Q3 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 Q3 2012 INCLUDES 5-YEAR FORECASTS TO 2016 Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: July 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 Q3 2012 © Business Monitor International Ltd Page Australia Information Technology Report Q3 2012 CONTENTS Executive Summary . SWOT Analysis Australia IT Sector SWOT Australia Political SWOT . Australia Economic SWOT Australia Business Environment SWOT . 10 Asia Pacific IT Risk/Reward Ratings . 11 Table: Asia Pacific IT Risk/Reward Ratings 16 IT Markets Overview 17 IT Penetration 17 IT Growth and Drivers . 19 Sectors And Verticals . 21 Market Overview 25 Government Authority 25 Industry Developments 33 Table: Computers For Schools Programme, Phase Two - Planned Spending By State 35 Industry Forecast . 36 Market Drivers . 37 Segments 37 Summary 38 Table: Australia IT Industry - Historical Data And Forecasts, 2008-2016 38 Internet 39 Table: Telecoms Sector - Internet - Historical Data & Forecasts, 2009-2016 . 39 Competitive Landscape 41 Computers . 41 Software 43 IT Services 44 Internet 46 Table: Australia Dial-Up And Broadband Internet Subscriptions, 2009-2010 46 Table: Australian Broadband Market, June 2009-June 2010 49 ADSL2+ . 49 Naked DSL . 51 WiMAX 52 National Broadband Network Update 53 Macroeconomic Forecast . 57 Table: Australia - Economic Activity, 2011-2016 60 Company Profiles 61 SAP 61 Microsoft Corporation . 64 Hewlett-Packard 69 © Business Monitor International Ltd Page Australia Information Technology Report Q3 2012 Demographic Outlook . 75 Table: Australia's Population By Age Group, 1990-2020 ('000) 76 Table: Australia's Population By Age Group, 1990-2020 (% of total) . 77 Table: Australia's Key Population Ratios, 1990-2020 . 78 Table: Australia's Rural And Urban Population, 1990-2020 . 78 BMI Methodology . 79 How We Generate Our Industry Forecasts 79 Transport Industry . 79 Sources 80 © Business Monitor International Ltd Page Australia Information Technology Report Q3 2012 Executive Summary BMI View: Australian IT sales are expected to reach US$21.6bn in 2012, up 4%, with BMI expecting an increase in consumer and business spending. 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. Growth areas in 2012 will include tablets and 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 unchanged as 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 unchanged and cloud-based delivery should boost sales of enterprise resource planning (ERP) and other e-business products to 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 unchanged, with cloud services a growth area as local companies try to use computing resources more effectively. Risk/Reward Ratings: Australia's score was 73.2 out of 100.0. Australia ranks second in our latest Asia region RRR table, still ahead of larger rivals such as China, India and Indonesia. Key Trends & Developments We expect the growing popularity of tablets to continue in 2012, with shipments reaching around 2mn units. By the end of 2012, it has been forecast that as many as 40% of Australians could be using a tablet PC, with population penetration at around 20%. On this forecast, the diffusion curve of tablets would be steeper than for almost any other consumer electronics product of recent years. A significant opportunity will be services that enable the use of cloud computing models such as SaaS and IaaS. Organisations in many industries are keen to drive down costs by using cloud computing models, but one priority for IT services vendors will be to address concerns about cloud security. In 2012 more leading Australian private and public sector organisations are expected to launch cloud initiatives, with surveys indicating that cloud computing is a key priority for Australian CIOs. © Business Monitor International Ltd Page Australia Information Technology Report Q3 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 Q3 2012 SWOT Analysis Australia IT Sector SWOT Strengths Weaknesses Opportunities Threats Strong government support for ICT programmes. IT-literate population. Strong financial sector. Relatively unaffected by global economic crisis compared with Europe and the US. Australia has a relatively mature domestic market, with relatively slow growth rates. Sensitive to volatility in the global economy. 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. 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 Q3 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. © Business Monitor International Ltd Page Australia Information Technology Report Q3 2012 Australia Economic SWOT Strengths Weaknesses Opportunities Threats 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. 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. 