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Chile Information Technology Report Q4 2011
Business Monitor International, October 2011, Pages: 60
Business Monitor International's Poland 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 Poland's information technology industry.
Chilean IT spending is expected to grow to US$2.8bn in 2011, with slower growth following a doubledigit IT market rebound in 2010. Chile's IT market is one of the most developed in Latin America and, with many indicators turning positive, is projected to grow at a compound annual growth rate (CAGR) of 8% in 2011-2015.
Demand for IT products and services is expected to grow steadily in 2011, after the PC market bounced back in 2010 with growth of more than 30%, thanks to economic recovery and the stronger Chilean peso. A new government digital action plan should drive opportunities in the public sector and promote the wider utilisation of ICT.
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, mining, telecoms, and healthcare all offer opportunities.
Industry Developments In November 2010, Chile's government unveiled a new digital action plan for public sector IT development for 2010-2014. The plan is intended to drive state modernisation and wider utilisation of ICT nationwide. Among specific targets is a plan to expand the number of government agencies that offer e-government services by around 20 during each year of the plan.
Chilean government ICT expenditure is forecast to be in the US$300-400mn range in 2011, with departments such as the Labor Office announcing IT budgets. 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.
Chilean President Sebastián Piñera has 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.
Competitive Landscape In 2011, Chilean IT giant Sonda expects its sales revenues to surpass US$1bn, up from US$950mn in 2010. The company has achieved an average annual growth rate of around 20% over the past few years and reported 19.1% growth in 2010. To support continued growth, Sonda has announced plans to build a US$30mn data centre in Chile.
Microsoft sees large enterprises as the main initial market for cloud solutions in Chile. The company has said that it expects around 20% of its roughly 450 large corporate clients to be using cloud solutions by the end of its current fiscal year in June 2011. Microsoft hopes that a new channel organisation will provide infrastructure that will guide local clients to transfer to cloud computing.
In December 2010, IBM said that it had selected Chile as the location for one of three new datacentres it plans to build to boost its operations in the region. IBM enjoyed more success in the Chilean market in 2010 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.
Hardware BMI forecasts Chile's computer and accessories market will have a CAGR of about 7% over the 2011- 2015 period. Computer hardware sales in 2011 are forecast at US$1.2bn, with single digit growth as the market stabilises after reporting high double-digit growth in 2010. With leading indicators pointing to a continued positive market trend, spending should reach US$1.6bn by 2015.
In the first half of 2010, there was a stronger than expected PC market rebound, with sales estimated to have grown by more than 40%, thanks to a combination of economic recovery and a cheaper US dollar.
Software Chile's software market is projected to be worth US$400mn in 2011, with solid growth consolidating a recovery in 2010. Software CAGR for 2011-2015 is projected at around 9%. 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 2010, 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. Chile has one of the highest regional uptakes of enterprise resource planning (ERP) software.
IT Services Chile's IT services market is projected at about US$1.1bn in 2011 and is expected to grow at a 9% CAGR over the 2011-2015 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 2010 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 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. The government plans to increase Chile's broadband options by auctioning 3G mobile and WiMAX and has allocated millions of dollars to support projects aimed at boosting internet coverage. The telecoms regulator, Subtel, launched a new universal access fund in 2008.
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