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Philippines Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 58
Business Monitor International's 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.
BMI expects the Philippine IT market will grow by around 14% 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$3.0bn in 2011 to around US$4.3bn in 2015.
In H111, electronics retailers reported solid demand in line with a firm expansion of private consumption. Low double-digit growth in IT spending is forecast for 2011, with an upturn in SME and enterprise hardware procurements reinforcing strong retail channel demand. Wage rises for civil servants in the 2010 budget helped to facilitate consumer spending, while remittances held up well. However, BMI does expect a moderation in private consumption growth in H211, which could place pressure on prices and margins.
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. 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 telco PLDT and IT solutions company Datacraft. Microsoft signed a service provider licensing agreement allowing PLDT to distribute Microsoft cloudbased software services in the Philippines. In August 2011, PLDT announced that IT services vendor Dimension Data, a subsidiary of Japanese telco NTT, would join the partnership.
Meanwhile in August 2011, Philippines communications provider Globe Telecom launched new cloud computing services for its business customers. Globe has partnered with Sandz Philippines and Ayala Systems Technology to deliver the services, which are hosted at Globe's data centre. US IT leader HP claims to have seen more Philippines companies shifting from traditional networking to cloud computing. In September 2011, Toshiba launched a new marketing and sales company, Toshiba Philippines. The copany invested 170mn Yen to start the new Philippines operation, which is located in Makati. The new division will be responsible for sales and aftersale service of notebook PCs and other consumer electronics products, as well as sales and marketing.
Computer Sales
BMI forecasts 2011 Philippine computer hardware spending of around US$1.9bn, which is expected to rise to US$2.5bn 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$331mn in 2011. Growth should be maintained over the next few years, as BMI projects a CAGR for the software sector over 2011-2015 of 12%. 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$815mn 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.
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.
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