Q2 2012 www.businessmonitor.com aUStraLIa information technology Report INCLUDES BMI'S FORECASTS ISSN 2041-7160 Published by Business Monitor International Ltd. AUSTRALIA INFORMATION TECHNOLOGY REPORT Q2 2012 INCLUDES 5-YEAR FORECASTS TO 2016 ROMA Part of BMI's Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: March 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. Australia Information Technology Report Q2 2012 © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 CONTENTS Executive Summary . SWOT Analysis . Australia IT Sector SWOT . Australia Political SWOT Australia Economic SWOT . Australia Business Environment SWOT Risk/Reward Ratings 10 Table: Asia IT Risk/Reward Ratings Q212 15 Asia IT Market Overview 16 Sectors And Verticals . 20 Australia Market Overview 23 Government Authority 23 Hardware . 23 Software . 26 IT Services . 28 Industry Developments 30 Healthcare IT . 31 Table: Computers For Schools Programme, Phase Two - Planned Spending By State . 32 Industry Forecast . 33 Table: Australia IT Sector - Historical Data & Forecasts (US$mn Unless Otherwise Stated) 35 Industry Forecast Internet . 36 Table: Telecoms Sector - Internet - Historical Data & Forecasts 36 Macroeconomic Forecast 38 Table: Australia – Economic Activity 40 Competitive Landscape . 41 Computers 41 Software . 43 IT Services . 44 Internet Competitive Landscape 46 Table: Australia Dial-Up And Broadband Internet Subscriptions, 2009-2010 47 Table: Australian Broadband Market, June 2009-June 2010 50 Company Profiles . 57 Hewlett-Packard 57 SAP 63 Microsoft Corporation . 67 Country Snapshot: Australia Demographic Data . 72 Section 1: Population . 72 Table: Demographic Indicators, 2005-2030 72 Table: Rural/Urban Breakdown, 2005-2012 . 73 Section 2: Education And Healthcare 73 Table: Education, 2002-2005 73 Table: Vital Statistics, 2005-2030 73 Section 3: Labour Market And Spending Power 74 © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 Table: Employment Indicators, 2001-2006 74 Table: Consumer Expenditure, 2000-2012 (US$) 74 Table: Average Annual Wages, 2000-2012 75 BMI Methodology . 76 How We Generate Our Industry Forecasts 76 Transport Industry . 76 Sources . 77 © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 Executive Summary BMI View: Australian IT spending is expected to reach US$21.6bn in 2012, up 4%, with BMI expecting a deceleration. The market should continue to offer opportunities, despite business concerns about the domestic carbon tax and the global economic situation. The government's ambitious broadband plans will drive development of Australia's digital economy and services such as online banking and shopping. Government tenders will drive considerable spending in future in areas such as education, e-government, transport, and healthcare. One growth area will by demand across market segments to take advantage of opportunities presented by cloud computing. Headline Expenditure Projections Computer hardware sales: US$9.2bn in 2011 to US$9.4bn in 2012, +1% in US dollar terms. Forecast in US dollar terms downwardly revised due to analyst modification although government programmes should help to shore up demand. Software sales: US$3.5bn in 2011 to US$3.7bn in 2012, +7% in US dollar terms. Forecast in US dollar terms downwardly revised due to analyst modification but enterprise resource planning (ERP), CRM and other e-business products will be increasingly popular with the small- and medium-sized enterprise (SME) market. IT Services sales: US$8.1bn in 2011 to US$8.5bn in 2012, +6.0% in US dollar terms. Forecast in US dollar terms downwardly revised due to analyst modification, with local companies trying to use computing resources more effectively. Risk/Reward Ratings: Australia's score was 70.9 out of 100.0. Australia ranks second in our latest Asia region BER table, still ahead of larger rivals such as China, India and Indonesia. The country benefited from a Country Structure score of 95. Key Trends & Developments The PC market is expected to be affected by supply issues in H112 linked to the severe flooding in Thailand in 2011. Vendors will look to ultrabooks as a new growth area, but sales are likely to be restricted to 10-15% of the PC market in 2012, due to high prices. The PC market reported mid-single digit growth in 2011, owing mainly to retailer promotions, which helped keep sales in positive growth territory. In 2012 more leading Australian private and public sector organisations are expected to launched cloud initiatives, with surveys indicating that cloud computing is a key priority for Australian CIOs. Cloud initiatives have already been implemented by many of the country's leading banks. Meanwhile, the government has adopted a six-year cloud