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 Q3 2012 Windows, Windows Live and Windows Phone OS. 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 © Business Monitor International Ltd Page 66 Australia Information Technology Report Q3 2012 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 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 © Business Monitor International Ltd Page 67 Australia Information Technology Report Q3 2012 year which ends June 30. So FYQ112=Q311 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 www.microsoft.com © Business Monitor International Ltd Page 68 Australia Information Technology Report Q3 2012 Hewlett-Packard Strengths HP is the world's largest manufacturer of personal computers and enjoys global brand recognition. Extensive distribution channel. Strong presence in the enterprise and consumer markets - also a key government agencies supplier. Weaknesses Strong inventory (negative cash conversion cycle) and supply chain management. Healthy financial position, enabling Dell to grow through mergers and acquisitions. Traditional desktop business under threat from mobile alternatives - even so, notebook sales are also falling as the tablet form factor is increasingly favoured; HP's own foray into the tablet market was badly handled and any future investment in tablets would be questioned by investors and analysts. Low-cost rivals - mainly from Asia - undermine what little traction HP still has in the mobile computer field. Expansion into the Big Data and cloud computing sectors requires years of investment with few immediate returns. Opportunities With deep expertise and a significant client base in the servers market, HP is well placed to benefit from growing demand for Big Data and cloud computing solutions. Deep cash resources have allowed HP to round out key skills and knowledge areas formerly lacking, enabling it to compete on a broader front with key competitors or outpace other rivals. Threats The PC-manufacturing arm of HP accounts for more than 25% of revenues, yet sales are falling and margins continue to be pared back. A slow recovery in the hard disk drive manufacturing sector would prolong inventory tightness, which could see PC prices remain elevated. Further deterioration in the global economy would dampen consumer and enterprise demand. Multiple IT and new business acquisitions could take time to fully integrate as existing and prospective clients need reassurance that its strategy will not change further and that rivals will not produce more compelling solutions. Overview Hewlett-Packard Company (HP) is a global provider of products, technologies, software, solutions and services to individual consumers, small- and medium-sized businesses and large enterprises, including customers in the government, health and education sectors. Key offerings span: personal computing; multi-vendor customer services; imaging and printingrelated products and services; and enterprise information technology infrastructure. Currently, the company is transforming itself to deal with the growing demands for so-called 'Big Data' solutions and cloud computing platforms. This transformative process has led, in equal © Business Monitor International Ltd Page 69 Australia Information Technology Report Q3 2012 measure, to controversial and well-received strategic decisions. The company continues to be scrutinised closely by analysts keen to see a successful reorientation. Analysts also see HP as a barometer for broader trends in technological development. HP's shares are primarily traded on the New York Stock Exchange and, as of January 2012, top shareholders included Dodge & Cox (5.9%), State Street Global Advisors (5.2%), Vanguard Group (4.1%), BlackRock Institutional Trust Company (3.6%), State Farm Insurance Companies (2.1%), AllianceBernstein (1.9%), Capital Research Global Investors (1.8%) and Fidelity Management & Research Company (1.7%). Some of these companies also own shares through mutual funds. Business Structure At the time of writing, HP was organised around seven business segments: Personal Systems Group (PSG); Services; Imaging and Printing Group (IPG); Enterprise Servers, Storage and Networking (ESSN); HP Software; HP Financial Services; and Corporate Investments. PSG provides PCs (desktops, notebooks, tablets), calculators and related accessories, software and services. PCs predominantly utilise the Microsoft Windows OS and use processors supplied by Intel and AMD. Services provides consulting, outsourcing and technology services across infrastructure, applications and business process domains. Services is divided into four main business units: infrastructure technology outsourcing, technology services, applications services