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Argentina Information Technology Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8366 Description Argentina's IT spending is projected by BMI to grow at a compound annual growth rate (CAGR) of 10%over 2009-2013, with growth expected to be flat this year before the market recovers to grow to aroundUS$3.7bn in 2010, from US$3.5bn in 2009. Negative growth is expected in the PC segment this year.There were signs of an improvement in retail demand in Q209, but the full-year decline could be morepronounced than our core scenario currently suggests if an expected recovery in Q409 does notmaterialise. In 2009 IT vendors have faced challenging trading conditions, with negative real growth projected thisyear for both investment and private consumption. Despite current economic headwinds, the secondlargest market in the region has strong growth fundamentals, including low PC penetration, risingincomes and a high-tech-focused national development plan. Government sector spending should be one growth area in 2009, with the potential for a boost after therecession. The prospect of mid-year elections led to delays in some projects. In August 2009 thegovernment launched a US$150mn tender for computers in schools. Meanwhile, the popularity of lowerpriced notebooks and netbooks has provided a growth area, with notebook sales continuing to grow inH109. Industry Developments Argentina's government continued in 2009 to roll out a number IT-related projects. One area ofspending was computers in education, with a tender launched in August 2009 for 250,000 netbooks to bedistributed to students of public schools. The budget for this programme is reportedly US$150m, which,in addition to the netbooks and 1,155 servers, also covered shipment and installation. There has also been a drive to introduce e-invoicing by the government and throughout the economy. InH109 Argentina's tax agency, the Administración Federal de Ingresos Públicos (AFIP) announced thatit was to introduce compulsory e-invoicing for independent professionals and others, starting inNovember. The introduction of e-invoicing is targeted mainly at professionals and companies with annualrevenues of around US$100,000 and above. In mid-2009, controversy erupted concerning a government proposal to impose new taxes on luxuryitems, including notebook computers and monitors, as well as other consumer electronics products suchas mobile phones. The government said that the intention behind the proposed tax hikes was to provideassistance to the electronics manufacturing hub of Tierra del Fuego, which has been hit by the globalelectronics demand slowdown. Competitive Landscape In 2009, as a result of the economic crisis, leading vendors such as HP and Dell have adjusted theirArgentine market strategy, particularly for the business segment. Leading local PC manufacturer Sicsawas among vendors to report an increase in orders during the second quarter of 2009. Sicsa hasannounced plans to modify its strategy to increase the sale of its revenues that comes from direct sales toverticals like the government and banks. Currently around 80% of Sicsa's overall sales come from theretail segment. Software market-leader Microsoft Argentina expected revenues to rise 24% to around US$100mn inFY09, which ended in June 2009. Microsoft hopes that the launch of its Windows 7 operating system,scheduled for October 2009, will boost its local sales. FY09 brought changes in the structure ofMicrosoft Latin America, which involved establishment of some new country subsidiaries, includingMicrosoft Argentina. IT services vendors have responded to an evolving market by investing in infrastructure, developing newservices and reaching out to new segments. In September 2009, Indian IT giant Tata ConsultancyServices (TGS) opened a new global delivery centre in Buenos Aires, which will initially employ 250staff. Meanwhile, earlier in 2009, IBM's IT outsourcing centre in Buenos Aires was upgraded to globaldelivery centre status, as one of the top IBM IT services centres worldwide. Computer Sales BMI projects that Argentina's computer and accessories market will have a CAGR of around 8% over2009-2013, reaching around US$2.1bn by 2013. Argentine sales of computer hardware are projected toexperience negative growth in 2009 following sharp year-on-year (y-o-y) declines in volume sales inH109. In H109, volume sales suffered a double-digit percentage decline, with lower sales of desktops themain driver. The steepest decline came in Q109, and by Q209 there were signs of recovery, with retailersincreasing their orders. Despite the challenging environment for PC vendors in 2009, there are still some opportunities. Inparticular, government sector spending is one growth area, with a continuation of PC procurement atnational and provincial levels. Other drivers should include greater availability of credit for lower incomeconsumers, due partly to affordable PC programmes, as well as growing broadband penetration, retailchannel expansion and the popularity of notebooks and netbooks. Software Argentina's software market is projected to be worth US$593mn in 2009, and software CAGR for 2009-2013 is forecast at around 12% despite the economic climate and high annual software piracy losses. Software sales are seen as rising to around US$927mn by 2013. There were reports in early 2009 of somecompanies scaling back non-essential investments in software. Demand from small and medium-sized enterprises (SMEs) for enterprise resource planning (ERP)applications should continue to grow, particularly in relatively untapped provincial areas. The mainfunctional category currently remains ERP solutions, estimated to account for more than 80% of theenterprise software total. However, vendors will increasingly look to applications such as customerrelationship management (CRM) and business intelligence, where faster growth is projected. IT Services Argentina's IT services market is forecast at around US$1.0bn in 2009 with low single-digit growthexpected despite the economic slowdown. For a developing market, the percentage of IT market revenuesgenerated by services is fairly typical at around 25%, but lower than some other countries in the regionwhere the services share is already above 30%. The economic situation is likely to have an impact on projects in some key verticals, with the effects mostlikely to be felt in H209 and 2010. However, IT services revenues are expected to grow faster than for themarket as a whole. Led by the financial, telecoms and public sectors, there is a trend towards biggermanaged service and outsourcing deals in key sectors of the local market. However, traditional servicessuch as desktop support are still the mainstay. E-Readiness Argentina has one of the most dynamic telecoms markets in the region, with a dramatic expansion in thenumber of mobile subscribers in the past few years. Fixed-line penetration is among the highest in LatinAmerica, providing a good platform for strong growth in broadband services adoption. Table of Contents
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