computing strategy. © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 Government subsidies of computers in education will provide support for the market. In 2011, national and state governments continued to roll out new initiatives, and the Victoria government has invested more than US$150mn in IT in schools. New South Wales and Queensland authorities were also rolling out IT for schools projects. © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 SWOT Analysis Australia IT Sector SWOT Strengths Strong government support for ICT programmes. IT-literate population. Strong financial sector. Relatively unaffected by global economic crisis compared with Europe and the US. Weaknesses Australia has a relatively mature domestic market, with relatively slow growth rates. Sensitive to volatility in the global economy. Opportunities The National Broadband Network programme will have many direct and indirect benefits for the IT market. Phase two of the computers for schools project is expected to generate an additional US$800mn of spending. Other major IT projects in areas such as healthcare and smart cards. Green IT as companies look to make power savings. Threats The biggest threat is the global economic slowdown affecting Australia's economic activity and leading to a scaling back of IT budgets. The cheaper Australian dollar will affect consumer and business demand in the import-dependent IT market. © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 Australia Political SWOT Strengths Australia is a mature democracy with a broadly stable party system. Economic stability over recent years supports the current political system and radical groups are unlikely to gain substantial support. Weaknesses As one of the region's largest and most stable states, the country attracts many refugees and economic migrants. The issue is a key source of domestic tension and one that is unlikely to disappear over the medium term. Opportunities Australia has historically enjoyed close military ties with the US. However, with the rise of regional economic powers such as China, it will need to balance competing military and economic ties. Threats Australia's early support for the US 'War on Terror', among other things, has made Australians abroad a target for Islamic extremists. Australia's close alliance with the US, particularly under John Howard, has left a lingering feeling among some Asian governments that it is America's 'deputy sheriff' in the region. Australia Economic SWOT Strengths A free-market economy supported by a highly educated workforce. Blessed with rich natural resources, Australia's economic activity will be augmented by commodity exports and the high investment inflows into the mining sector. Weaknesses The persistent current account deficit increases vulnerability to capital flows and, by extension, currency volatility. The export basket is highly concentrated in commodities, with the consequence that the economy and currency remain vulnerable to fluctuations in world prices for metals, coal and agricultural goods. Opportunities Threats The rapid expansion of Asian economies in recent years – notwithstanding the current global recession – offers new opportunities for diversifying trading ties from core European markets. A low level of government debt has provided a certain amount of flexibility in fiscal policy to support domestic demand through the downturn. The high level of private sector debt – especially mortgage loans – poses a threat to sustained growth. A collapse in exports from a drop in resource demand from China would severely impact headline GDP growth. Australia is vulnerable to extreme weather that may lead to droughts and floods, which have become increasingly severe in past years as a result of global climate change. © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 Australia Business Environment SWOT Strengths Weaknesses Opportunities Threats A highly educated workforce and comparatively modern transport infrastructure underpin economic prospects. A number of free trade agreements with countries such as New Zealand, Thailand and the US serve as a boon for trading activities. Despite its openness, Australia requires the Foreign Investment Review Board to approve any commercial real estate investment by a foreign company or individual valued at US$5mn or more. With a population of just over 22mn, the domestic consumer base is small by regional standards. Australia is currently in talks with China, Malaysia, the Gulf Co-operation Council, Indonesia, India, Japan and South Korea regarding potential bilateral free trade agreements. Upgrade and expansion of urban infrastructure will be needed to sustain population growth in Australia's main