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Philippines Information Technology Report Q3 2011
Business Monitor International, July 2011, Pages: 60
BMI expects the Philippine IT market will grow by around 10% in 2011, slightly slower than in 2010. Over our five-year forecast period, the market should achieve regional outperformer status, growing from a projected US$2.9bn in 2011 to around US$4.1bn 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 sustained growth, 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 10% 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, Lubang Island in Occidental Mindoro launched the first local pilot of the One Laptop Per Child (OPLC) project. Lubang became the first formal classroom deployment of the programme in South East Asia, and there were plans to use it as a model for replication across the country. Meanwhile, in 2010, the Philippines Department of Trade and Industry continued to expand its Personal Computers for Public Schools (PCPS) programme.
Various government organisations are implementing projects designed to facilitate delivery of e-services. The Bureau of Customs Electronic-to-Mobile (e2m) project is introducing paperless transactions for processing imports documents. 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 April 2011, Microsoft launched a partnership with local telecoms company PLDT and IT solutions company Datacraft. PLDT have signed a service provider licensing agreement allowing PLDT to distribute Microsoft cloud-based software services in the Philippines. Datacraft will provide a cloud infrastructure and support as part of the deal.
PLTD sees the agreement with Microsoft as the next step in building up the application portfolio of its clou computing brand. In August 2010, the company launched what were promoted as the first cloud computing services in the Philippines under its AppFarm brand. Meanwhile US IT leader HP claims to have seen more Philippines companies shifting from traditional networking to cloud computing. 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.
Computer Sales
BMI forecasts 2011 Philippine computer hardware spending of around US$1.8bn, which is expected to rise to US$2.6bn 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$310mn in 2011. Growth should be maintained over the next few years, as BMI projects a CAGR for the software sector over 2011-2015 of 10%. 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$742mn in 2011, up from US$675mn 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. Growing adoption by the BPO sector is expected in 2011. 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.
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's information technology industry.
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