Indonesia information technology report q4 2014

Q4 2014 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report Q4 2014 INCLUDES 5-YEAR FORECASTS TO 2018 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 2014 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 © 2014 Business Monitor International All rights reserved. All information contained in this publication is copyrighted in the name of Business Monitor International, and as such no part of this publication may be reproduced, repackaged, redistributed, resold in whole or in any part, or used in any form or by any means graphic, electronic or mechanical, including photocopying, recording, taping, or by information storage or retrieval, or by any other means, without the express written consent of the publisher. DISCLAIMER All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor International accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the publication. 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 2014 CONTENTS BMI Industry View . SWOT IT . Wireline SWOT . 11 Political . 13 Economic . 15 Business Environment 17 Industry Forecast 18 Table: IT Industry - Historical Data And Forecasts (Indonesia 2011-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Macroeconomic Forecasts . 25 Economic Analysis . 25 Table: Indonesia - Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Industry Risk Reward Ratings 29 Table: APAC IT Risk/Reward Ratings - Q4 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Market Overview . 33 Hardware . 33 Software . 43 IT Services 49 Industry Trends And Developments 52 Regulatory Development 56 Table: Key Ministers And Departments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Competitive Landscape 59 International Companies . 59 Table: Lenovo Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 Table: Intel Indonesia Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 Table: Microsoft Indonesia PT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 Table: IBM Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Table: Foxconn Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Local Companies . 64 Table: Performance PT Multipolar Technology Tbk (MLPT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 Table: Walden Global Services (WGS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: Aprisma Indonesia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 Table: ALTiUS ERP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Company Profile 67 Sigma 67 © Business Monitor International Page Indonesia Information Technology Report Q4 2014 Regional Overview 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 Industry Forecast Methodology 78 Sources 79 Risk/Reward Ratings Methodology 80 Table: It Risk/Reward Ratings Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 Table: Weighting Of Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 © Business Monitor International Page Indonesia Information Technology Report Q4 2014 BMI Industry View BMI View: our bullish outlook for the Indonesian IT market is reflected in the latest consumer confidence survey released by Nielsen in July 2014, which found Indonesians to be the second most optimistic from a cross-section of 60 markets. This supports our forecast for the Indonesian IT market to be a regional outperformer over the medium term - with IT market growth expected to benefit from strong economic growth, a low PC penetration rate, enterprise and public service modernisation and an emerging middle class. Retail hardware, enterprise software and cloud computing are expected to be key drivers of mediumterm growth. However, there is short-to-medium term downside in Indonesia as vendors face depreciation of the rupiah, which has raised the cost of dollar denominated hardware and software imports, or required vendors to absorb the costs. In the immediate future, IT spending is forecast to increase to IDR142.5trn in 2014, up 17.3% from 2013, with the IT market accounting for 1.4% of GDP. Headline Expenditure Projections Computer Hardware Sales: IDR85.5trn in 2014 to IDR131.7trn in 2018, at a compound annual growth rate (CAGR) of 12.2% in local currency terms. Growth boosted by deepening of the market as Android tablet vendors and Microsoft notebook vendors compete aggressively on price. Software sales: IDR23.9trn in 2014 to IDR43.7trn in 2018, at a CAGR of 17.5% in local currency terms. Piracy is a major drag on software market growth, but despite this demand growth in 2014 will be strong as enterprise software deployments drive spending, with modernisation in the manufacturing, mining and tourism verticals offering the greatest opportunities to vendors. IT Services Sales: IDR33.1trn in 2014 to IDR56.0trn in 2018, at a CAGR of 15.0% in local currency terms. Cloud service adoption remains low in 2014, but as telecoms infrastructure improves and end-user education levels increase cloud services are expected to gain traction. Key Trends & Developments Indonesia's hardware market has in recent years been dominated by trends affecting markets across the region, including the rapid growth of tablet volumes due to the wide array of low-cost Android devices available since mid-2012. However, there is set to be a shift starting in 2014 as notebook volumes begin to recover, and BMI forecasts solid medium term growth - particularly in emerging markets such as Indonesia. The decision by Microsoft to slash OS licensing costs on low-cost devices will enable partner vendors to © Business Monitor International Page Indonesia Information Technology Report Q4 2014 compete more aggressively on price with Android tablet vendors, while integrating many of the mobility advantages of tablets into hybrid notebook designs. We expect hybrid devices will prove popular with emerging market first-time buyer households, where functionality and productivity remain important considerations for consumers. Meanwhile in the enterprise market the development of the cloud computing market is the leading trend. Cloud computing adoption remains low in Indonesia in 2014, with Fujitsu Indonesia Country Head of Infrastructure Services and Solution (ISS) Dewi Mulia Karnadi, citing network infrastructure quality and cyber security as bottlenecks to wider deployment. In 2013 it was reported that Indonesia was responsible for 38% of the world's malicious internet traffic, surpassing China as the leading root of online attacks. This has grown from only 0.7% of recorded attacks 12 months previously, according to the US-based Akamai Technologies. The reasons behind the growth are under