cities, providing opportunities for public-private partnerships in the future. The government is also targeting infrastructure improvements to rural areas. Corporate taxes for foreign investors in Australia remain higher than in other countries, even as the government has promised to gradually reduce rates over the medium term. Recent investment proposals by Chinese firms regarding the resource extraction sector have raised fears that strategic assets will be lost to foreign players. © Business Monitor International Ltd Page Australia Information Technology Report Q2 2012 SAP Strengths Strong balance sheet and revenue growth outpacing that of key rival Oracle. Established multinational with strong relationships with a wide range of corporate clients around the world. Achieved revenue growth in 2011 even in recession- hit markets such as Portugal, Italy and Spain. Weaknesses Forced to turn to acquisitions in 2010 and 2011 after recent efforts at developing cloud and mobility products and services in- house did not achieve objectives. Opportunities Acquisition of SuccessFactors in December 2011, the largest cloud service by endusers, offers potential for cross-selling of SAP services. Due to Mmacroeconomic headwinds and consumer deleveraging could help grow demand for SAP products could grow, due their emphasis on operational efficiency. Product exposure in mobility, cloud and big data gives SAP the chance to benefit from industry- wide growth trends. Threats Severe macroeconomic headwinds may curtail investment in IT systems and applications. Competition from smaller more flexible players in individual areas in which it operates. Overview SAP is a global enterprise applications market leader in terms of software and softwarerelated service revenue. Founded in 1972, it has growth grown to have more than 176,000 customers in over more than 120 countries. In 2011 60% of the global transactions touched at least one SAP system. It has subsidiaries in every major country and employs over more than 54,000 people in total. SAP markets its products and services through these local subsidiaries, which are licensed to distribute SAP products in defined areas. Recent Development SAP has a traditional product portfolio consisting of its Business Suite (customer relationship management, product lifecycle management, supply chain management and supplier relationship management), the NetWeaver platform and SAP Business ByDesign, a softwareas-a-service (SaaS) enterprise resource planning solution. However, in 2010 and 2011, it turned to new business areas to expand its product portfolio both through product innovation and acquisitions. SAP had been quiet in terms of acquisitions relative to main rival Oracle until May 2010, when it picked up mobile device applications designer Sybase for US$5.8bn. Sybase currently operates as an independent business unit. The acquisition of Sybase was made to strengthen SAP's presence in mobility by using Sybase's platform to offer SAP's existing product range. In addition, SAP targeted the utilisation of its in-memory processing technology with Sybase to offer real-time mobile analytics. SAP made another significant acquisition in Q411, agreeing to pay US$3.4bn for cloud-based © Business Monitor International Ltd Page 63 Australia Information Technology Report Q2 2012 human capital management solutions provider SuccessFactors. At the time of acquisition, SussessFactors was the second largest pure cloud application firm behind after Salesforce.com, with 3,500 clients and 15mn users in 168 countries, and strengthenswhich strengthens SAP in the key growth area of cloud. SAP stressed that it sees the SuccessFactors acquisition delivering value both as a standalone proposition, through synergies with SAP's existing product portfolio and through cross-sale opportunities. Co-CEO Bill McDermott stated that only 15% of SucessFactors' customer base are existing SAP customers, demonstrating the potential for cross-selling. In addition to acquisitions targeting mobility and cloud markets, SAP has developed new products in-house, most notably HANA in October 2010. HANA is a High-Performance Analytics Appliance, offering in-memory business intelligence analytics in real-time. In Q411 SAP reported that two-thirds of revenue growth came from new innovations such as HANA, mobility and cloud. New clients in the quarter included major internationals such as Verizon, Broadcom, Groupon, Tate & Lyle, Desano and Sharp. Strategy SAP wants to become the fastest growing database company in the world and is targeting revenues of EUR20bn by 2015 equating to 10% CAGR. It has identified software and software- related service revenue growth to meet this target. Over the same period, it