Indonesia information technology report q2 2013

Q2 2013 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report Q2 2013 INCLUDES 5-YEAR FORECASTS TO 2017 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 2013 Business Monitor International Senator House 85 Queen Victoria Street London EC4V 4AB United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2013 Business Monitor International All rights reserved. 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All information is provided without warranty, and Business Monitor International makes no representation of warranty of any kind as to the accuracy or completeness of any information hereto contained. Indonesia Information Technology Report Q2 2013 CONTENTS BMI Industry View . SWOT Wireline SWOT . 11 Political . 13 Economic . 15 Business Environment 17 Industry Forecast 18 Table: Indonesia IT Industry - Historical Data And Forecasts (IDRmn) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Broadband . 21 Table: Internet - Historical Data And Forecasts, 2010-2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Macroeconomic Forecasts . 23 Economic Analysis . Trade Deterioration Slowing… . …But Risks Seen In Portfolio Account Risks To Outlook 23 23 24 26 Industry Risk Reward Ratings 27 Industry Risk/Reward Ratings 27 Table: Asia Pacific IT Risk/Reward Ratings - Q2 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Market Overview . 31 Hardware . 31 Software . 35 IT Services 37 Industry Trends And Developments 40 Regulatory Development 44 Table: Key Ministers And Departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 Company Profile 46 Oracle Corp . 46 Table: Oracle: Selected Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Hewlett-Packard . 51 IBM 57 Sigma 63 Regional Overview 66 Asia Pacific Regional Market Overview . 66 IT Penetration . 66 © Business Monitor International Page Indonesia Information Technology Report Q2 2013 IT Growth and Drivers 68 Sectors And Verticals 70 Demographic Forecast . 74 Table: Indonesia's Population By Age Group, 1990-2020 ('000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 Table: Indonesia's Population By Age Group, 1990-2020 (% of total) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76 Table: Indonesia's Key Population Ratios, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Table: Indonesia's Rural And Urban Population, 1990-2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Methodology 78 Methodology . 78 IT Industry 78 IT Ratings - Methodology 79 Table: IT Business Environment Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 Weighting . 81 Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Sources 81 © Business Monitor International Page Indonesia Information Technology Report Q2 2013 BMI Industry View BMI View: Indonesian IT spending is expected to reach IDR64.6trn in 2013, up 16%, although BMI has downwardly revised its forecast due to our expectation of a deteriorating investment climate. BMI still expects the Indonesian market to be one of the region's fastest-growing IT markets over our five-year forecast period. In 2013, continued strength in government spending should offset an expected deceleration in household demand. PC penetration remains at below 10%, giving this huge market unrivalled long-term growth potential. Rising computer penetration and growing affordability should ensure the market remains firmly in positive growth territory. Headline Expenditure Projections Computer hardware sales: IDR45.9trn in 2013 to IDR63.2trn in 2017, an average of 10%. Forecast revised after a slowdown in H112, but growing affordability and credit availability are driving sales in the consumer segment. Software sales: IDR7.8trn in 2013 to IDR12.6trn in 2017, average growth of 14%. Forecast upwardly revised due to analyst modification although progress will depend on the success in bringing down illegal software use. IT services sales: IDR11trn in 2013 to IDR16.6trn in 2017, up 12% over the period. Forecast unchanged, with a key growth area being cloud services, which could be worth more than US$100mn by 2017. Risk/Reward Ratings: Indonesia's score was 41.9 out of 100.0. Indonesia remained in ninth position in our latest RRR table. Key Trends & Developments ■ An active approach by the government to encourage IT development, led by the National ICT Council, should stimulate spending through a series of infrastructure and education initiatives. The Indonesian government's Master Plan for Acceleration and Expansion for Indonesia Economic Development (MPEEI) states that connectivity between the islands of the country is a priority area. Major government infrastructure and ICT initiatives, particularly the Palapa Ring Project, have been rolled out to create the infrastructure to support IT market growth. • With ICT penetration of only 20% and development restricted to richer areas such as Java, the market has much growth potential. However, Indonesia's uneven development and digital divide are major barriers to faster growth within this potentially huge IT market. © Business Monitor International Page Indonesia Information Technology Report Q2 2013 • According to government data, there are 30-35mn Indonesian companies that still not use IT-based solutions, representing a huge potential market. Modernisation is driving spending on applications such as CRM, ERP and financial management in key sectors such as financial services, telecoms, utilities, government, retail and manufacturing. © Business Monitor International Page Indonesia Information Technology Report Q2 2013 SWOT SWOT Analysis Strengths ■ Large potential market. ■ The market may be entering a faster growth stage. It is forecast to grow quicker than most other Association of South East Asian Nations (ASEAN) markets over the forecast period due to its underdeveloped nature. Weaknesses ■ Computer penetration is among the lowest in South East Asia, estimated at only 1.5%. ■ Underdeveloped telecommunications infrastructure due to years of government control and slow progress in deregulation. ■ Lack of government support, and there is still no unified ICT ministry. ■ History of recent political instability. ■ Legal concerns, such as intellectual property rights, are a deterrent to foreign direct investment. Opportunities ■ Some positive trends: computer ownership and internet access are on the rise, and the government is showing signs of taking intellectual property more seriously. ■ Per capita IT spending to increase by 50% over 2010-2014. ■ Opportunities exist in services such as system integration, support systems, training, professional services, outsourcing and internet services. ■ Computer sales are predicted to grow faster than almost anywhere else in the ASEAN over the next few years, although from a lower base. © Business Monitor International Page Indonesia Information Technology Report Q2 2013 SWOT Analysis - Continued Threats ■ Continuing lack of government action to support increased PC penetration and internet access, or drive ICT sector development. ■ The global economic slowdown may hit key demand segments. © Business Monitor International Page 10 Indonesia Information Technology Report Q2 2013 In Indonesia, PC penetration of around 3% could double by 2016 if government initiatives are followed through. The Indonesian government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio of PCs to students in public schools to 1:20. Meanwhile, the Vietnamese government has launched a programme entitled 'One Teacher-One Computer', which offers discounts on PCs for teachers and students. A similarly broad range is found with respect to internet penetration. The highest levels of internet penetration are found in South Korea, Hong Kong, Singapore, and Australia, with estimated 2012 penetration rates of 76.9%, 74.0%, 73.3% and 71.0%, respectively. Singapore has by far the highest rate of broadband penetration, which was estimated at 189.5% in 2012. Meanwhile, the Philippines has the lowest levels of internet usage, with just 8.3% narrowband and 7.4% broadband penetration estimated in 2012. The fastest growth is expected in Indonesia, where Broadband Penetration internet penetration is projected to leap from 45.4% in 2012 to 68.9% in 2016, and the Philippines, where Per 100 Population penetration is forecast to reach 12.6% by 2016. India is still at only 11.8% internet penetration despite an improvement in fixed-line infrastructure, and penetration is forecast to reach only 16.2% by 2016. Steady growth is also projected for Sri Lanka, where penetration is projected to increase from 18.8% to 25.4% by 2016. Some 56.4% of Malaysians have internet access in 2012. Dial-up technology is still the dominant access method in many states. However, even in developing f = BMI forecast. Source: BMI, Regulators markets, the number of broadband subscribers continues to gain ground steadily. Broadband penetration has been boosted by a growing number of mobile broadband users, as 3G mobile services are expanded across the region. In China, broadband penetration is on course to reach 20.9% by 