Q4 2012 www.businessmonitor.com INDoNeSIa information technology Report INCLUDES BMI'S FORECASTS ISSN 1750-5070 Published by Business Monitor International Ltd. INDONESIA INFORMATION TECHNOLOGY REPORT Q4 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: August 2012 Business Monitor International 85 Queen Victoria Street London EC4V 4AB UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2012 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 Q4 2012 © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 CONTENTS Executive Summary . SWOT Analysis . Indonesia IT Sector SWOT . Indonesia Telecoms Industry SWOT Indonesia Political SWOT Indonesia Economic SWOT . 10 Indonesia Business Environment SWOT 11 Asia Pacific IT Risk/Reward Ratings 12 Table: Asia Risk/Reward Ratings, Q412 15 IT Markets Overview . 16 IT Penetration 16 IT Growth and Drivers 18 Market Overview . 24 Table: Key Ministers And Departments . 24 Table: Bandung High-Tech Valley SWOT . 25 Hardware . 25 Software . 28 Services 29 Special Focus: Banks . 31 Industry Developments 32 Industry Forecast . 35 Table: Indonesia IT Sector - Historical Data & Forecasts , 2009-2016 37 Industry Forecast Internet . 38 Table: Telecoms Sector – Internet – Historical Data And Forecasts . 38 Competitive Landscape . 40 Hardware . 40 Software . 42 IT Services . 43 Internet Competitive Landscape 45 Macroeconomic Forecast 46 Table: Indonesia - Economic Activity, 2011-2016 . 48 Company Profiles . 49 IBM 49 Hewlett-Packard 54 Oracle Corp . 60 Sigma (telkomsigma) 64 Indonesia Demographic Outlook 66 Table: Indonesia's Population By Age Group, 1990-2020 ('000) . 67 Table: Indonesia's Population By Age Group, 1990-2020 (% of total) . 68 © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 Table: Indonesia's Key Population Ratios, 1990-2020 . 69 Table: Indonesia's Rural And Urban Population, 1990-2020 69 BMI Methodology . 70 How We Generate Our Industry Forecasts 70 Transport Industry . 70 Sources . 71 © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 Executive Summary BMI View: Indonesian IT spending is expected to reach US$5.9bn in 2012, up 11%, slightly lower than previously 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 2012, buoyant private consumption should support demand for IT products and services and PC penetration remains at around 6%, giving this huge market unrivalled long-term growth potential. Rising computer penetration and growing affordability should ensure that the market remains firmly in positive growth territory. Headline Expenditure Projections Computer hardware sales: US$3.8bn in 2011 to US$4.2bn in 2012, +10.0% in US dollar terms. Forecast in US dollar terms unchanged, with growing affordability and credit availability driving sales in the consumer segment, and a trend towards slimline, lightweight notebooks. Software sales: US$594mn in 2011 to US$681mn in 2012, +15% in US dollar terms. Forecast in US dollar terms unchanged and progress will depend on the success in bringing down illegal software use. IT services sales: US$873mn in 2011 to US$1.0bn in 2012, +12.0% in US dollar terms. Forecast in US dollar terms unchanged, with a key growth area being cloud services, which could be worth around US$100mn by 2016. Risk/Reward Ratings: Indonesia's score was 42.7 out of 100.0. Indonesia remained fifth from bottom of the Asia region in our latest RRR table, behind the Philippines and ahead of Vietnam, Sri Lanka, India and Thailand. Key Trends & Developments 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. 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. Around 30-35mn Indonesian companies are estimated to lack any IT-based solutions and enterprise resource planning (ERP) and other e-business applications will find increasing popularity in the small and medium-sized enterprise (SME) market. © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 Spending in some key IT verticals, such as financial services and banking, should continue to be significant in 2012 as Bank Indonesia turns dovish. Banking IT spending is expected to grow by a doubledigit factor in 2012. Government IT spending is also expected to increase and could have accounted for as much as 25% of the IT market in 2011, with reports that the government was encouraging state companies to use more IT services. © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 SWOT Analysis Indonesia IT Sector SWOT Strengths Weaknesses Opportunities Threats 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. 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. 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. 