also wants to achieve a non-IFRS operating margin of 35%, by targeting increased efficiency across sales channels, services, support infrastructure and R&D. In terms of revenues, for the period to 2015, SAP has identified cloud, mobility and big data as the three areas to deliver additional growth. Taken together with SAP's existing target markets of business analytics, middleware and enterprise resource planning, it estimates it will be competing in a market worth a total of US$230bn by 2015. Having strengthened its cloud portfolio with the acquisition of SuccessFactors, SAP wants to take EUR2bn in revenues from cloud services in 2015, of which EUR1bn will come from SuccessFactors. Starting in 2012 cloud subscriptions and support will be reported as a separate financial indicator in SAP's quarterly results allowing for progress towards this target to be tracked. Big data and mobility are also growth markets, with mobility the most developed at the time of writing, with revenues reaching EUR110mn in Q411. Recent Financial SAP reported strong financial performance in 2011 with revenue increases across its Performance geographic footprint. Total revenue in Q411 increased 10.8% y-o-y to EUR4.498bn, with FY11 revenue increasing 14.2% to EUR14.231bn. Software and software- related service revenues, which accounted for 82.7% of total revenues in Q411, increased by 15.6% y-o-y to Q411, reaching EUR3.72bn. Meanwhile, professional service revenues, including consulting and training revenues, grew by 9.1% y-o-y to reach EUR778mn. According to SAP two-thirds of Q411 revenue growth came from net new innovation areas such as mobility and cloud. SAP reported growth in every part of its footprint with Americas revenue up 14.7% in 2011 to EUR5.09bn, Asia- Pacific revenue up 21.8% y-o-y to EUR2.15bn and EMEA revenue up 11.6% y-o-y to EUR6.989bn in 2011. [With EMEA, and specifically Europe, the largest single component of SAP's base, despite its global presence, it is significant that European revenues © Business Monitor International Ltd Page 64 Australia Information Technology Report Q2 2012 were up over 21% y-o-y, and, in those hardest hit countries such as Italy, Portugal and Spain, revenue growth averaged just over 20% y-o-y in 2011.][this sentence is a little confusing] SAP attributed this to its business focus on helping clients achieve cost efficiencies, and area that companies wish to focus on even in times of austerity. In terms of profit, operating profit increased 206.3% y-o-y to EUR1.67bn in Q411, and was up 88.3% y-o-y for FY11 at EUR4.879bn. This corresponds to an operating margin of 34.3% for 2011. Profit after tax increased slightly faster, reaching EUR3.44bn in 2011, up 89.8% y-o-y. Financial Data Revenue (2008): EUR11.57bn Revenue (2009): EUR10.67bn Revenue (2010): EUR12.46bn Revenue (2011): EUR14.23bn Revenue (Q111): EUR3.02bn Revenue (Q211): EUR3.3bn Revenue (Q311): EUR3.41bn Revenue (Q411): EUR4.5bn Operating Profit (2008): EUR2.84bn Operating Profit (2009): EUR2.64bn Operating Profit (2010): EUR2.59bn Operating Profit (2011): EUR4.88bn Operating Profit (Q111): EUR597mn Operating Profit (Q211): EUR857mn Operating Profit (Q311): EUR1.76bn Operating Profit (Q411): EUR1.67bn Net Income (Profit After Tax) (2008): EUR1.87bn Net Income (2009): EUR1.79bn Net Income (2010): EUR1.81bn Net Income (2011): EUR3.44bn Net Income (Q111): EUR403mn Net Income (Q211): EUR588mn Net Income (Q311): EUR1.25bn Net Income (Q411): EUR1.2bn © Business Monitor International Ltd Page 65 Australia Information Technology Report Q2 2012 Company Details SAP AG Dietmar-Hopp-Allee 16 69190 Walldorf Germany www.sap.com © Business Monitor International Ltd Page 66 Australia Information Technology Report Q2 2012 Microsoft Corporation Strengths Recent operating systems XP and Windows have proved popular. Strong grip on the desktop application market, with Microsoft Office holding over 90% of the office software market. Weaknesses Microsoft has received criticism in the past for problems with anticompetitive practices, stability, security and compatibility. Late entrant to the smartphone OS market sees it lag behind rivals Apple and Google. Opportunities Despite its relatively late entrance to the gaming services industry, the Xbox has enjoyed rapid success. The Windows Phone OS may yet gain a new lease of life through deployment on next-generation phones from Nokia. Interconnectivity between Microsoft's many different products and services will allow the company to capitalise strongly on its substantial investment in cloud computing. Microsoft's acquisition of Skype will further this ambition. Threats Windows division experienced a 6% decrease in Q411 revenue as PC sales fell. The economic downturn