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Indonesia Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 58
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.
The Indonesian IT market is forecast to grow at a compound annual growth rate (CAGR) of 18% over the 2011-2015 period, with a revival in business spending building on momentum from consumer spending. In 2010, computer sales grew strongly and a double-digit IT market growth scenario looks well supported again in 2011.
Indonesia is forecast to be one of the best regional IT market growth prospects over BMI's five-year forecast period. IT spending is forecast to increase to US$5.3bn in 2011, up from US$4.7bn in 2010. Some fundamental drivers, including rising computer penetration and growing affordability, should ensure that the market remains firmly in positive growth territory. Growing investment in datacentres and other ICT infrastructure will support more demand for outsourcing and cloud computing, with sector players such as Telekom Indonesia launching new services in 2011.
By 2015, IT spending is projected to reach a value of US$10.1bn. With information and communication technology (ICT) penetration of around just 20% and development restricted to richer areas such as Java, the market has much growth potential. However, the country's uneven development and digital divide are major barriers to faster growth in this potentially huge IT market.
Industry Developments In 2010, Indonesia's information society development received a boost when the government said that it would start to introduce e-passports. Indonesia will thus follow in the footsteps of other South East Asian countries such as Singapore, Malaysia and Thailand. The immigration department plans to distribute 10,000 e-passports in the first phase, with these being mainly available in immigration offices in Jakarta, Semarang and Surabaya.
The government is also rolling out e-learning initiatives, which could cause education's share of local IT spending to rise from its estimated level of around 4%. The ratio of PCs to students in public schools is around 1:3,200. The government wants to increase this to 1:20. As there are 53mn students in the Indonesian schools system, this would require at least 2.5mn computers.
Competitive Landscape In August 2011, Chinese vendor Lenovo, the bestselling computer vendor in the Asian region, launched a campaign targeting young Indonesian consumers. Earlier in 2011, the vendor announced plans to achieve a double-digit Indonesia PC market share in its current fiscal year. According to company data, the company currently has a share of around 7.6%. The consumer campaign builds on moves last year to create a stronger logistics and service infrastructure in Indonesia.
Cloud computing will be a key focus for vendors in 2011. In 2011, Microsoft announced that it planned to invest around US$2.5bn in Indonesia to develop cloud-computing systems. The company is partnering with Telekom Indonesia, and a number of other partners and has reported interest in its cloud services from several government agencies and large companies. In 2010, Telkom partnered with Microsoft to launch cloud computing services, including platform-as-a-service (PaaS), infrastructure-as-aservice (IaaS) and software-as-a-service (SaaS).
Hardware BMI forecasts 2011 Indonesian computer hardware spending of US$3.8bn, up from US$3.2bn in 2010. The market is forecast to rise at a CAGR of 17% to a value of US$7.1bn by 2015. In 2010, consumer demand was reinforced by a revival in business IT hardware spending, which could account for about two-thirds of sales opportunities during the forecast period, with sales value doubling by 2015.
Hardware accounts for more than 70% of Indonesian IT spending. The main drivers are growing affordability and more credit availability in a country where only about 20% of the population have access to a PC, compared with more than 40% in some other South East Asian countries such as Malaysia or Thailand.
Software Indonesia's software sales are forecast by BMI to reach US$589mn in 2011, up from an estimated US$535mn in 2010. During BMI's five-year forecast period to 2015, the software sector CAGR is forecast at 22%. In 2011, migrations to Microsoft's new Windows 7 operating system should remain a driver, although much will depend on consumer and business confidence. One market inhibitor is the continuing software piracy problem, which, according to the government's own figures, loses Indonesian software companies more than US$100mn per year.
Over the forecast period, enterprise resource planning (ERP) software should continue to be of most interest to small- and medium-sized enterprises (SMEs) as only around 20% of Indonesian SMEs are estimated to make use of IT. In addition to cost savings, businesses will look to boost efficiency and increase the flexibility of responses to customer needs.
IT Services Indonesia's IT services market is forecast to be worth US$866mn in 2011, recording double-digit growth from US$769mn in 2010, based on BMI estimates. IT services account for 17% of Indonesia's hardwarecentric IT market sales. Hardware deployment services remain the largest Indonesian IT services category with a 20% market share.
Improvements in Indonesia's telecoms and ICT infrastructure are expected to drive long-term growth in the Indonesian IT services market. Commercial datacentres are being built, linked to growing rollout by public sector and commercial organisations of e-government or e-commerce services. However, most opportunities are in fundamental service areas such as system integration, support systems, training, professional services, outsourcing and internet services.
E-Readiness Low telephone line density, high charges and low PC penetration are all significant obstacles to higher internet penetration. However, the situation is not all bad, with signs of faster growth in user numbers and recent surveys showing that, among a very small elite, there is fast adoption (by regional standards) of broadband and a willingness to pay for video conferencing, security and other additional features. The government is encouraging fixed wireless deployments, including WiMAX, to bring the internet to more remote areas.
The government is also rolling out an internet-based National Education Network, which involves 1,000 network points in five clusters nationwide, designed to facilitate the use of the internet in schools. Despite some advances in e-education, constraints remain due to poor infrastructure and a lack of public awareness in a country where only 20mn people own fixed-line telephones.
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