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Philippines Information Technology Report Q1 2011
Business Monitor International, Jan 2011, 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 Philippines's information technology industry.
Market Overview
BMI expects the Philippine IT market to record low double-digit growth in 2011, slightly slower than in 2010. Over BMI’s five-year forecast period, the market should retain its regional outperformer status, growing to reach a value of around US$4.8bn in 2015. Demand from areas outside Manila will continue to drive growth this year.
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 information and communication technology (ICT) programmes. In the enterprise segment, surveys suggest that many enterprises and small and medium-sized enterprises (SMEs) plan to increase IT spending again in 2011. The business process outsourcing (BPO) industry, which accounts for around 30% of IT spending, continues to grow.
The Philippine 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 compound annual growth rate (CAGR) for IT spending at 13% for 2011-2015, driven by rising incomes as well as PC penetration. Per capita IT spend was estimated at just US$28 in 2010, far lower than in other Asian countries such as Malaysia and China.
Industry Developments
In 2010, the Philippines Department of Trade and Industry continued to expand its Personal Computers for Public Schools (PCPS) programme, with a project to provide 425 public schools in Mindanao with desktop computers. According to the most recent available figures, the PCPS project had provided 3,714 public high schools with 47,100 computer packages. According to government figures, this had reduced the deficit in computers in public high schools from 75% to 37%.
Despite the global economic slowdown, 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
Vendors in the Philippine 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.
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 revenue growth for the Philippines surpassed that of the same period of 2009. Microsoft Philippines’ 2009 revenues were estimated at US$99mn. The company has said it continues to see growth in the Philippine market, particularly through cooperation with local original equipment manufacturers, which bundle Windows 7 and other Microsoft products together with their PCs.
Computer Sales BMI estimates 2010 Philippine computer hardware spending at US$1.7bn, which is expected to rise to US$3.0bn by 2015. Spending on computer hardware is estimated to have grown 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 education department’s Laptop for Teachers programme will help sustain spending in this segment.
Software BMI estimates the addressable Philippine software market will increase to US$315mn in 2011. Growth should be maintained over the next few years, as BMI projects a CAGR for the software sector over 2011-2015 of 14%. Software accounted for about 11% of IT spending in 2010 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 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. Opensource 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$755mn in 2011, up from US$681mn in 2010. 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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