is leading customers to delay the purchase of such devices Rival Google has had a head start in the cloud computing sphere, which may mean Microsoft may miss out as devices with lower processing power become more popular, such as tablets and e-readers. Overview Microsoft Corporation develops, manufactures, licenses and supports a wide range of computing services. It was founded in 1975, and became the dominant player in the home computer market in the 1980s through its MS-DOS operating system. This was succeeded by Microsoft Windows. It also created Microsoft Office, the dominant player in the Office software suite. Microsoft is divided into five product divisions: Windows & Windows Live Division, Server and Tools, Online Services Division, Microsoft Business Division, and Entertainment and Devices Division. Windows & Windows Live Division Windows & Windows Live Division develops and markets PC operating systems, related software and online services, and PC hardware products. This division focuses on software, hardware and services designed to improve efficiency through extended browsing capabilities and operations across the user's hardware and software. The Windows Division consists of multiple editions of the Windows operating system, software and services through Windows Live and Microsoft PC hardware products. Server And Tools This area develops and markets technology and related services, with the aim to improve productivity and efficiency. Products and services under this divisioninclude Windows Server, © Business Monitor International Ltd Page 67 Australia Information Technology Report Q2 2012 Microsoft SQL Server, Windows Azure, Visual Studio, System Centre products, Windows Embedded device platforms and Enterprise Services. Enterprise Services comprise Premier product support services and Microsoft Consulting Services. It also covers developer tools, training and certification. Around 50% of this segment's revenue comes from multi-year volume licensing agreements, 30% is purchased through transactional volume licensing programs, retail packaged product and licences sold to OEMs, and the remainder comes from Enterprise Services. Online Services Division (OSD) The OSD develops and markets information and content designed to help simplify tasks and improve utility of online services. It also helps advertisers connect with their target audiences. OSD products include Bing, MSN, adCenter and advertiser tools. Bing and MSN generate revenue through the sale of search and display advertising, which accounts for nearly 100% of OSD's annual revenue. Microsoft Business Division (MBD) This division is the development and marketing arm for software and online services designed to increase productivity in teams, organisations and on a personal level. MBD offerings include Microsoft Office (comprising mainly SharePoint, Exchange, Lync and Office 365), which generates over 90% of MBD revenue. The other 10% comprises Microsoft Dynamics business solutions. Revenues are divided into business revenue, which includes Microsoft Office system revenue, generated through volume licensing agreements and Microsoft Dynamics revenue, and consumer revenue, which includes revenue from retail packaged product sales and OEM revenue. Entertainment and Devices Division (EDD) This area focuses on the development and marketing of entertainment and connectivity services. EDD products include the Xbox 360 (which includes gaming and entertainment consoles, Kinect, Xbox 360 video games, Xbox LIVE, and accessories). It also includes Mediaroom IPTV software, Skype and Windows Phone. Microsoft acquired Skype on October 13 2011. In Q112, the EDD recorded 8.2mn consoles sold, an increase of 25% y-o-y. Xbox live subscribers came to 40mn, up 33% y-o-y and the Kinect reached an installed base of 18mn units. Skype registered 200mn users. Strategy The main pinnacle of Microsoft's strategy is to increase connectivity between its products and services. Its main strategy for 2012 is expanding cloud computing, Windows Phone and the launch of Windows 8. All these elements are interconnected, and will become increasingly so. Cloud Computing and Interconnectivity In April 2011, Microsoft announced it was to spend 90%, or US$8.64bn, of its R&D budget on developing cloud computing services. Microsoft's shift towards Software-as-a-Service (SaaS) is enabling applications and services that historically have been separate to become more integrated, working to connect PCs, phones, cameras, game consoles and video and music players through client software and high-speed internet services using a combination of Windows, Windows Live and Windows Phone OS. © Business Monitor International Ltd Page 68 Australia Information