated 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. BMI forecasts a value of US$681mn in 2010, up from US$631mn 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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