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Home > Computers and Information Technology > IT Administration & Services > General Services
Argentina Information Technology Report Q3 2008
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Market Overview
The Argentine IT market is projected by BMI to be worth nearly US$4bn by 2012, with the consumersegment and SMEs fuelling growth. The IT market is the second largest in the Latin America region, butPC penetration is only around 22%, and the government is continuing efforts to expand computerpenetration to under-served segments of the population. The main drivers of PC sales are falling pricesand greater availability of credit for lower income consumers, due partly to programmes like ‘Mi PC’ and‘PC Abuela’. Higher broadband penetration and the popularity of notebooks are other factors.Demand for IT products and services should grow at a CAGR of around 9% over the forecast period.
Despite some continued weakness in IT investment by large companies, small and medium enterprises arebuilding on earlier purchases with further investments in software and systems. The federal government islaunching tenders for IT projects in areas such as customs and social security, while local governments,notably Buenos Aires, also have their own plans.
The overall economic outlook is constructive, with the administration’s objective being to maintain thehigh rate of economic expansion, while containing any risks of overheating. All the signs point to doubledigitPC sales growth in 2008, with resellers and retailers planning further investments this year.
However, the market is constrained by significant income and geographical disparities, and the financialturmoil surrounding the US credit woes could have a negative impact on Argentina’s economic growthoutlook.
Industry Developments
Government policy is a key market influence. The customs agency hopes this year to launch a tender toreplace its Sistema Maria legacy IT platform. The project, if it receives the go-ahead, would be worth anestimated US$90-100mn. Meanwhile, social security agency Anses recently said that it expects to savemore than ARS2mn (US$636,000) in 2008 by using open source software. So far the transition hasreportedly involved at least 8,000 computers.
Regional governments are launching their own IT initiatives. Buenos Aires province recently rolled outan IT Action Plan 2008-2011. Provincial governor Daniel Scioli said that he wants to make the province aleading supplier of software and IT services. Meanwhile, Salta provincial government has also rolled outan ambitious e-development agenda which tackles issues such as digital signature and informationsecurity.
Competitive Landscape
Argentina’s consumer PC segment is an increasingly important competitive battleground. Dell expects theconsumer segment to account for 20% of its local sales in 2008. Across the Latin America region, the USgiant has initiated a shift in focus from the enterprise segment to consumers. Meanwhile, recognising thatavailability of credit is an important driver for consumer demand, Lenovo has recently launched a creditprogramme for resellers.
SAP, which has more than 50% of the enterprise applications market, saw local software sales grow 50%in 2007. According to SAP data, the company now has more than 450 clients in Argentina and sawcontract wins rise 65% last year. In April 2008, rival Oracle announced a contract win from DanaCorporation, a major provider of automobile parts and systems in Argentina.
In the IT services segment, global vendors such as IBM and Accenture have netted a growing number oflarge deals. Accenture recently implemented the first phase of a multi-million dollar solution for TelecomArgentina. IBM is also strong in key verticals such as Telecoms and Banking, and recently extended itsmajor regional services contract with major telecoms company Telefónica, which is serviced from itsBuenos Aires data centre.
Computer Sales
BMI projects that Argentina’s computer and accessories market will have a CAGR of at least 8% over the2007-2012 period. For 2007, market revenues were put at US$1.29bn, and they should approach theUS$1.8bn mark by 2012. The consumer segment now accounts for around 50% of PC sales, and isexpected to grow faster than the PC market as a whole in 2008. The main drivers are falling prices andgreater availability of credit for lower income consumers, due partly to programmes like ‘Mi PC’ and ‘PCAbuela’. The average price of a PC fell 2% last year. Another factor is growing broadband penetration.The consumer segment is expected to grow 80% in 2008, as compared with 50% for the corporate sector.Sales of notebooks accounted for more than 20% of unit sales in 2007.
Software
Argentina’s software market is estimated to have been worth US$422mn in 2007, and the figure for 2008is expected to come out at a little more than US$464bn. Software CAGR for 2007-2012 is projected ataround 10%, despite high annual software piracy losses. Enterprise software accounts for around half oftotal software revenues. Demand from SMEs for ERP applications is growing, as many such companiesbuild on earlier investments in infrastructure and basic systems. Investment by larger companies has beenrelatively weak since the financial crisis of 2001 however, but should start to recover, giving furtherimpetus to the market. The main functional category currently remains ERP solutions, estimated toaccount for more than 80% of the enterprise software total. Demand will remain strong in the near-termdue to the large potential market represented by SMEs in many parts of the country.
IT Services
Argentina’s IT services market is estimated to have grown around 11% in 2007 to a value of just short ofUS$700mn, with similar growth expected in 2008. The percentage of IT market revenues generated byservices is fairly typical for an emerging market, at around 25%, but is lower than some other countries inthe region. However, IT services revenues are expected to grow faster than for the market as a whole,with CAGR for the 2007-2012 period in the low double-digit range. Some sectors will be in the forefront,notably financial services, and telecoms, which has generated a number of big contracts in recent monthsfrom companies such as Telecom Argentina and Telefónica.
E-Readiness
Argentina possesses one of the most dynamic telecoms markets in the region, with a dramatic expansionin the number of mobile subscribers over the past years. Fixed line penetration is also among the highestin the region, providing a good platform for strong growth in broadband services adoption. According toBMI estimates, the number of Argentine internet users reached 12.5mn in 2007, representing 32% of thepopulation. The percentage of broadband subscribers in the general population was 5.7%, compared with3.7% in Brazil.
Argentina IT Sector SWOT
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