Technology Report Q2 2012 Windows Phone The Windows Phone was released in Europe, Singapore, Australia, New Zealand, the US, Canada and Mexico in H210 and in Asia in H111. Microsoft and Nokia formed a strategic partnership in February 2011 to build a global mobile ecosystem based on complementary assets. Microsoft would provide developer tools, making it easier for application developers to leverage Nokia's global scale while Nokia's application and content store would be integrated into Microsoft Marketplace. The Windows Phone will play a prominent role in Microsoft's 2012 strategy. In December 2011, it revealed it was investing in a range of exclusive apps for the device, incompatible with other smartphones. The company hopes this exclusivity will tempt users to switch phones, although it has struggled to secure a number of apps popular on iOS, which will leave it disadvantaged. Windows There is also focus on Windows 8, the next version of the Windows Operating System. The beta version will be released in late February 2012. The company is aiming to have the product ready for general release in 2012, most likely Q312. Company History Microsoft was officially established on April 1975, by Paul Allen and Bill Gates, but entered the operating system business in 1980 with a version of Unix, called Xenix. They licensed this to hardware manufacturers such as Intel, Tandy and Altos. However, it was the DOS system that proved the key to Microsoft's success. In November 1980, IBM awarded a contract to Microsoft to provide a version of the system to be used in the upcoming IBM Personal Computer. While IBM rebranded the system PC-DOS, Microsoft retained ownership of the MS-DOS system, and it soon became the leading PC OS vendor. In 1984, the company released Microsoft Windows, a graphical extension for MS-DOS. In 1986, the company launched an IPO, which made 12,000 Microsoft employees instant millionaires. In 1990, the company launched the Microsoft Office suite, which joined Windows as being a dominant player in its field. However, this led to numerous legal wrangles, as Microsoft was accused of anticompetitive practices. As the internet began to gain popularity in 1995, the company expanded into computer networking and online services. This year saw the release of Windows 95, online service MSN and the web browser Internet Explorer, which set Microsoft as a pioneer in the internet era. The company moved into the video games market in 2001, with the release of the Xbox, providing a challenger to Sony and Nintendo in that market. In March 2004 the company was involved in an antitrust case against the EU which resulted in Microsoft paying EUR497mn for abuse of market dominance. The company was forced to produce new versions of Windows XP without Windows Media Player, Windows XP Home Edition N and Windows XP Professional N. Windows Vista and Microsoft 2007 were released in January 2007, which led to a record profit for Microsoft in that year. However, the legal wrangles continued and the company was fined an additional EUR899mn for lack of compliance with the 2004 ruling. Bill Gates stepped down as chief software architect in 2008, although continues to hold positions within the company to © Business Monitor International Ltd Page 69 Australia Information Technology Report Q2 2012 today. In 2008, the company launched its Azure Services Platform, its first foray into the cloud computing market. In 2010, it focused on reforming its operating system for mobile telephony, named Windows Phone OS, and refined its strategy for entering the smartphone industry. Financial Data Revenue (2008): US$61.981bn Revenue (2009): US$58.689bn Revenue (2010): US$66.69bn Revenue (2011): US$72.996bn Revenue (Q111): US$16.428bn Revenue (Q211): US$17.367bn Revenue (Q311): US$17.372bn Revenue (Q411): US$20.885bn Operating Profit (2008): US$21.912bn Operating Profit (2009): US$21.42bn Operating Profit (2010): US$26.384 Operating Profit (2011): US$28.571bn Operating Profit (Q111): US$5.709bn Operating Profit (Q211): US$6.171bn Operating Profit (Q311): US$7.203bn Operating Profit (Q411): US$7.994bn Net Income (Profit After Tax) (2008): US$17.232bn Net Income (2009): US$16.258bn Net Income (2010): US$20.568bn Net Income (2011): US$23.974bn Net Income (Q111):US$5.232bn Net Income (Q211): US$5.874bn Net Income (Q311): US$7.203bn Net Income (Q411): US$6.624bn Employees (2011): 90,000 *nb the above data is for the calendar year - Microsoft reports data according to its financial year which ends June 30. So FYQ112=Q311 © Business Monitor International Ltd Page 70 Australia Information Technology Report Q2 2012 Operational Data Company Details Consoles Sold (Q411): 8.2mn Xbox Live Subscribers (Q411): 40mn Skype Subscribers (Q411): 200mn Microsoft Corporation One Microsoft Way Redmond Washington United States WA 98052 Click here to enter text. www.microsoft.com © Business Monitor International Ltd Page 71 Australia Information Technology Report Q2 2012 Country Snapshot: Australia Demographic Data Section 1: Population Population by age, 2005:2030 (total) Population by age, 2005 75+ 75+ 70-74 70-74 65-69 65-69 60-64 60-64 55-59 55-59 50-54 50-54 45-49 45-49 40-44 40-44 35-39 35-39 30-34 30-34 25-29 25-29 20-24 20-24 15-19 15-19 10-14 10-14 5-9 5-9 0-4 0-4 -1.0 -0.5 0.0 Male 0.5 1.0 -2.0 -1.0 0.0 1.0 2030 Female 2.0 3.0 2005 Figures in millions. Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010 2020f 2030f Dependent population, % of total 32.1 32.1 35.5 38.5 Dependent population, total, ‘000 6,501 6,765 8,323 9,758 67.8 67.8 64.4 61.4 13,695 14,282 15,095 15,530 19.6 18.6 17.7 17.2 Youth* population, total, % of total 3,960 3,926 4,147 4,372 Pensionable population, % of total 12.5 13.4 17.8 21.3 2,541 2,839 4,176 5,386 Active population, % of total Active population, total, % of total Youth* population, % of total Pensionable population, total, % of total f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 72 Australia Information Technology Report Q2 2012 Section 2: Education And Healthcare Table: Rural/Urban Breakdown, 2005-2012 2005 2010 2020f 2030f Urban population, % of total 92.7 94.0 90.6 91.9 Rural population, % of total 7.3 6.0 9.4 8.1 Urban population, total, ‘000 18,679 19,927 21,217 23,239 Rural population, total, ‘000 1,476 1,274 2,201 2,048 20,155 21,201 23,418 25,287 Total population, '000 f = forecast. Source: UN Population Division Table: Education, 2002-2005 2002/03 2004/05 Gross enrolment, primary 103 104 Gross enrolment, secondary 149 149 72 73 Gross enrolment, tertiary Gross enrolment is the number of pupils enrolled in a given level of education regardless of age expressed as a percentage of the population in the theoretical age group for that level of education. Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010 2020f 2030f Life expectancy at birth, males (years) 77.6 78.5 80.6 82 Life expectancy at birth, females (years) 82.8 83.4 84.8 85.9 Life expectancy estimated at 2005. f = forecast. Source: UNESCO © Business Monitor International Ltd Page 73 Australia Information Technology Report Q2 2012 Section 3: Labour Market And Spending Power Table: Employment Indicators, 2001-2006 2001 2002 2003 2004 2005 2006 9,796 9,943 10,067 10,207 10,492 10,665 1.1 1.4 1.2 1.3 2.8 1.6 50.6 50.8 51.0 51.2 51.6 51.9 Employment, '000 9,063 9,248 9,459 9,636 9,957 10,154 – % change y-o-y 1.2 2.0 2.2 1.8 3.3 1.9 – male 5,035 5,135 5,227 5,338 5,486 5,582 – female 4,028 4,113 4,232 4,298 4,471 4,572 — female, % of total 44.4 44.4 44.7 44.6 44.9 45.0 Total employment, % of labour force 92.5 93.0 93.9 94.4 94.9 95.2 Unemployment, '000 667 637 607 571 535 526 – male 384 364 330 309 287 284 – female 283 273 277 262 248 242 – unemployment rate, % 6.9 6.4 6.0 5.6 5.1 5.0 Economically active population, '000 – % change y-o-y – % of total population Source: ILO Table: Consumer Expenditure, 2000-2012 (US$) 2000 2007 2008 2009 2010 2012f 11,934.8 23,776 24,218 23,877 23,636 24,075 Poorest 20%, expenditure per capita 3,520.8 7,014 7,144 7,044 6,973 7,102 Richest 20%, expenditure per capita 24,645.4 49,097 50,010 49,305 48,808 49,715 Richest 10%, expenditure per capita 30,314.4 60,390 61,513 60,647 60,035 61,150 Middle 60%, expenditure per capita 10,502.6 20,922 21,312 21,011 20,800 21,186 14,987.1 19,531 20,505 na na na Poorest 20%, expenditure per capita 4,421.2 5,762 6048.9 na na na Richest 20%, expenditure per capita 30,948.3 40,332 42,343 na na na Richest 10%, expenditure per capita 38,067.1 49,609 52,083 na na na Middle 60%, expenditure per capita 13,188.6 17,187 18,044 na na na Consumer expenditure per capita Purchasing power parity Consumer expenditure per capita f = BMI forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 74 Australia Information Technology Report Q2 2012 Table: Average Annual Wages, 2000-2012 2000 2007 2008 2009 2010 2011f 2012f Non-agricultural, AUD 41,309 55,812 58,644 61,460 64,448 66,076 69,273 Manufacturing, AUD 37,773 55,181 57,981 60,765 63,720 65,329 68,490 Non-agricultural, US$ 23,959 45,844 46,704 45,922 45,406 44,145 45,213 Manufacturing, US$ 21,908 45,326 46,176 45,403 44,892 43,646 44,702 f = BMI forecast. Source: ILO, BMI © Business Monitor International Ltd Page 75 Australia Information Technology Report Q2 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. Real Trade Volumes The sum of imports and exports plays a particularly important role in developing countries with a small © Business Monitor International Ltd