Peru Information and Technology Report Q1 2008: Industry Research Report

Peru Information and Technology Report Q1 2008

Published Date: February 2008

Published By: Business Monitor International

Page Count: 24

Order Code: R302-2432

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Market Overview

The Peruvian IT market is one of the smaller in the Latin America region but is projected to grow at acompound annual growth rate (CAGR) of 8% over the 2007-2012 period. A major driver will be therecently signed free trade agreement (FTA) between Peru and the US, which will reduce tariffs by up to80% and drive IT investments by companies. The total value of spending on IT products and servicesshould pass US$880mn in 2008 and US$1bn by 2010. Despite strong enterprise and retail demand for IThardware in 2007, a PC penetration rate of less than 15% indicates plenty of room for growth.

The overall economic outlook is constructive for growth in IT spending, with the Peruvian governmentprojecting that the economy should expand by approximately 9% in 2008 as a result of the FTA with theUS. The retail sector should register solid growth in PC sales due to a greater range of tariff reductions,rising incomes, and more flexible terms from retailers. Corporate IT spending is likely to receive a boostfrom the FTA as large and medium sized companies invest to compete in the new competitiveenvironment. Government spending is around 10% of total IT spending and the government will remain asupport to the market with a number of programmes to drive PC penetration.

Industry Developments

In November 2007 Peru’s President García launched a new programme called ‘Teachers of the 21stCentury’. The programme gives teachers the opportunity to purchase laptops at reduced prices and is partof the government’s strategy to improve education in Peru. The government’s ultimate aim is for everyteacher to have a laptop. Chinese PC manufacturer Quanta Computer has developed the XO laptopswhich will be used by the programme in PeruIn 2007, national attention also focused on developing the Peruvian software segment through a numberof initiatives. The government is targeting US$100mn annual software exports by 2012, from US$25mnlast year. In one initiative, industry association Apesoft signed an agreement with the AndeanDevelopment Corporation (CA), targeted at improving the improving the competitiveness of Peruviansoftware firms.

Competitive Landscape

Peru’s status as one of the Latin American region’s faster growing PC and notebook markets in 2007 isproviding opportunities for international vendors. Strong sales in Peru in 2007 helped to drive Dell’srecovery in the Latin America region in 2007, with the company taking around a 7% share in the region.Peru Information Technology Report Q1 2008

Meanwhile, Lenovo received a boost in 2007 when it was selected as one of the vendors for the Peruviangovernment’s laptops for teachers programme.

Turning to software, SAP is dominant in the enterprise software segment which contains around twelvemajor providers and is worth around US$50mn a year. SAP is increasingly focusing on the SME sector,however, and has said that it expects some 70 SMEs to develop IT upgrade projects in 2007. SAP claims80 implementations of its Business One ERP suite for small companies.

Computer Sales

BMI is projecting that Peru’s computer and accessories market will have a CAGR of at least 7% over the2007-2012 period. For 2007, computer sales were put at US$381mn, and should pass the US$500mnmark by 2012. Annual computer sales including notebooks are currently more than 500,000 units a year,and increasing at around 20% a year. Indeed, 2007 was a particularly strong year for hardware sales withdemand up from both retail and enterprise segments. The main market driver is, however, the retail sectorwhich accounts for around 45% of PC sales and recorded 50% year-on-year (y-o-y) growth in somequarters of 2007.

Software

Peru’s software market is estimated to have been worth US$98mn in 2007, and the figure for 2008 isexpected to come out at around US$106mn. Software CAGR for 2007-2012 is projected to be in theregion of 8%. Software demand is starting to pick up, with the use of pirated software in the public sectordropping significantly in 2006 to around 40% of all software from 73% in 2003. The main driver of thistrend is a regulation passed in 2003 obliging all public entities to use legitimate software and setting up awatchdog Indecopu to oblige public entities to audit applications running on their employee PCs.

IT Services

Peru’s IT services market is estimated to have grown around 12% in 2007 to a value of aroundUS$269mn. Some 10% growth is projected by BMI for 2008. For a developing market, the percentage ofIT market revenues generated by services is high at around 32%, although in line with the region andlower than for Brazil. In Peru, the growing level of investment in recent years in corporate managementsolutions is translating into demand for support and maintenance as well as more sophisticated ITservices.

E-Readiness

The World Economic Forum ranked Peru 78th in the world in its most recent survey of ‘degree ofpreparation to participate in and benefit from information and communications technology’, some 25Peru Information Technology Report Q1 2008places behind Brazil. However, Peru had risen seven places and the report cited improvements in someinstitutions including Judicial, Police and Education. According to BMI estimates, the number ofPeruvian internet users reached 6.2mn in 2007, representing 22% of the population. The percentage ofbroadband subscribers in the general population however was only 2.1%.

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