Market Overview
The Indonesian IT market is projected by BMI to be worth nearly US$5bn by 2012, as the countrywitnesses significant but uneven expansion on the IT front. The huge population, combined with PCpenetration of around 2% and falling prices, provides strong fundamentals for growth. IT now plays anincreasingly significant role in a wider range of industries. However, ICT development is still largelyrestricted to richer areas such as Java, and this digital divide is a barrier as well as an opportunity for ITvendors.
Indonesia’s expected IT spending CAGR of 11% for the 2007-2012 period means that Indonesia willgrow faster than most of its ASEAN neighbours. The market faces structural constraints notably lowincomes and poor telecommunications infrastructure. Despite this, PC sales were strong in 2007, drivenby growing affordability, especially of notebooks. A key question is how the economic climate willimpact on consumer behaviour, with the retail sector now more important for vendors. Small and mediumbusinesses are likely to be a focus area as computer use is currently low.
A more active approach by the government, including the establishment of a new committee headed byPresident Susilo, should stimulate IT spending. The government is pushing for more integrated EGovernmentdevelopment, and promoting a series of infrastructure and education initiatives. Governmentspending remains relatively small however, compared with regional neighbours such as Singapore andIndia. The financial services and banking sectors are likely to be the most important vertical during theforecast period, accounting for as much as 30% of total spending.
Industry Developments
A lack of interoperability among institutions has been identified as a weakness in Indonesia’s egovernmentdevelopment. Djoko Agung Harijadi, e-government director at the Department ofCommunications and Informatics, said that each government institution was developing its own platformsin isolation. The government has said that the main focus for the Directorate General of Telematics thisyear is the development of e-government applications and key public infrastructure.
Despite the relative autonomy of various programmes, there have been some efforts by government todrive integration. The government has provided local governments with software packs coveringcategories such as health, demographics and logistics. In addition, there have been a number of pandepartmentalinitiatives, such as a project to provide a unified portal to facilitate import-export permits.To further drive development, regional governments are encouraged to adopt the new institution of a CIO(Chief Information Officer). The Director General of Telematics Applications at the Department ofCommunications and Information said that the new CIO post was needed in every government institution.
Competitive Landscape
The fast growth of the Indonesian market has made computers affordable to new lower-income tiers.Vendors are responding by targeting more segments with a wider range of products selling at differentprice points. Global vendors such as HP, Acer and Lenovo now offer products which retail at betweenUS$500 and US$2000. At the lower end of the market, prices have been coming down, although they arestill relatively expensive compared with some other markets.
In 2008 Dell is implementing a strategy to target Indonesia’s consumer segment, building on its successin the corporate segment. The company has launched four new Inspiron series laptops and slim builddesktops. In contrast to Dell, Lenovo’s strategy was already to focus on the consumer market with its ownproducts while supplying IBM legacy products for the commercial market.
Microsoft founder Bill Gates visited Indonesia in May 2008. The visit came at a time when thegovernment was reportedly considering extending co-operation with Microsoft, despite a number ofinitiatives over the years to promote open source software. In 2005, the government launched the‘Indonesia Goes Open Source’ (IGOS) initiative, hoping to counter software piracy, reduce dependencyon proprietary software, and encourage local manufacturers.
Computer Sales
Notebook sales were the main driver of PC market growth in 2007, and accounted for around 60% of unitsales. Industry association Apkomindo predicts that this year’s notebook sales will reach 2mn units, up100% from last year. Computer sales (including notebooks and peripherals) will be worth an estimatedUS$1.9bn in full year 2008, according to BMI estimates, up from US$1.7bn in 2007. Notebooks are nowgrowing faster than the PC market as a whole, with demand driven by falling prices as well as smaller andlighter form factors. As notebook prices fall, up to one fifth of the market is expected to be notebooks by2009. New features are also important selling points including multimedia features, TV connectivity,movies and games. Prices of both notebooks and desktops are falling, with desktop prices now as low asUS$400 while notebooks start from around US$500. The consumer market is only around one quarter ofthe whole, but it has become a growing focus of attention for some vendors.
Software
For 2008, legal software sales are forecast by BMI at US$361mn, up from an estimated US$310mn in2007, despite the continuing piracy problem. One the key functions of the new Information andCommunications Technologies Council founded last year (see Industry Developments) is to address thepiracy issue, with Indonesia having one of the worst records in the world in terms of its failure tosignificantly reduce the software piracy rate, which was estimated at 85% in 2007 by the BusinessSoftware Association. The piracy issue lay behind the MoU signed last year between the governmentand Microsoft. Under the agreement, the government reportedly agreed to purchase 35,496 licensedcopies of the MS Windows operating system and 117,480 copies of the MS Office package for a totalprice of around US$41.9mn. Over the 2007-2012 period, overall software sector CAGR is forecast at15%.
IT Services
Indonesia’s IT services market is expected to be worth US$500mn in 2008, recording year-on-year (y-oy)growth of 14% from US$439 in 2007, based on BMI estimates. Hardware deployment services remainthe largest Indonesian IT services category, with approximately a 20% share. Currently, opportunities aremainly in fundamental services such as system integration, support systems, training, professionalservices, outsourcing and internet services. Sector CAGR over the 2005-2010 period is expected to bearound 13%.
E-Readiness
With an ICT penetration rate of around 20%, only about 14% of Indonesians have internet accesscurrently, translating into around 32mn users. Low telephone line density, high charges and low PCpenetration are all significant obstacles. Moreover, research last year indicated that only 42% of thoseIndonesians with internet access have ever made purchases through the internet. However, the picture isnot all bad, as there are signs of faster growth in user numbers, and recent surveys have shown that amonga very small elite, there is fast adoption (by regional standards) of broadband and a willingness to pay forvideo conferencing, security and other additional features. BMI estimated that there were just under 1mnbroadband users in 2007, representing a 0.4% penetration rate. The government is encouraging fixedwireless deployments, including WiMax, to bring internet to more remote areas.
The government is rolling out an internet-based National Education Network, which involves 1,000network points in five clusters nationwide and is designed to facilitate the use of internet in schools.Despite some advances in e-education, constraints remain due to poor infrastructure and lack of publicawareness in a country where only 20mn people own fixed-line telephones.
|
0 items