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 Ltd Page Indonesia Information Technology Report Q4 2012 Indonesia Telecoms Industry SWOT Strengths A rapidly growing mobile sector due to the emergence of greater competition. The presence of key strategic investors, including SingTel, ST Telemedia of Singapore, Telekom Malaysia, Maxis of Malaysia, Hong Kong's Hutchison and the UAE's Etisalat. Weaknesses Opportunities Threats Security and corruption issues still make Indonesia a risky investment climate. Limited mobile spectrum due to overcrowding in the sector following the government decision to open the market to greater competition. Mobile broadband spectrum fees remain high for operators, reducing the implementation and variety of tariffs. Operators struggling with raised costs after the government forced companies to charge a fee based on cost rather than share part of their revenues. The mobile market expected to surge over the coming years, reaching nearly 431mn people over the forecast period. The popularity of mobile value-added/data services offers potential to international content providers. The growth of 3G will lead to investment opportunities for content providers and distributors. A government registration scheme could lead to short-term fall in fixed wireless and mobile users as non-registrants are deactivated. The dominance of the prepaid market leading to falling average revenue per user rates. Mobile operators could put too much emphasis on 3G mobile network expansion when consumer demand is unproven at the expense of 2G growth. © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 Indonesia Political SWOT Strengths Weaknesses Opportunities Threats Indonesia managed a successful transition to democracy in 2004. In addition, the 2009 parliamentary and presidential elections passed peacefully, signalling the consolidation of the democratic process. Since 2009, the government has shown further signs of improvement in both efficacy and engagement. The military's role in politics has gradually been reduced. The prospects of a military coup – which seemed a real possibility in the late 1990s and early 2000s – have diminished substantially. As the military's role in politics continues to wane, Indonesia's political stability should likewise improve. Indonesia's domestic political scene is characterised by a proliferation of minority parties, and formal and informal coalitions are necessary to govern and legislate. Moreover, the efficiency of state institutions is encumbered by bureaucracy and corruption. Prospects for reform are beset with numerous challenges, such as the long-running practice of politicians promising government positions to campaign supporters. The archipelago was impacted by separatist rebellion and ethnic violence in the late 1990s and early 2000s, which took great efforts to bring to heel. In the event of a new economic crisis, calls for regional secession could re-emerge. President Susilo Bambang Yudhoyono's Democratic Party had a strong showing in the 2009 parliamentary elections. Coupled with a strong mandate following his re-election in the same year, the implementation of policies in the legislature should become less problematic. Indonesia's status as the world's most populous Muslim country leaves it well positioned to speak out on global Islamic issues and act as a bridge between the Middle East and the Asia Pacific region. Regional militant group Jemaah Islamiah (JI) poses a lingering threat to security in Indonesia. JI is blamed for a series of attacks, including the Bali bombings of October 2002 and the Jakarta bombings of July 2009. The fact that Indonesia subsidises basic goods means that when the government raises prices, there is a risk of public unrest, or at least a political backlash. Additionally, Indonesia's population is extremely young, with more than 50% of Indonesians younger than 30. Younger populations have historically been a predictor of political instability. © Business Monitor International Ltd Page Indonesia Information Technology Report Q4 2012 extended to webOS as an open source platform that may yet form the heart of next generation consumer computing devices and services produced by HP or a partner company. However, the company's future strategy remained ill-defined at the time of writing and HP's share price continued to underperform its peers. Competition HP faces intense price- and feature-driven competition in all of its markets globally, but claims to be the largest company offering general purpose computers and personal information, imaging and printing products for industrial, scientific, business and consumer applications, and IT services. Competitors in the PSG sector include Dell, Acer, ASUSTeK Computer, Apple, Lenovo Group and Toshiba. In certain regions, HP also competes with local companies and generic 'white label' product manufacturers. The service businesses, including HP Enterprise Services and Technology Services, compete in IT support services, consulting and integration, infrastructure technology outsourcing, business process outsourcing and application services. The IT support services and consulting and integration markets are under significant pressure as customers are reducing their IT budgets. However, this trend has benefited HP's outsourcing businesses and customers look to lower IT management costs. Key competitors include IBM Global Services, Computer Sciences Corporation, Accenture, Fujitsu, Wipro, Infosys Technologies and Tata Consultancy Services. IPG's consumer, SME, graphics and enterprise customer segments witness competition from Canon USA, Lexmark