and business process outsourcing. IPG provides consumer and commercial printer hardware, supplies, media and scanning devices. IPG is also focused on imaging solutions for commercial markets. ESSN provides server, storage and networking products in a number of categories. HP's Converged Infrastructure portfolio of servers, storage and networking combined with HP Software's Cloud Service Automation software suite comprise HP's CloudSystem. ESSN aims to optimise the combined product solutions required by different customers and provide solutions for a wide range of environments. Products are offered under the following categories: Industry Standard Servers; Business Critical Systems; Storage; and Networking. HP Software provides enterprise IT management software, information management solutions and security intelligence/risk management services. Solutions are delivered in the form of traditional software licences or as software-as-a-service (SaaS). Mergers & Acquisitions The competitive and fast-changing nature of the technology markets HP serves means that it is often necessary to acquire competitive or complementary businesses in order to keep pace with change, add key products and technologies to the solutions portfolio and to arm itself with the patents and knowledge necessary to evolve its offerings in line with customer requirements. Since 2001, HP has completed 59 mergers or acquisitions, including the following key businesses: Compaq Computer Corporation (2001, gave HP a thriving personal computer © Business Monitor International Ltd Page 70 Australia Information Technology Report Q3 2012 business that has become the leading provider of PCs globally); StorageApps (2001, US$350mn, storage virtualisation solutions); Extreme Logic (2003, e-business solutions provider); Snapfish (2005, an online photo service); SPI Dynamics (2007, web application security assessment software); EDS (2008, US$13.9bn, IT and business process outsourcing technology); 3Com (2009, US$2.7bn, networking switching, routing and security solutions); Palm (2010, US$1.2bn, connected multimedia devices, including smartphones and a next generation operating system, webOS); 3PAR (2010, US$2.35bn, utility storage solutions and related technology); and, Autonomy Corporation (2011, US$276mn, enterprise infrastructure software). In August 2011, however, HP CEO Leo Apotheker announced a company transformation aimed at strengthening its capabilities in the enterprise sector and positioning it favourably for the shift away from discrete internal networking solutions to cloud-based models. A key part of this transformation was the discontinuation of webOS devices, specifically the Palm Pre family of smartphones and the TouchPad range of tablet computers, the first of which had only been launched less than two months earlier. It was also announced that HP would consider its options for the Personal Systems Group, including - potentially - its complete disposal or a partial spin-off. The rationale behind these decisions was that margins for the PC business had been eroded to the point where HP could no longer afford to focus marketing and development costs yet still offer a quality product. Meanwhile, it was decided that the longterm costs of developing webOS for smartphones and tablets also outweighed the likely return on investment at a time when Google's Android had quickly come to dominate the market where there were already four high-profile OSs. In January 2012, HP decided to turn webOS to the open source developer community; it will still derive income from licensing the software. Investors and analysts who were already concerned that HP had overpaid for Palm in the first place and that the TouchPad had not been given sufficient time to establish itself in the nascent tablet market were alarmed by this turn of events. Many were also less than sanguine about the prospect of HP jettisoning its biggest division in terms of revenue, though, with Asian competitors forcing a price war in the PC segment, this was perhaps not surprising in retrospect. The announcement also coincided with the agreement to purchase Autonomy and came as many technology companies were buying rivals and peers for the patents they considered most useful in fending off competitors in the future; in this light, investors argued that HP was overpaying for Autonomy products and assets that might never deliver a return on investment. The muddled execution of these announcements and a lack of a definitive post-PSG strategy eventually cost Apotheker his job. He stepped down as CEO in late September 2011, less than a year after taking on the role. In that time, HP's share price halved in value. His successor is Meg Whitman, an HP director since January 2011. Under Whitman's leadership, HP has promised to consider retaining the PSG business and a lifeline, of sorts, has been © Business Monitor International Ltd Page 71 Australia Information Technology Report Q3 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. 