Page 76 Australia Information Technology Report Q2 2012 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 77 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... economy should keep downward pressure on consumer spending going into 2012 © Business Monitor International Ltd Page 11 Australia Information Technology Report Q2 2012 Malaysia remains in fifth position in our Q21 2 regional ratings Recent developments such as a slowdown in Country Structure A Letdown Asia Pacific IT Risk/Reward Ratings Q21 2 production activity and falling commodity prices, which will exacerbate... Northern Territory 1.3 1,303 computers delivered to 37 secondary schools 2,041 State New South Wales Victoria South Australia Sources: BMI, official figures © Business Monitor International Ltd Page 32 Australia Information Technology Report Q2 2012 Industry Forecast In 2012, BMI forecasts Australian IT market growth of 4%, with spending of US$21.6bn, compared with US$20.8bn in 2011 According to our forecasts... The National E-Health Transition Authority aims to create a paperless environment in Australia' s health sector, including public hospitals © Business Monitor International Ltd Page 33 Australia Information Technology Report Q2 2012 Market Drivers Several factors underpin our forecast of a 5% 2012- 2016 CAGR for the Australian IT market Government tenders will drive considerable spending in future in... services to local organisations Surveys indicate that cloud computing is a top priority for Australian CIOs New cloud computing offerings and increased competition in this segment are expected to fuel demand from end-users for this © Business Monitor International Ltd Page 27 Australia Information Technology Report Q2 2012 technology In addition to cost savings, businesses will aim to boost efficiency and... regional peers © Business Monitor International Ltd Page 14 Australia Information Technology Report Q2 2012 Table: Asia IT Risk/Reward Ratings Q21 2 Limits Of Potential Returns Risks To Realisation Of Potential Returns IT Market Country Structure Limits Market Risks Country Risk Risks IT Rating Regional Rank Singapore 57.0 100.0 72.1 70.0 85.1 79.0 74.1 1 Australia 55.5 95.0 69.3 80.0 71.2 74.7 70.9 2 Hong... already accounts for more than 60% of the market by value In 2012, the PC market is projected to report low single-digit growth Business demand remains affected by concerns about the economic situation in Europe and the US, as well as domestic issues such as the © Business Monitor International Ltd Page 23 Australia Information Technology Report Q2 2012 proposed carbon tax Meanwhile, a shortage in the supply... grow from US$9.4bn in 2012 to US$10.3bn in 2016, with PC sales © Business Monitor International Ltd Page 34 Australia Information Technology Report Q2 2012 (including accessories) forecast to rise from US$7.8bn to US$8.7bn, boosted by computer procurement for education Software spending is forecast to rise from US$3.7bn to US$4.9bn and IT services from US$8.5bn to US$11.5bn Table: Australia IT Sector... projects in the public and private sectors Market Structure (% Of Total IT Market) 2011e 2015f e/f = estimate/forecast Source: BMI © Business Monitor International Ltd Page 22 Australia Information Technology Report Q2 2012 Australia Market Overview Government Authority Government Authority Department for Broadband, Communications and the Digital Economy Chairman Stephen Conroy The Department for Broadband,.. .Australia Information Technology Report Q2 2012 Risk/Reward Ratings BMI's Asia Pacific IT Risk/Reward Ratings (RRR) compares the potential of a selection of the region's markets over our forecast period through to 2016 Our Q21 2 ratings reflect our consideration of the political and economic risks, as well as the... this share is set to decline Unsurprisingly, given the high penetration levels in business and consumer segments, the Australian PC market is dominated by replacement sales Upgrades are estimated to © Business Monitor International Ltd Page 24 Australia Information Technology Report Q2 2012 account for at least 80% of business purchases and more than 50% in the case of households BMI expects a trend . Copy deadline: March 2012 Australia Information Technology Report Q2 2012 © Business Monitor International Ltd Page 2 Australia Information Technology Report Q2 2012 © Business. import-dependent IT market. Australia Information Technology Report Q2 2012 © Business Monitor International Ltd Page 8 Australia Political SWOT Strengths Australia is a mature democracy. Risk/Reward Ratings Q21 2 Source: BMI Australia Information Technology Report Q2 2012 © Business Monitor International Ltd Page 11 technologies. Furthermore, a number of leading Australian