debate, but the implications of a dramatic increase in online attacks have worried officials. Cyber security is notoriously weak in Indonesia with networkheavy industries, such as oil and gas, most susceptible to data phishing attempts. There is however scope for rapid growth in cloud deployments as the network quality and cyber security climate strengthens over the medium term to 2018. © Business Monitor International Page Indonesia Information Technology Report Q4 2014 SWOT IT SWOT Analysis Strengths ■ Large potential market with population of almost 250mn at the end of 2013, and forecast to reach 264mn in 2018. ■ 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. ■ Local presence of major global vendors in terms of sales and production, providing linkages for local start-ups and entrepreneurs. Weaknesses ■ Underdeveloped telecommunications infrastructure, due to years of government control and slow progress in deregulation. ■ History of recent political instability. ■ High piracy rate continues to be a drag on the software market, with the highest piracy rate in the region and slow progress in reducing incidence of unlicensed software. ■ Indonesia overtook China as the largest source of cyber attack traffic in 2013, with cyber threats becoming an increasingly important issue for domestic users as well. Opportunities ■ Computer ownership is low, but rising incomes and wider internet access will enable period of rapid 'catch-up growth'. ■ Government is showing signs of taking intellectual property more seriously. ■ Strong demand for tablets and low-cost laptops from a youthful population and booming economic performance. ■ Per capita IT spending to increase rapidly as the middle class increases in size. © Business Monitor International Page Indonesia Information Technology Report Q4 2014 SWOT Analysis - Continued ■ IT services, with local telcos investing heavily in data centres, networks, machine-tomachine communication and cloud computing services. 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. ■ Rupiah weakness could have a dampening effect on household and business spending. © Business Monitor International Page 10 [...]... International Page 34 Indonesia Information Technology Report Q4 2014 Hardware Market (2011-2018) 125,000,000 100,000,000 75,000,000 50,000,000 25,000,000 0 2011 2012 2013e 2014f Personal computer sales, IDRmn 2015f 2016f 2017f 2018f Servers sales, IDRmn e/f - BMI estimate/forecast Source: BMI © Business Monitor International Page 35 Indonesia Information Technology Report Q4 2014 Enterprise Demand... We forecast a compound annual growth rate (CAGR) of 13.8% 2014- 2018, with Indonesia' s IT market expected to reach a total value of IDR231.4trn in 2018 © Business Monitor International Page 18 Indonesia Information Technology Report Q4 2014 2014 Outlook The latest consumer confidence surveys underline the buoyancy of the Indonesia economy in 2014, and we forecast the IT market will be a regional and... Source: BMI © Business Monitor International Page 32 Indonesia Information Technology Report Q4 2014 Market Overview Hardware BMI upgraded the forecast for the hardware market in Indonesia in the Q4 2014 update to better reflect the rapid growth of tablet and notebook sales We now expect the hardware market to grow by 15.4% in local currency terms in 2014 to reach a value of IDR85.5trn The withdrawal... towards Indonesia' s long term economic growth prospects Given the nature of Indonesian politics where the personality is more important than party politics, Jokowi stands a good chance of being able to canvass strong enough public support in order to push through such unpopular but necessary reforms © Business Monitor International Page 27 Indonesia Information Technology Report Q4 2014 Table: Indonesia. .. cloud portfolio in Sri Lanka in April 2014, following the launch of Amazon Web Services the leading global cloud hosting provider - in December 2013 A continuation of this trend could see Sri Lanka's score improve over the medium term © Business Monitor International Page 31 Indonesia Information Technology Report Q4 2014 Table: APAC IT Risk/Reward Ratings - Q4 2014 Rewards Country Risks Industry Rewards... Business Monitor International Page 14 Indonesia Information Technology Report Q4 2014 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... infrastructure Indonesia GVA By Sector (%) 2014f f - BMI forecast Source: BMI, National Statistics, World Bank, UN Summary The value of the hardware market is predicted to grow from IDR85.5trn in 2014 to IDR131.7trn in 2018, with PC sales (including accessories) rising from IDR64.4trn to IDR98.6trn Meanwhile, software spending © Business Monitor International Page 23 Indonesia Information Technology Report Q4 2014. .. segments of the Indonesian economy in 2014, and there are modernisation drives underway in all three verticals We expect inward investment in manufacturing facilities as wages rise in China to create demand for enterprise software deployments to connect with global supply chains, as well as create efficiencies © Business Monitor International Page 22 Indonesia Information Technology Report Q4 2014 Meanwhile,... resumption of the Cepu field, which occurred in late 2009, may help to alleviate Indonesia' s dependence on foreign oil given its small boost to production output, but we expect this bounce to be short-lived © Business Monitor International Page 15 Indonesia Information Technology Report Q4 2014 SWOT Analysis - Continued ■ Indonesia is perceived as one of Asia's riskier destinations This leaves the economy... to believe that it may not be too premature to deliberate Indonesia' s economic trajectory under a Jokowi-led administration Below, we highlight three sectors that could witness upside potential if and when Jokowi assumes the presidency © Business Monitor International Page 25 Indonesia Information Technology Report Q4 2014 The Jokowi Effect Indonesia - Jakarta Stock Exchange Index Source: Bloomberg . Q4 2014 www.businessmonitor.com INDONESIA INFORMATION TECHNOLOGY REPORT INCLUDES 5-YEAR FORECASTS TO 2018 ISSN 1750-5070 Published by:Business Monitor International Indonesia Information Technology Report. 13.8% 2014- 2018, with Indonesia& apos;s IT market expected to reach a total value of IDR231.4trn in 2018. Indonesia Information Technology Report Q4 2014 © Business Monitor International Page 18 2014. Weighting Of Components 82 Indonesia Information Technology Report Q4 2014 © Business Monitor International Page 5 BMI Industry View BMI View: our bullish outlook for the Indonesian IT market is