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, © Business Monitor International Ltd Page 72 Australia Information Technology Report Q3 2012 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 Results 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 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. Operational Data Financial Data • 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 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 © Business Monitor International Ltd Page 73 Australia Information Technology Report Q3 2012 Company Details 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 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 • Hewlett-Packard Company • 3000 Hanover Street Palo Alto California 94304 United States • +1 650 857 1501/ • www.hp.com © Business Monitor International Ltd Page 74 Australia Information Technology Report Q3 2012 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 Australia'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 75 Australia Information Technology Report Q3 2012 Table: Australia's Population By Age Group, 1990-2020 ('000) 1990 1995 2000 2005 2010 2012f 2015f 2020f 17,096 18,118 19,164 20,404 22,268 22,919 23,793 25,241 0-4 years 1,260 1,300 1,276 1,289 1,458 1,535 1,588 1,661 5-9 years 1,262 1,293 1,354 1,339 1,365 1,413 1,523 1,645 10-14 years 1,244 1,296 1,337 1,400 1,406 1,413 1,426 1,576 15-19 years 1,396 1,276 1,328 1,399 1,505 1,508 1,500 1,505 20-24 years 1,369 1,420 1,299 1,426 1,643 1,647 1,629 1,602 25-29 years 1,419 1,394 1,447 1,389 1,626 1,690 1,742 1,714 30-34 years 1,391 1,454 1,432 1,510 1,498 1,557 1,693 1,802 35-39 years 1,315 1,425 1,495 1,488 1,630 1,608 1,557 1,745 40-44 years 1,259 1,332 1,450 1,538 1,536 1,593 1,679 1,600 45-49 years 985 1,258 1,342 1,469 1,586 1,578 1,563 1,703 50-54 years 818 974 1,258 1,339 1,471 1,531 1,588 1,565 55-59 years 730 803 968 1,239 1,319 1,364 1,453 1,570 60-64 years 735 707 791 942 1,233 1,271 1,285 1,419 65-69 years 660 689 678 760 905 1,020 1,181 1,236 70-74 years 489 589 630 628 702 745 844 1,108 75+ years 765 907 1,079 1,247 1,387 1,444 1,543 1,790 Total years f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 76 Australia Information Technology Report Q3 2012 Table: Australia's Population By Age Group, 1990-2020 (% of total) 1990 1995 2000 2005 2010 2012f 2015f 2020f 0-4 years 7.37 7.17 6.66 6.32 6.55 6.70 6.67 6.58 5-9 years 7.38 7.14 7.06 6.56 6.13 6.17 6.40 6.52 10-14 years 7.28 7.15 6.98 6.86 6.31 6.17 5.99 6.24 15-19 years 8.16 7.04 6.93 6.86 6.76 6.58 6.30 5.96 20-24 years 8.01 7.84 6.78 6.99 7.38 7.19 6.85 6.35 25-29 years 8.30 7.70 7.55 6.81 7.30 7.38 7.32 6.79 30-34 years 8.14 8.03 7.47 7.40 6.73 6.79 7.11 7.14 35-39 years 7.69 7.87 7.80 7.29 7.32 7.02 6.54 6.91 40-44 years 7.36 7.35 7.57 7.54 6.90 6.95 7.06 6.34 45-49 years 5.76 6.94 7.00 7.20 7.12 6.89 6.57 6.75 50-54 years 4.78 5.38 6.57 6.56 6.61 6.68 6.67 6.20 55-59 years 4.27 4.43 5.05 6.07 5.92 5.95 6.11 6.22 60-64 years 4.30 3.90 4.13 4.62 5.54 5.54 5.40 5.62 65-69 years 3.86 3.80 3.54 3.72 4.06 4.45 4.96 4.90 70-74 years 2.86 3.25 3.29 3.08 3.15 3.25 3.55 4.39 75+ years 4.48 5.00 5.63 6.11 6.23 6.30 6.49 7.09 f = BMI forecast. Source: World Bank, UN, BMI © Business Monitor International Ltd Page 77 Australia Information Technology Report Q3 2012 Table: Australia's Key Population Ratios, 1990-2020 1990 1995 2000 2005 2010 2012f 2015f 2020f Dependent ratio, % of total working age 49.7 50.4 49.6 48.5 48.0 49.3 51.7 55.6 Dependent population, total, '000 5,679 6,074 6,355 6,663 7,222 7,571 8,104 9,016 Active population, % of total 66.8 66.5 66.8 67.3 67.6 67.0 65.9 64.3 Active population, total, '000 11,417 12,045 12,809 13,740 15,046 15,348 15,689 16,224 Youth population, % of total working age 33.0 32.3 31.0 29.3 28.1 28.4 28.9 30.1 Youth population, total, '000 3,766 3,889 3,967 4,028 4,228 4,362 4,537 4,883 Pensionable population, % of total working age 16.8 18.1 18.6 19.2 19.9 20.9 22.7 25.5 Pensionable population, '000 1,914 2,185 2,388 2,635 2,994 3,209 3,568 4,134 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: Australia's Rural And Urban Population, 1990-2020 1990 1995 2000 2005 2010 2012 2015 2020 Urban population, % of total 85.4 86.1 87.2 88.2 89.1 89.4 89.9 90.6 Rural population, % of total 14.6 13.9 12.8 11.8 10.9 10.6 10.1 9.4 Urban population, '000 14,573.6 15,560.0 16,701.4 17,988.2 19,841.1 20,493.9 21,390.2 22,868.0 Rural population, '000 2,491.5 2,512.0 2,451.6 2,406.6 2,427.3 2,424.8 2,403.1 