International, Xerox Corporation, Seiko Epson Corporation, Samsung Electronics and Brother Industries. The ESSN group competes with broad solutions providers such as IBM as well as more focused competitors such as EMC Corporation and NetApp (storage) and Dell (servers). HP Software group markets enterprise IT management software in competition with IBM and BMC Software, among others. Its information management solutions compete with products from the likes of IBM, EMC and Symantec Corporation. It also delivers enterprise security/risk intelligent solutions that compete with offerings from Symantec, IBM, Cisco Systems and McAfee. Financial Performance For the financial year ended October 31 2011, HP recorded net revenue of US$127.2bn, up by almost 1% y-o-y. The Services division accounted for US$36.0bn and was up by around 1.2% y-o-y; the Technology Services and Applications Services segments grew fastest while the Business Process Outsourcing segment declined y-o-y. ESSN generated revenues of US$22.2bn in FY 2011, up by around 9.3% y-o-y; in general, Networking and Storage revenues were up y-o-y while Industry Standard Servers revenue was down slightly and Business Critical Systems revenue was down sharply. HP Software revenues totalled US$3.2bn in FY 2011, up by 18.0% y-o-y due to revenue growth in licences and services. PSG revenues totalled US$39.6bn in FY 2011, down by 2.9% y-o-y; although commercial client revenue grew slightly, consumer client revenue was down markedly and total unit shipments grew by only 2% y-o-y, aided by price cutting. IPG revenues totalled US$25.8bn in © Business Monitor International Ltd Page 57 Indonesia Information Technology Report Q4 2012 FY 2011, flat y-o-y as a decline in consumer printing revenues was matched by growth in commercial printer revenues. HP ended FY 2011 with operating income of US$9.7bn, down by 15.7% y-o-y and the company's net profit amounted to US$7.0bn, down from US$8.8bn a year earlier as restructuring charges, the winding down of the webOS business, goodwill impairment and acquisition costs weighed on profits. Strategy HP states that its long-term strategy is focused on leveraging its portfolio of hardware, software and services as the company adapts to a changing/hybrid model of IT delivery and consumption driven by the growing adoption of cloud computing and increased demand for solutions. To successfully execute on this strategy, HP needs to continue to evolve its historically hardware-centric business model towards a model that includes more software and higher value services offerings. In addition, the company believes it needs to continue to further evolve the focus of its organisation towards the delivery of integrated IT solutions for its customers. The restructuring process announced in August 2011 created a great deal of uncertainty as investors raised concerns about plans to offload the largest revenue-generating business unit, PSG, the seemingly premature termination of the mobile devices business and a failure to move as decisively and as quickly as rivals Dell and Cisco in the storage and networking solutions markets towards a more cloud-centric business. Some of that uncertainty has evaporated after the decision was made to retain PSG for now and a promise was made to make more selective organic investments to drive longer-term profitable growth. Financial Data Net Revenue FY2009: US$114.552bn Net Revenue FY2010: US$126.033bn Net Revenue FY2011: US$127.245bn Services Revenue FY2010: US$35.529bn Services Revenue FY2011: US$35.954bn Enterprise Revenue FY2010: US$20.356bn Enterprise Revenue FY2011: US$22.241bn Software Revenue FY2010: US$2.729bn Software Revenue FY2011: US$3.217bn Personal Systems Revenue FY2010: US$40.471bn Personal Systems Revenue FY2011: US$39.574bn Imaging & Printing Revenue FY2010: US$25.764bn Imaging & Printing Revenue FY2011: US$25.783bn Operating Profit FY2009: US$10.136bn © Business Monitor International Ltd Page 58 Indonesia Information Technology Report Q4 2012 Operational Data Company Details Operating Profit FY2010: US$11.479bn Operating Profit FY2011: US$9.677bn Net Income FY2009: US$7.660bn Net Income FY2010: US$8.761bn Net Income FY2011: US$7.074bn PC Sales, Calendar 2008: 55.77mn (Gartner estimate) PC Sales, Calendar 2009: 58.94mn (Gartner estimate) PC Sales, Calendar 2010: 62.77mn (Gartner estimate) Employees (October 2011): 349,600 Hewlett-Packard Company 3000 Hanover Street Palo Alto California 94304 United States +1 650 857 1501/ www.hp.com © Business Monitor International Ltd Page 59 Indonesia Information Technology Report Q4 2012 Oracle Corp Strengths Third largest software developer in the world. Has actively pursued an aggressive acquisition strategy, adding more than 35 companies since 2007 and extending the reach of services it offers. Weaknesses Strong company brand and international presence. Acquisition strategy leaves several companies to be integrated into Oracle – this can be a costly and distracting exercise. Reliance on partnerships in some countries can limit Oracle's control over its brand and products in some markets. Opportunities