2016. In India, penetration should increase more than double to reach 2.8% by 2016 from around 1.2% currently, although this remains below government targets. Sri Lanka will also see continued solid growth in broadband penetration, which is projected to reach 21.7% by 2016. © Business Monitor International Page 67 Indonesia Information Technology Report Q2 2013 Across the region, government programmes are an important driver of ICT penetration. The Chinese government has a five-year plan to make the internet available in every administrative village in central and eastern China and every township in the west. In Australia, the government's commitment to develop the National Broadband Network should further the development of Australia's digital economy. Meanwhile, the growth of Wi-Fi coverage will be one driver of notebook sales in places such as Hong Kong, where the government has committed another HKD200mn to the deployment of a Wi-Fi network covering more than 200 public venues. IT Growth and Drivers Across Asia in 2012, IT spending should benefit from improved economic circumstances and tenders 2012 IT Market Sizes US$mn, forecast previously deferred as a result of the economic situation, although a forecast slowdown in China could act as a drag on some markets. Strong fundamental demand drivers of IT spending meant that there will be continued opportunities. Key factors common to most markets include cheaper PCs and reform in sectors such as telecommunications and finance, as well as government initiatives. In some of the region's largest markets largest markets, such as China, lower-tier cities and towns f = BMI forecast. Source: BMI will be among the fastest growing segment of the IT market. BMI expects China's IT market growth to be driven by an expansion into western China and rural areas as well as growing demand from small and medium-sized enterprises (SMEs). Despite these drivers, BMI expects a moderation in Chinese consumer and business IT investment in 2012 owing to government economic cooling measures and uncertainty about the global economic situation. However, an expansion in consumer credit and a modernisation drive in sectors such as education, healthcare and manufacturing will sustain market growth. The long-term IT market potential of another Asian giant, India, is plain: less than 3% of people in India own a computer (about one-fifth of the level in China), meaning particular potential in the lower-end © Business Monitor International Page 68 Indonesia Information Technology Report Q2 2013 product range. Having postponed IT projects during the economic slowdown, many Indian private and public sector organisations are now investing again in upgrading their IT infrastructure. India's IT market appears to be positioned for strong growth thanks to an improving economy and consumer sentiment as well as government support IT Market Sizes As % Of National GDP for modernisation in lagging sectors. Meanwhile, India's business process outsourcing industry is growing at around 40% per annum and will continue to generate opportunities for vendors of IT products and services. In Thailand, demand will be bolstered by market expansion in the relatively underpenetrated rural areas. SIS estimates that market growth in upcountry areas should be 30% in 2011, double that it has forecast for the country as a whole. A similar situation pertains in India where in 2012 there are f = BMI forecast. Source: BMI expected to be strong growth opportunities in smaller cities. The Philippines is one of the countries currently benefiting from low-priced PC programmes (PC4ALL), which provide opportunities for vendors to penetrate the low-income segments. Other regional computer sale drivers over the forecast period include education, lower prices, IP telephony and cheaper processors as well as notebook entertainment and wireless networking features. Meanwhile, in Indonesia, the basic demographics of rising computer penetration and growing affordability should drive growth. SMEs represent a growth opportunity, as currently only around 20% of Indonesian SMEs are estimated to make use of IT. Compliance with government and international regulations will be a driver in financial, manufacturing and other sectors. © Business Monitor International Page 69 Indonesia Information Technology Report Q2 2013 In more developed markets, such as Hong Kong and Singapore, robust retail sales the led way in 2011, as IT Markets Compound Growth evidenced by the strong advance sales of Apple's 2012f-2016f (%) iPad2. In 2012 vendors hope that the iPad and ultrabooks will provide new growth areas. Economic expansion and improving business conditions are underpinning stronger business sector demand while a strong property market and lower unemployment have boosted confidence among consumers. However, a potential cooling of the Chinese economy as a result of monetary tightening would quickly spread to both markets. The largest IT market in the region is, unsurprisingly, China, estimated at US$124.4bn in f = BMI forecast. Source: BMI 2012, trailed distantly by Australia (US$22.0bn), India (US$20.7bn) and South Korea (US$18.5bn). Singapore's IT market (including communications) is the largest as a proportion of national GDP (2.4%), followed by Hong Kong (2.1%). Thailand's IT market has been affected by a number of exogenous events including floods, which in late 2011 disrupted its production of hard disk drives, but in 2012 it looks to be back on track. The fastest growing IT markets over the forecast period looks set to be India and Indonesia with 2012-2016 compound growth of 109% and 96% respectively, driven by increasing PC penetration. Sri Lanka is third with the IT market growing by an estimated 83% over BMI's five-year forecast period, while China's total growth is estimated at a still healthy 55%, slower than Vietnam at 69%. Sectors And Verticals Regional IT markets remain hardware-centric, with hardware accounting for 43-73% of total spending in all markets in 2012. However, spending on software and services will grow faster. Notebook sales are growing much faster than the PC market as a whole with growth driven by falling prices and more features. In mature markets such as Australia and Singapore, PC sales are dominated by replacement sales. In Australia, upgrades are estimated to account for at least 80% of business purchases and over 50% in the case of households. Over 90% of Australian households now have a PC, but consumers have appeared © Business Monitor International Page 70 Indonesia Information Technology Report Q2 2013 willing to spend on upgrading their notebook computers and it is also becoming more popular to purchase a second household PC. Around 30% of households have more than one PC. Tablet sales will provide a PC market growth area, with triple-digit growth projected in many markets. In China it is estimated that tablets accounted for around 6-7% of computer sales in 2011. The tariff on an imported iPad was previously set at around CNY1,000 and has now been reduced to CNY500. In 2012, tablets should be a growth area in India as well, with sales surpassing 1mn units, although much will depend on greater affordability. The arrival on the market of cheaper, locally produced tablets, retailing for as low as US$30, will help expand the market. However, partly thanks to the tablets surge, demand for netbooks has lost momentum in some markets. Sales, although initially promising, have sometimes fallen short of perhaps unrealistic expectations. Meanwhile, vendor expectations of a substantial boost from their promotion of high-tier ultrabooks may not be realised until prices come down closer to their US market level. In less developed markets, demand from under-penetrated rural areas, affordable computer programmes and growing broadband penetration should generally drive growth. In China, as in much of emerging Asia, demand from smaller towns and rural areas where PC penetration is relatively low will provide the main source of growth. In India, 2011 saw a wave of computer procurements by local governments. Another driver in emerging Asian markets will be replacement of desktops with notebooks. SMEs will be one of the strong growth segments over the forecast period, with SME demand for servers and networking equipment a significant growth opportunity. Falling prices is another major driver, placing pressure on margins. In India, the average price of a PC has nearly halved over the past few years, and rising incomes and greater credit availability will continue to bring computers within the reach of lower income demographics. In both emerging and more mature markets, the growing popularity of broadband will help to support computer sales. China Telecom is among regional telecoms companies to have rolled out PC bundling offers as part of its broadband packages. Meanwhile, broadband plans will also help to popularise tablets. Australia telecoms operators such as Telstra were competing to offer affordable tablets bundled with data services. Due in part to high levels of