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Venezuela Information Technology Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8452 Description Market OverviewVenezuela's near-term economic outlook is challenging for IT spending, with the increasingly consumerdrivengrowth of recent years cooling due to economic uncertainty and the collapse in oil prices. However, there will continue to be areas of opportunity, and BMI projects that IT spending will growfrom US$1.6bn in 2009 to around US$2.0bn by 2013. 2009 and 2010 are likely to be difficult years for IT vendors, with negative real growth projected for bothinvestment and private consumption. However, computer shipments should continue to grow, thanks togovernment affordable computer programmes, and more local production of computers. Banks andtelecoms operators are continuing to spend on IT, and deployment of fixed and mobile broadband willhelp to drive spending. Venezuela is one of the smaller markets in its region, but a rather low PC penetration rate of less than12% indicates the underlying potential for growth. Government policies such as the promotion of opensource software will continue to shape the market. The business sector will offer opportunities, includingfrom small and medium-sized enterprises (SMEs), but overall levels of investment are likely to remainrelatively low, particularly among private companies. Industry Developments In September 2009, the government said that it would start to assemble its own laptops as part of itseducational programme, Canaima Educativo. The laptops will be manufactured at two plants in theParaguaná Peninsula, Falcon state, with production scheduled to start within eight months. The goal is todistributed 300,000 PCs manufactured under the programme, starting in September 2010. Earlier in 2009, Venezuelan President Chávez had announced plans to supply schools with 350,000 lowcostnetbooks this year. The computers are being delivered from Portugal as part of a technologyknowledge transference agreement signed in late 2008. As of Q309 around 50,000 laptops imported fromPortugal had already been distributed under the plan. The government-manufactured laptops will come with 100% open source software. In August 2008 the ITagency CNTI said that nearly 60% of Venezuela's government offices had switched from proprietarysoftware to open source, compared with its target of 100% migration by year-end 2008. Competitive Landscape In August 2009, Venezuelan mobile operator Digitel announced a partnership with Chinese PC vendorLenovo in the launch of a new mobile broadband offering. Digitel's broadband packaged will comebundled with a Lenovo netbook inclusive of a modem for 3G service, with the packages available at acost of VEB3,249 (about US$1,500). Digitel launched 3G services this year, and has targeted 7.5mnsubscribers for its service by the end of 2009. In 2009, local PC vendor Siragon was the first company to launch netbooks in Venezuela, and thecompany estimated that sales of around 15,000 units in 2008 gave it about 50% of that segment. Thecompany is targeting netbooks as a priority for 2009, as part of its plan to achieve revenue growth of 30%this year. The company estimated that it was on course to sell 80,000 desktops and 50,000 laptops in theVenezuelan market last year. In September 2009, Microsoft Venezuela created a new unit to focus specifically on public sectoraccounts. The company aimed to increase the amount of business generated from government during itsfiscal year 2010, which began in July 2009. Microsoft claimed to have achieved double-digit growth inVenezuela in fiscal 2009, and hoped to replicate this achievement in fiscal 2010. Computer Sales BMI has upwardly revised its Q409 computer hardware projections, and the market is now expected to beworth US$871mn in 2009, with sales to pass the US$1bn mark by 2013. Telecoms operators havecontinued to promote sales of netbooks bundled with their mobile and fixed broadband data plans. Vendors and retailers, including telecoms operators, have offered more flexible financing. Thegovernment has continued to roll out affordable computer programmes for households and students.The Veneuzelan computer hardware market should therefore have a positive growth trajectory over thefive-year forecast period, with a projected compound annual growth rate (CAGR) of 6%. The currentlevel of computer penetration is estimated at around 12% and is expected to reach close to 18% by 2013.The main long-term driver is greater affordability, partly as a result of cheap computer programmes andthe government's initiative to manufacture low-cost 'Bolivarian' computers. Software Venezuela's software market is projected at US$298mn in 2009. Software revenues are expected to rise ata CAGR of 5% to around US$367mn by 2013. However, revenue growth is forecast to be flat this yeardue to rapidly declining business confidence in the private sector, and a relatively high and apparentlyincreasing software piracy rate The market landscape is likely to remain shaped by the government's drive to promote open sourcesoftware. However, enterprises in sectors such as retail, distribution, telecoms, financial services andexport companies should provide potential opportunities for proprietary software vendors. IT Services Venezuela's IT services market is projected at US$254mn in 2009, with little growth compared with2008. By regional standards, the percentage accounted for by services in Venezuela's hardwareVenezueladominated IT market is much lower than average, at around 16%. In many countries, such as Brazil,services account for more than 30% of spending. The most demand, around 75%, will come from the large company sector, with the oil sector itself stillsignificant, despite the fall in oil prices. Venezuela's banks and telecoms operators also continued tospend in H109 as they rolled out new platforms and services. E-Readiness With the number of telecentres continuing to increase and the availability of internet services expanding,it is projected that internet usage will continue to rise at a strong pace in Venezuela. Wireline servicesseem to dominate, but there is potential for wireless broadband to become a significant driver ofbroadband growth. Because of the low levels of internet access the country, the Venezuelan government has generally beenslow to roll out e-services. The recent decision by the government to launch in 2008 a consultation on anew telecoms law to promote competition may be a hopeful augur of progress. The country has fastgrowing mobile penetration and has also been rolling out fixed wireless services such as Wi-Fi and theKorean technology WiBro. In 2008, Venezuela's government conducted technical tests on different digital TV standards to decidewhich ones to adopt. The government expects to implement digital TV by 2012, with both digital andanalogue technologies coexisting for a five-year period. The tests involved a number of differentstandards, including integrated services digital broadcasting (ISDB) from Japan, digital videobroadcasting (DVB) from Europe and a Chinese standard. E-Government The government is committed to improving e-use in the public sector and reducing the digital divide. Thedevelopment of e-infrastructure is also seen as one method to fight corruption in the public sector. Telecom Venezuela is working with the government on a project called Telepolítica, which involvesusing information and communication technology (ICT) for local development projects. In 2008, stateownedtelecoms company Telecom Venezuela signed a co-operation agreement the Comptroller General'sOffice (CGR) and the National IT Institute (CNTI) to help build ICT infrastructure for the CGR and otherpublic bodies. Table of Contents
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