Cloud computing is the IT industry's hottest topic as companies look to store data on cloud servers. Growing demand for IT services and software in emerging markets. Acquisition of Java through Sun Microsystems purchase – Java is present in many different devices, opening up market opportunities. Market trends are focused on mobile data and provision of data over mobile networks. Threats Rival SAP has begun pursuing an acquisition strategy, potentially creating more competition for new acquisitions. Further economic difficulties could see companies postponing their IT spending, leaving fewer opportunities for contracts. Overview Oracle is a business software and hardware systems development company, based in the US. The company offers computer hardware systems and enterprise software products. Oracle develops a range of IT services and software including database development, enterprise resource planning (ERP) software, customer relationship management (CRM) software and supply chain management (SCM) software. Company History The company started as Software Development Laboratories in 1977, set up by Larry Ellison, Bob Miner and Ed Oates. Two years later it was renamed as Relational Software, Inc before changing to Oracle Systems in 1982 in line with its flagship Oracle Database product. In 1995 it was renamed Oracle Corporation. The company was the leading developer of database software but has since expanded to include newer technologies that target growing areas of the market such as CRM and ERP. While Oracle largely grew organically in its first two decades, the company's expansion from 2002 was mostly driven by acquisitions (see table). Oracle organises its acquisitions into five business areas: Database, Middleware, Applications, Server and Storage Solutions and Industry Solutions. © Business Monitor International Ltd Page 60 Indonesia Information Technology Report Q4 2012 Company Structure Oracle has three main business segments, in which there are a further seven operating units: Software – New Software Licences and Software Licence Updates and Product Support. Hardware Systems – Hardware Systems Products and Hardware Systems Support. Services – Consulting, Cloud Services and Education. Hardware systems was a new addition to Oracle's portfolio in FY 2009/10 when it acquired Sun Microsystems. In its first year in the company, it accounted for 9% of revenues, rising to 19% in FY 2010/11. Software still accounts for the largest proportion of the company's revenues, although this declined from 77% to 68% between FY09/10 and FY10/11. Strategy As with many companies in the IT services sector, cloud computing is a key focus for Oracle. The company's aggressive acquisition strategy over the past few years highlights its drive to move into new segments of the IT services and software sectors, acquiring experience and products from major software developers and including hardware through the Sun Microsystems acquisition. Oracle has described its strategy for the EMEA region as 'complete, open and integrated'. This translates to a portfolio of industry solutions and large-scale investment in research and development and acquisitions, as well as open, standards-based architecture. By adding hardware to the mix, the Sun acquisition fits into Oracle's strategic plan to become a technology one-stop shop for its global customer base. Oracle can also leverage synchronicities with Sun software. Sun's Java platform, used to write platforms for websites and mobile phones, will be a major asset for Oracle. Sun's Solaris is a major platform for Oracle's database software. The company aims to capitalise on the growing trend for big data, expanding features in the Oracle database for cloud computing and providing businesses with the tools to take advantage of the data they are gathering on their infrastructure. Financial Performance At the end of Oracle's second quarter of its financial year ended May 31 2012, the company reported revenues of US$17.2bn, up 6.7% y-o-y. The second quarter (ended November 30 2011) saw a 2.4% y-o-y increase as the 10% decrease in hardware systems revenues had a strong impact on the company's performance. Q2's performance was sharply lower than the 11.6% increase seen in Q1 (ended August 31 2011). By business group, software revenues provide the largest proportion of revenues, reaching US$6.034bn, or 68.6% of revenues. Hardware contributed 17.9% of revenues while services made up the remainder. Of Oracle's software revenues, database and middleware make up the largest proportion, accounting for 69.4% of the total. A geographic split of Oracle's revenues show that the Americas is by far the company's largest region. We believe this is dominated by the US market where Oracle is based. However, in growth terms, Asia Pacific is the fastest growing, increasing 18.7% in Q1 and 8% in Q2 compared with 8.2% and 1.8% respectively for Americas. EMEA saw strong growth in © Business Monitor International Ltd Page 61 Indonesia Information Technology Report Q4 2012 the first quarter of Oracle's financial year, increasing 13.6%, but fell to just 