piracy, software's share of IT spending is relatively low, ranging from 11-36% among countries covered by BMI. Efforts are being made to tackle the issue of piracy, but, despite government crackdowns in China and the Philippines, software piracy remains above 70% in most of emerging Asia. © Business Monitor International Page 71 Indonesia Information Technology Report Q2 2013 Across the region there is a growing trend for smaller companies to seek greater efficiency by using IT to improve productivity and reduce costs (including labour costs). In 2012, growing numbers of SMEs are expected to invest in enterprise resource planning (ERP), while many of those that already have it will explore efficiencies through consolidation and virtualisation. As Asian companies have become more integrated into the global supply chain, their multinational business partners often encourage them to install back-office systems to meet requirements of efficiency. The growing global ambitions of many Asian companies, as well as often booming domestic markets, will fuel investments in software. In general, ERP and other e-business products still dominate the enterprise software market, but vendors are also looking to other areas such as customer relationship management (CRM) and business intelligence, where faster growth is possible. Although the market remains relatively small, more companies are looking at computing solutions such as Software-as-a-Service (SaaS). Cloud computing business models such as SaaS offer smaller businesses a cost-effective way to deliver applications such as payroll, tax-return processing and recruitment. Market Structure (% of IT Market) 2012f (LHS) & 2016f (RHS) f = BMI forecast. Source: BMI The hosted application model may already account for between one-fifth and one-quarter of China software revenues and SaaS has also enjoyed steady growth in the Hong Kong market over the past few years. Improved broadband infrastructure will assist the popularisation of the rented software model in markets © Business Monitor International Page 72 Indonesia Information Technology Report Q2 2013 such as Indonesia. Meanwhile, around one-third of Australian organisations already use some cloud computing. The cloud computing market in India is currently very small but is forecast to expand rapidly. New platforms and services in the telecoms field is a driver for that key IT spending segment, where an industry restructuring with the advent of 3G mobile services has led to more competition. Meanwhile, expanding technology adoption in the logistics industry and public transport will be a source of IT services projects. Sectors such as hospitals and real estate will also provide opportunities. The IT services segment accounts for 17-41% of spending in the Asian markets covered by BMI. The global economic slowdown and credit tightening had an impact on projects in some verticals, but in 2012 a brightening business climate should mean more opportunities in key IT spending verticals such as financial services, telecoms, government, healthcare and logistics. Government spending will account for a larger share of spending in many markets. In China, government stimulus packages have helped to drive IT-related investments, while, in Singapore, government ICT projects such as SOE2 provide significant opportunities. Meanwhile, the Hong Kong government's Digital 21 initiative will continue to generate spending. Regionally, hardware deployment services remain the largest IT services category, with other fundamental services including system integration, support systems, training, professional services, outsourcing and internet services. Main spenders across the region include banks and financial institutions as well as governments. Even in emerging markets such as India, IT vendors are having to pay more attention to value-added services such as technical support and product troubleshooting, or basic IT and hardware consulting. In many countries, the number and size of local outsourcing deals are increasing. Outsourcing could account for as much as 30% of China's IT services spending by 2013, while in India there have been some large contracts such as that awarded by Idea Cellular to IBM. Singapore and Hong Kong have both seen a trend towards larger outsourcing projects in the public and private sectors. Meanwhile, growing interest in cloud computing will be further stimulated by government programmes. In China, government cloud pilots are under way in at least five cities. The Hong Kong government announced plans