2,372.6 Source: World Bank, UN, BMI © Business Monitor International Ltd Page 78 Australia Information Technology Report Q3 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 79 Australia Information Technology Report Q3 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 80 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... the past few years, Australia has been the global vanguard of virtualisation of X86 servers, even if the rate is slackening © Business Monitor International Ltd Page 29 Australia Information Technology Report Q3 2012 Strong growth in demand for cloud computing services is expected in 2012 A broad range of Australian organisations, from Australia Post to the Commonwealth Bank of Australia, now use cloud... with the release of Kindle's new lower cost Wi-Fi Kindle, which will retail in Australia for AUD178, likely to help to bring down average prices © Business Monitor International Ltd Page 28 Australia Information Technology Report Q3 2012 Software Software is expected to account for about 17% of the Australian IT market in 2012, with estimated spending of US$3.7bn As the focus moves from hardware to... available in every administrative village in central © Business Monitor International Ltd Page 18 Australia Information Technology Report Q3 2012 and eastern China and every township in the west In Australia, the government's commitment to develop the National Broadband Network should further the development of Australia' s digital economy Meanwhile, the growth of Wi-Fi coverage will be one driver of notebook... manufacturing and other sectors © Business Monitor International Ltd Page 20 Australia Information Technology Report Q3 2012 In more developed markets, such as Hong Kong and Singapore, robust retail IT Market Compound Growth sales the led way in 2011, as evidenced 2012- 2016 (%) by the strong advance sales of Apple's iPad2 In 2012 vendors hope that the iPad 3 and ultrabooks will provide new growth areas... for an escalation of its cloud strategy over the next few years In 2012 more leading Australian private and public sector organisations are expected to launched cloud initiatives and the government has adopted a six-year cloud computing strategy © Business Monitor International Ltd Page 24 Australia Information Technology Report Q3 2012 Market Overview Government Authority Government Authority Department... tablets, as well as government programmes and growing © Business Monitor International Ltd Page 25 Australia Information Technology Report Q3 2012 broadband penetration The fastest-growing segment is notebooks, which already accounts for more than 60% of the market by value In 2012, the PC market is projected to report low single-digit growth By Q411, there were signs of weakening consumer demand Meanwhile,... netbooks Netbooks were never as popular in Australia as in some © Business Monitor International Ltd Page 27 Australia Information Technology Report Q3 2012 other markets, peaking at around 16% of the PC market, and the emergence of tablets is expected to result in a continued decline in the netbook share We expect the growing popularity of tablets to continue in 2012, with shipments reaching around 2mn.. .Australia Information Technology Report Q3 2012 Australia Business Environment SWOT Strengths 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 Weaknesses Despite its openness, Australia requires the... People's Bank of China's decision to cut its reserve requirement ratio in February 2012 and a sharp drop in the HSBC flash purchasing managers' index for China to 48.1 in March 2012 from 49.6 in the previous month providing support © Business Monitor International Ltd Page 12 Australia Information Technology Report Q3 2012 A Chinese economic slowdown would negatively affect the IT market growth, albeit... Monitor International Ltd Page 31 Australia Information Technology Report Q3 2012 may reinforce the logic of outsourcing non-core functions in some cases, as companies will be less willing to spend on in-house IT capabilities Telecoms companies such as Telstra and Optus have rolled out cloud computing service offerings from Australian datacentres Meanwhile, the majority of Australia' s top banks such as . Copy deadline: July 2012 Australia Information Technology Report Q3 2012 © Business Monitor International Ltd Page 2 Australia Information Technology Report Q3 2012 © Business. import-dependent IT market. Australia Information Technology Report Q3 2012 © Business Monitor International Ltd Page 8 Australia Political SWOT Strengths Australia is a mature democracy. 57 Table: Australia - Economic Activity, 2011-2016 60 Company Profiles 61 SAP 61 Microsoft Corporation 64 Hewlett-Packard 69 Australia Information Technology Report Q3 2012 ©