0.7% growth in Q2 Oracle's operating income was US$3.111bn, a 35.4% margin while net income was US$2.192bn. Both saw strong growth in the first quarter of the year, increasing 40% and 36.1% respectively. Net income increased 17.2% in Q2. Traditionally, Oracle sees its strongest performance in the final quarter of its financial year (March to May), with net income around a third higher in this quarter than others. In the financial year ended May 31 2011, Oracle reports revenues of US$35.622bn, up 32.8% y-o-y. This was primarily the result of organic growth. New software licence growth of 19% and Exadata and Exalogic systems expansion were highlighted by the company as contributing to end-of-year growth. Latest Developments In February 2012 Oracle and Cloudera entered in to an agreement to provide Apache Hadoop distribution and tools for the Oracle Big Data Appliance. Oracle combined Cloudera's Distribution, including Apache Hadoop (CDH) and Cloudera Manager software, into the Oracle Big Data Appliance designed to deliver high performance and scalable information processing setting. In January 2012, Oracle launched an updated edition of its TimeTen In-Memory database. The database was reportedly a crucial element of the company's in-development Exalytics appliance and acts as a relational database that can provide rapid transaction response time and new analytic support workloads. November 2011 saw the release of Oracle Solaris 11 cloud-based operating system. The Solaris 11 will act as the first operating system to be based on the cloud, and customers will be able to use applications through both private, public and hybrid cloud networks. In the same month the company announced plans for its JavaFX rich internet application platform. The new plans called for transparency and replacing any closed code with open code. Oracle wants JavaFX to serve as a step to providing the next generation Java client toolkit. The company says JFX would contribute to OpenJDK, its official open source implementation of Java, and that it seeks patches and early feedback from the community. According to officials in the company, Oracle is not just interested in open sourcing the code, but is also moving into an open development model. In early November 2011 Oracle was reported to be considering a bid for CRM applications company Salesforce.com. In the same month the company completed its acquisition of cloudbased customer services company RightNow for US$1.5bn. At Oracle's OpenWorld developer conference in October 2011, the company's social networks were first detailed. The company is set to launch its speciality enterprise social networking product. Financial Data Revenues (FY09/10): US$26.820bn Revenues (FY10/11): US$35.622bn Revenues (Q1 11/12): US$8.374bn © Business Monitor International Ltd Page 62 Indonesia Information Technology Report Q4 2012 Revenues (Q2 11/12): US$8.972bn Net Income (FY09/10): US$6.135bn Net Income (FY10/11): US$8.547bn Net Income (Q1 11/12): US$1.840bn Net Income (Q2 11/12): US$2.192bn st Oracle's financial year ends 31 May Company Details Oracle Corporation 500 Oracle Parkway Redwood City California 94065 USA +1/650 506 7000 650 633 1269 www.oracle.com © Business Monitor International Ltd Page 63 Indonesia Information Technology Report Q4 2012 Sigma (telkomsigma) One of Indonesia's leading IT companies. Focus on finance and banking industries. Ownership by Telkom provides potential for synergies with telecoms services. Weaknesses Focus on local industry may limit scope for expansion in the future. Opportunities Growing banking sector in Indonesia. Increasing focus on IT services from companies in emerging markets. Continued global economic uncertainty may weigh on future demand from clients. Strengths Threats Overview Sigma Cipta Caraka is a leading Indonesian IT company specialising in the banking sector, offering services such as software development and customisation, network and systems integration, managed resources and internet access. Sigma is one of IBM's major channels to sell hardware to local banks. In 2008, telecoms incumbent PT Telkom acquired an 80% stake in Sigma, buying the remaining 20% stake in August 2010. The merger aimed to bring synergies between Telkom's 6,000 corporate customers and 170 of Sigma's customers, mainly banks, at the time of the merger. Telkomsigma had more than 250 clients across a number of industries in early 2012. It is one of the largest IT services acquisitions in Indonesia's history. Telkomsigma has three subsidiaries offering different solutions. Sigma Solusi Integrasi is an Oracle Platinum Partner which implements and maintains Oracle licences. Signet Pratama provides systems integration solutions for business-to-business networking and internet. Sigma Metrasys Solution maintains SAP licences and project implementation. Strategy Sigma management has said the company will be strengthening its core role as an IT provider for the whole banking sector. As an innovator in the Islamic banking sector, Sigma is well placed to take advantage of the growing trend in the country. While the company has a strong