in 2011 for an escalation of its cloud strategy over the next few years. In 2012 more leading Australian private and public sector organisations are expected to launched cloud initiatives and the government has adopted a six-year cloud computing strategy. © Business Monitor International Page 73 Indonesia Information Technology Report Q2 2013 Demographic Forecast Demographic analysis is a key pillar of BMI's macroeconomic and industry forecasting model. Not only is the total population of a country a key variable in consumer demand, but an understanding of the demographic profile is key to understanding issues ranging from future population trends to productivity growth and government spending requirements. The accompanying charts detail Indonesia's population pyramid for 2011, the change in the structure of the population between 2011 and 2050 and the total population between 1990 and 2050, as well as life expectancy. The tables show key data points from these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: BMI, World Bank, UN © Business Monitor International Page 74 Indonesia Information Technology Report Q2 2013 Table: Indonesia's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012e 2015f 2020f 184,346 199,400 213,395 227,303 239,871 244,769 251,880 262,569 0-4 years 22,625 22,182 21,526 22,272 21,579 21,017 20,740 19,722 5-9 years 22,818 22,273 21,904 21,296 22,077 22,095 21,416 20,596 10-14 years 21,767 22,678 22,151 21,790 21,197 21,464 21,987 21,333 15-19 years 20,294 21,517 22,483 21,948 21,599 21,320 21,061 21,856 20-24 years 18,354 19,902 21,166 22,079 21,552 21,453 21,331 20,808 25-29 years 15,902 17,975 19,494 20,686 21,589 21,529 21,171 20,979 30-34 years 13,384 15,563 17,603 19,067 20,255 20,748 21,194 20,820 35-39 years 10,341 13,063 15,228 17,233 18,699 19,217 19,916 20,887 40-44 years 8,046 10,037 12,730 14,864 16,860 17,517 18,365 19,606 45-49 years 7,450 7,739 9,690 12,317 14,422 15,260 16,451 17,976 50-54 years 6,711 7,067 7,363 9,242 11,789 12,679 13,916 15,947 55-59 years 5,498 6,229 6,584 6,878 8,667 9,648 11,182 13,290 60-64 years 4,225 4,938 5,624 5,971 6,266 6,800 8,010 10,442 65-69 years 2,911 3,607 4,249 4,871 5,206 5,257 5,571 7,225 70-74 years 1,958 2,288 2,866 3,409 3,944 4,112 4,339 4,742 75+ years 2,064 2,342 2,734 3,382 4,168 4,653 5,230 6,340 Total f = BMI forecast. Source: BMI, World Bank, UN © Business Monitor International Page 75 Indonesia Information Technology Report Q2 2013 Table: Indonesia's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012e 2015f 2020f 0-4 years 12.27 11.12 10.09 9.80 9.00 8.59 8.23 7.51 5-9 years 12.38 11.17 10.26 9.37 9.20 9.03 8.50 7.84 10-14 years 11.81 11.37 10.38 9.59 8.84 8.77 8.73 8.12 15-19 years 11.01 10.79 10.54 9.66 9.00 8.71 8.36 8.32 20-24 years 9.96 9.98 9.92 9.71 8.98 8.76 8.47 7.92 25-29 years 8.63 9.01 9.14 9.10 9.00 8.80 8.40 7.99 30-34 years 7.26 7.80 8.25 8.39 8.44 8.48 8.41 7.93 35-39 years 5.61 6.55 7.14 7.58 7.80 7.85 7.91 7.95 40-44 years 4.36 5.03 5.97 6.54 7.03 7.16 7.29 7.47 45-49 years 4.04 3.88 4.54 5.42 6.01 6.23 6.53 6.85 50-54 years 3.64 3.54 3.45 4.07 4.91 5.18 5.52 6.07 55-59 years 2.98 3.12 3.09 3.03 3.61 3.94 4.44 5.06 60-64 years 2.29 2.48 2.64 2.63 2.61 2.78 3.18 3.98 65-69 years 1.58 1.81 1.99 2.14 2.17 2.15 2.21 2.75 70-74 years 1.06 1.15 1.34 1.50 1.64 1.68 1.72 1.81 75+ years 1.12 1.17 1.28 1.49 1.74 1.90 2.08 2.41 f = BMI forecast. Source: BMI, World Bank, UN © Business Monitor International Page 76 Indonesia Information Technology Report Q2 2013 Table: Indonesia's Key Population Ratios, 1990-2020 Dependent ratio, % of total working age Dependent population, total, '000 1990 1995 2000 2005 2010 2012e 2015f 2020f 67.3 60.8 54.7 51.2 48.3 47.3 45.9 43.8 74,142 75,371 75,430 77,020 78,172 78,598 79,283 79,957 59.8 62.2 64.7 66.1 67.4 67.9 68.5 69.5 Active population, total, '000 110,204 124,029 137,966 150,283 161,699 166,171 172,597 182,612 61.0 54.1 47.5 43.5 40.1 38.9 37.2 33.8 67,210 67,133 65,581 65,358 64,853 64,576 64,143 61,651 6.3 6.6 7.1 7.8 8.2 8.4 8.8 10.0 6,932 8,238 9,849 11,662 13,318 14,022 15,141 18,306 Active population, % of total Youth population, % of total working age Youth population, total, '000 Pensionable population, % of total working age Pensionable population, '000 f = BMI forecast; 0>15 plus 65+, as % of total working age population; 0>15 plus 65+; 15-64, as % of total population; 15-64; 0>15, % of total working age population; 0>15; 65+, % of total working age population; 65+. Source: BMI, World Bank, UN Table: Indonesia's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012e 2015f 2020f Urban population, % of total 30.6 35.6 42 48.1 53.5 55.5 58.4 62.5 Rural population, % of total 69.4 64.4 58 51.9 46.5 44.5 41.6 37.5 Urban population, '000 54,279.90 68,174.50 86,217.70 105,440.20 128,450.90 135,773.40 146,972.20 164,105.90 Rural population, '000 123,105.30 123,326.90 119,062.60 113,770.10 111,420.10 108,995.70 104,908.20 98,463.50 f = BMI forecast. Sources: BMI, World Bank, UN © Business Monitor International Page 77 Indonesia Information Technology Report Q2 2013 Methodology Methodology BMI's industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, i.e. seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms. Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base and © Business Monitor International Page 78 Indonesia Information Technology Report Q2 2013 methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. Within best-practice techniques of time-series modelling, BMI's quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: ■ Overall economic context, and GDP and demographic trends; ■ Underlying 'information society' trends; ■ Projected GDP share of industry; ■ Maturity of market structure; ■ Regulatory developments and government policies; ■ Developments in key client sectors such as telecommunications, banking and e-government; ■ Technological developments, and diffusion rates; ■ Exogenous events. Estimates are calculated using BMI's own macroeconomic and demographic forecasts. IT Ratings - Methodology Our approach in BMI's IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators that were traditionally evaluated on a subjective basis. Finally, we include aspects of BMI's proprietary Country Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas:Limits of potential returns: Evaluation of sector's size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state's political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. © Business Monitor International Page 79 Indonesia Information Technology Report Q2 2013 Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. Table: IT Business Environment Indicators Indicator Rationale Limits to potential returns Market structure IT market value, US$bn Denotes breadth of IT market. Large markets score higher than smaller ones Sector value growth, % year-on-year Denotes sector dynamism. Scores based on annual average growth over five-year (y-o-y) forecast period Denotes spending boost provided by public sector, which can be a crucial Government initiatives and spending determinant of sector development Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales - compared to services/software - indicates that the overall IT market is immature Country structure Urban-rural split Urbanisation is used as a proxy for development. Predominantly rural states therefore score lower GDP per capita, US$ A high GDP per capita supports long-term industry prospects. Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting ICT policy Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code Country risk Short-term external risk Rating from CRR evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment Short-term financial risk Rating from BMI's CRR, to denote risk of currency crisis and stability of banking sector. The former would hit revenues in hard currency, while the latter would curtail investment funding Trade bureaucracy Rating from CRR to denote ease of trading with the state Legal framework Rating from CRR denotes the strength of legal institutions in each state - security of investment can be a key risk in some emerging markets Bureaucracy Rating from CRR denotes ease of conducting business in the state © Business Monitor International Page 80 Indonesia Information Technology Report Q2 2013 IT Business Environment Indicators - Continued Indicator Rationale Corruption Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies' ability to compete Source: BMI Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all sub-components equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 70% - IT market 65% - Country structure 35% Risks to realisation of potential returns 30% - Industry risks 40% - Country risk 60% Source: BMI Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication Union (ITU), officially released company results and figures, and international and national industry news agencies. © Business Monitor International Page 81 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... International Page 15 Indonesia Information Technology Report