background in banking and financial IT, it is looking to expand into new sectors, such as autos and manufacturing. The acquisition by PT Telkom was part of the incumbent's strategy to expand its communications services into the IT sector. The merger offers opportunities for Sigma to offer a wider range of services. Products And Sigma's flagship product is AlphaBITS, the software initially developed in 1989. It is a core Partnerships banking system for day-to-day operations, connecting aspects such as delivery channels (teller and customer services) and back-office activities (accounting and general affairs). Developed as an industry-standard banking application, AlphaBITS offers integrated functionality with six main modules (kernel and security, CIF, retail, deposit, loan and general ledger). Using integrated design architecture, AlphaBITS can be incorporated with third-party applications. © Business Monitor International Ltd Page 64 Indonesia Information Technology Report Q4 2012 Sigma has been an innovator in the Islamic banking sector, as an increasing number of Indonesian individuals and companies choose to business with banking institutions that comply with shari'a principles. Sigma has capitalised on this, with its shari'a core banking system designed to follow the principles of Islamic banking. The company's services include consulting, managing IT services, software development services and integrated datacentre operations in the banking (conventional and sharia-based), financial, telecommunications, manufacturing, distribution and other sectors. Among the products offered, Sigma offers cloud computing, datacentre, telecoms managed services, software development services and systems integration. Sigma is a local partner for international IT companies including Oracle, QNX Solutions, IBM and Microsoft. Developments Following its acquisition by PT Telkom, Sigma expanded its operations and spent US$7mn on a new IT disaster recovery centre in Surabaya. It has signed an agreement with Oracle to provide outsourcing services focusing on large companies, particularly in banking and telecoms. The arrangement centres on helping large companies to focus on core business while the IT partners optimise and maintain IT units. Among the recent wins for the partnership is a tender from Bussan Auto Finance, one of the leading multi-finance companies in Indonesia, to implement various Oracle applications. Company Details PT Sigma Citra Caraka DEA I Tower, 8th Floor Kawasan Mega Kuningan JI. Mega Kuningan Barat IX Kav. E43 No. Indonesia +62/21 576 2150 21 576 2155 www.sigma.co.id © Business Monitor International Ltd Page 65 Indonesia Information Technology Report Q4 2012 Indonesia Demographic Outlook 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 datapoints from all of these charts, in addition to important metrics including the dependency ratio and the urban/rural split. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 66 Indonesia Information Technology Report Q4 2012 Table: Indonesia's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 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: World Bank, UN, BMI © Business Monitor International Ltd Page 67 Indonesia Information Technology Report Q4 2012 Table: Indonesia's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 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: World Bank, UN, BMI © Business Monitor International Ltd Page 68 Indonesia Information Technology Report Q4 2012 Table: Indonesia's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f 67.3 60.8 54.7 51.2 48.3 47.3 45.9 43.8 Dependent population, total, '000 74,142 75,371 75,430 77,020 78,172 78,598 79,283 79,957 Active population, % of total 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 Youth population, % of total working age 61.0 54.1 47.5 43.5 40.1 38.9 37.2 33.8 Youth population, total, '000 67,210 67,133 65,581 65,358 64,853 64,576 64,143 61,651 Pensionable population, % of total working age 6.3 6.6 7.1 7.8 8.2 8.4 8.8 10.0 Pensionable population, '000 6,932 8,238 9,849 11,662 13,318 14,022 15,141 18,306 Dependent ratio, % of total working age 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: World Bank, UN, BMI Table: Indonesia's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015 2020 Urban population, % of total 30.6 35.6 42.0 48.1 53.5 55.5 58.4 62.5 Rural population, % of total 69.4 64.4 58.0 51.9 46.5 44.5 41.6 37.5 Urban population, '000 54,279.9 68,174.5 86,217.7 105,440. 128,450. 135,773. 146,972. 164,105. Rural population, '000 123,105. 123,326. 119,062. 113,770. 111,420. 108,995. 104,908. 