Q2 2013 SWOT Analysis - Continued ■ Indonesia is perceived as one of Asia's riskier destinations This leaves the economy vulnerable to sudden capital outflows at times of risk aversion, which can lead to sharp swings in the currency © Business Monitor International Page 16 Indonesia Information Technology Report Q2 2013 Business Environment... Monitor International Page 17 Indonesia Information Technology Report Q2 2013 Industry Forecast The Indonesian IT market should grow at a compound annual growth rate (CAGR) of 10.8% over 2013- 2017, with Indonesia forecast to be one of the best regional IT market growth prospects over BMI's five-year forecast period IT spending is forecast to increase to IDR64.6trn in 2013, up from IDR55.6bn in 2012... the Indonesian market, with a wide array of product launches by vendors The shape of things to come was unveiled to an extent in the boot camp held by Microsoft Indonesia in April 2012 for Windows 8 The camp saw the launch of as many as 44 applications developed by Indonesians for Windows 8 © Business Monitor International Page 33 Indonesia Information Technology Report Q2 2013 Local manufacturers Indonesia. .. Communication and Information Technology will create a backbone of optical fibre on a nationwide scale spanning more than 55,000 km and including terrestrial, as well as undersea cables The Global Business Guide Indonesia reports the project had achieved completion levels of 80% in February 2012 itself © Business Monitor International Page 34 Indonesia Information Technology Report Q2 2013 •The ongoing... country Windows 8 © Business Monitor International Page 35 Indonesia Information Technology Report Q2 2013 Windows 8 was well received by businesses According to Indonesia Finance Today, Microsoft counted 500 companies that used the enterprise edition of Windows 8, in January 2013 Windows 8 has an added dimension of interest in the Indonesian market Indonesia hosts a considerable legacy of Windows OS, including... remain flat at 5.4% in 2013 While we expect Sri Lanka's economic outlook to remain gloomy for the foreseeable future, the IT industry remains a key focus for the © Business Monitor International Page 29 Indonesia Information Technology Report Q2 2013 government due to its importance in enabling trade and empowering consumers For example, Sri Lanka's Information and Communications Technology Agency soft... International Page 30 Indonesia Information Technology Report Q2 2013 Market Overview Hardware BMI forecasts that the computer hardware spending in Indonesia will reach a value of IDR46tn in 2013 and will increase to IDR63tn in 2017, growing at a CAGR of 8.3% The share of hardware in the overall IT market will decline by more than 2.5% in that duration BMI forecasts a spectacular 2013 for IT hardware... picture of the market opportunity Indonesia presents an attractive demographic distribution with more than half the population under 30 years of age, as of 2013 The distribution places the segment most receptive to IT in a clear majority, which bodes well for IT hardware vendors © Business Monitor International Page 31 Indonesia Information Technology Report Q2 2013 Notebooks Indonesia remains the largest... Page 32 Indonesia Information Technology Report Q2 2013 50% in the country's tablets Samsung launched its Galaxy Note 10.1 in the Indonesian market in September 2012 at a price of US$754 Ultrabooks Ultrabooks are seeing an interesting play in Indonesia While universally the response to ultrabooks has been mixed; Intel, the key driver behind the ultrabook concept remains bullish about it in Indonesia. .. Business Monitor International Page 14 Indonesia Information Technology Report Q2 2013 Economic SWOT Analysis Strengths ■ Indonesia' s strategic location between the Indian and Pacific Oceans and its adjacency to major east-west trade routes make it an important economy in the region Indonesia is also resource-rich and is the world's largest producer of palm oil ■ Indonesia has a low cost and large supply . Q2 2013 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2017 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report. 81 Sources 81 Indonesia Information Technology Report Q2 2013 © Business Monitor International Page 5 BMI Industry View BMI View: Indonesian IT spending is expected to reach IDR64.6trn in 2013, up. the reach for the majority of Indonesians. Indonesia Information Technology Report Q2 2013 © Business Monitor International Page 12 Political SWOT Analysis Strengths ■ Indonesia managed a successful