98,463.5 Sources: World Bank, UN, BMI © Business Monitor International Ltd Page 69 Indonesia Information Technology Report Q4 2012 BMI Methodology How We Generate Our Industry Forecasts 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, 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 of all 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. Transport Industry There are a number of principal criteria that drive our forecasts for each transport variable: GDP Growth As transport activity is heavily influenced by real GDP growth, this factor is examined to ascertain its relationship with overall trade volumes. Projected GDP growth is calculated using BMI’s own macroeconomic and demographic forecasts. © Business Monitor International Ltd Page 70 Indonesia Information Technology Report Q4 2012 Real Trade Volumes The sum of imports and exports plays a particularly important role in developing countries with a small domestic industrial sector. In particular, the focus is on goods, as services not employ transport. The volumes are forecast based on the following criteria: Trends manifested through historical data; The impact of future step changes to the economy (such as future membership of the EU or some other regional body). Port Traffic Port traffic levels act as a ‘second opinion’ on trade volumes. However, this check needs to be used with caution as trade values and volumes not always move over time in the same way. Market Share The market share of each mode (road, rail, inland waterway, coastal shipping) for future years is based upon: Trends in historical modal split data; Evidence of government policy favouring one or more modes over others; Government and or private sector investment plans in specific modes. Sources Sources used in transport reports include local transport ministries, officially released company results and figures, established think tanks and institutes and donor agencies such as the World Bank and the Asian Development Bank. © Business Monitor International Ltd Page 71 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...].. .Indonesia Information Technology Report Q4 2012 Indonesia Economic SWOT 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... BMI forecasts 2012 Indonesian computer hardware spending of US$4.3bn, up from US$3.9bn in 2011 The market is forecast to rise at a CAGR of 17% to a value of US$8.0bn by 2016 PC shipments reported © Business Monitor International Ltd Page 25 Indonesia Information Technology Report Q4 2012 solid growth in 2011 building on a strong recovery in 2010 PC penetration remains below 10%, with Indonesian Computer... entrepreneurs, the Telecom Technology Institute in Bandung is building an IT development centre The US$2.2mn centre will act as an incubator for small firms in the IT sector © Business Monitor International Ltd Page 34 Indonesia Information Technology Report Q4 2012 Industry Forecast The Indonesian IT market should grow at a compound annual growth rate (CAGR) of 11% over 20122 016, with Indonesia forecast to... International Ltd Page 29 Indonesia Information Technology Report Q4 2012 services Banking is emerging as the most important vertical, responsible for roughly 30% of IT spending, followed by telecoms and government Services sector CAGR over 2012- 2016 is expected to be around 19% Improvements in Indonesia' s telecoms and ICT infrastructure are expected to drive long-term growth in the Indonesian IT services... awareness in a country where only 20mn people own fixed-line telephones © Business Monitor International Ltd Page 33 Indonesia Information Technology Report Q4 2012 E-Passports Indonesia' s information society development received a boost from the government's plan to start to introduce e-passports Indonesia is following in the footsteps of other South East Asian countries such as Singapore, Malaysia and Thailand... Indonesia' s dependence on foreign oil 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 Ltd Page 10 Indonesia Information Technology Report Q4 2012 Indonesia Business Environment SWOT Strengths Indonesia is South East Asia's largest... government investing more than US$150mn in IT in schools 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 © Business Monitor International Ltd Page 16 Indonesia Information Technology Report Q4 2012 the current 1:3,200 ratio of PCs to students in public... Given the focus at many businesses of controlling costs, new © Business Monitor International Ltd Page 28 Indonesia Information Technology Report Q4 2012 IT delivery models such as software-as-a-service (SaaS) and platform-as-a-service (PaaS) are expected to grow in popularity Microsoft Indonesia has reported that cloud computing accounts for around 20% of its local revenue and it has been growing at about... International Ltd Page 17 Indonesia Information Technology Report Q4 2012 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 2012 IT Market... 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 Ltd Page 23 Indonesia Information Technology Report Q4 2012 Market Overview The National ICT Council is chaired by the Indonesian president and is tasked . Copy deadline: August 2012 Indonesia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 2 Indonesia Information Technology Report Q4 2012 © Business. Table: Indonesia& apos;s Population By Age Group, 1990-2020 (% of total) 68 Indonesia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 4 Table: Indonesia& apos;s. the expense of 2G growth. Indonesia Information Technology Report Q4 2012 © Business Monitor International Ltd Page 9 Indonesia Political SWOT Strengths Indonesia managed a successful