Published by BUSINESS MONITOR INTERNATIONAL LTD Indonesia Information Technology Report Q2 2009 ISSN: 1750-5070 Including 5-year industry forecasts Business Monitor International Mermaid House, Puddle Dock London EC4V 3DS UK Tel: +44 (0)20 7248 0468 Fax: +44 (0)20 7248 0467 email: subs@businessmonitor.com web: http://www.businessmonitor.com © 2009 Business Monitor International. All rights reserved. All information, analysis, forecasts and data provided by Business Monitor International Ltd is for the exclusive use of subscribing persons or organisations (including those using the service on a trial basis). All such content is copyrighted in the name of Business Monitor International, and as such no part of this content may be reproduced, repackaged, copied or redistributed without the express consent of Business Monitor International Ltd. All content, including forecasts, analysis and opinion, has been based on information and sources believed to be accurate and reliable at the time of publishing. Business Monitor International Ltd makes no representation of warranty of any kind as to the accuracy or completeness of any information provided, and accepts no liability whatsoever for any loss or damage resulting from opinion, errors, inaccuracies or omissions affecting any part of the content. Indonesia Information Technology Report Q2 2009 Including 5-year industry forecasts by BMI Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Publication date: April 2009 Business Monitor International Mermaid House, Puddle Dock, London, EC4V 3DS, UK Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: subs@businessmonitor.com Web: http://www.businessmonitor.com © 2009 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 Q2 2009 © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 CONTENTS Executive Summary .5 SWOT Analysis .8 Indonesia IT Sector SWOT . Indonesia Telecoms Sector SWOT . Indonesia Political SWOT 10 Indonesia Economic SWOT . 11 Indonesia Business Environment SWOT 12 Asia Regional IT Markets Overview 13 IT Penetration 13 Market Growth And Drivers 15 Sectors And Verticals . 17 IT Business Environment Ratings 19 Table: Regional IT Business Environment Ratings 21 Market Overview .22 Government Authority 22 History And Market Structure 22 Bandung Hi-Tech Valley SWOT . 23 Hardware . 24 Table: Computer Spending By Sector, 2007 Estimate 25 Software . 25 Services 26 Industry Developments 28 Industry Forecast Scenario .30 Table: Indonesia’s IT Industry – Historical Data And Forecasts (US$mn unless otherwise stated) 31 Internet 32 Table: Telecoms Sector – Internet – Historical Data & Forecasts 32 Macroeconomic Forecast 34 Table: Indonesia – Economic Activity 36 Country Context .37 Table: Consumer Expenditure, 2000-2012 (US$) 37 Table: Rural/Urban Breakdown, 2005-2030 . 37 Competitive Landscape .38 Hardware . 38 Software . 39 IT Services . 40 Internet Competitive Landscape 41 Table: Regional Broadband Penetration Overview, 2007 . 41 Company Monitor .42 IBM Indonesia . 42 © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 Oracle 43 Sigma Cipta Caraka (SCC) 44 HP 46 Country Snapshot: Indonesia Demographic Data 47 Section 1: Population . 47 Table: Demographic Indicators, 2005-2030 47 Section 2: Education And Healthcare 48 Table: Education, 2000-2005 48 Table: Vital Statistics, 2005-2030 48 Section 3: Labour Market And Spending Power 49 Table: Employment Indicators, 2001-2006 49 Table: Average Annual Manufacturing Wages, 2000-2012 (IDR) . 49 BMI Forecast Modelling .50 How We Generate Our Industry Forecasts 50 IT Industry . 50 IT Ratings – Methodology 51 Table: IT Business Environment Indicators . 52 Weighting . 53 Table: Weighting Of Components 53 Sources 53 © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 Executive Summary Market Overview The Indonesian IT market should grow at a CAGR of around 9% between 2008 and 2013, despite signs in 2008 of an IT spending slowdown as demand in key segments was affected by the global economic crisis. Some organisations were cutting IT budgets, particularly in the financial sector which had previously accounted for as much as 30% of total spending. Relatively low levels of government IT spending compared with many other states may also mean that the IT market lacks a stabiliser which could help immunise it from the slowdown. However, by 2013, the hardware-dominated IT market should reach a value of US$5.1bn, with Indonesia displaying faster growth than many ASEAN neighbours. Some fundamental drivers including low computer penetration, and growing affordability, and these should ensure that the market remains in positive growth territory. Private consumption, which makes up more than 60% of GDP, continued to grow strongly in HY208, with an easing of inflationary pressures. The SME sector of 42.2mn companies will drive demand for basic hardware and applications Industry Developments Indonesia’s Department of Communications and Informatics (Depkominfo) is rolling out a new platform to increase the efficiency of a number of department services. The new system will be deployed to help expedite processing of permit applications, as well as increasing transparency of procurement and other department operations. Among other current projects, Indonesia’s state enterprises ministry is to launch an e-procurement system that will standardise procurement in 25 state-owned companies. The companies include some of the largest in Indonesia, such as oil and gas company PT Pentamina and electricity firm PT PLN. The government is also rolling out new e-learning initiatives, which could see education’s share of the local IT spending rise from its estimated level of around 4%. The current ratio of PCs to students in public schools is around 1:3200 and the government wants to increase this to 1:20. As there are 53mn students in Indonesia’s schools system, this would require at least 2.5mn computers. Competitive Landscape International vendors dominate the Indonesian brand PC market, with Acer the leader in the notebook sector and HP the overall leader. A number of local PC and notebooks brands also enjoy increasing success, including Zyrex and Ion. In 2008 Dell, the leading desktop supplier in the government and big © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 corporate segments with around a 12% share, rolled out a new strategy to target Indonesia’s consumers. Dell introduced new products and added new channel partners such as its new partnership with retail network Metrodata. In 2008, following Asus’ initial success with its Eee PC, the netbook segment witnessed a series of releases from the main international vendors. HP released a series of consumer netbooks called HP Mini, while Dell Indonesia launched some of its own Mini Netbook series, including the Inspiron Mini, which featured a relatively larger keyboard. Acer launched its popular Aspire 3G netbook on the local market. Market leader Microsoft Indonesia reported a 30% year-on-year rise in revenues in its fiscal year 2008, well above the company’s global average of 18%. Microsoft has recently been involved in IT for Education initiatives, announcing a co-operation with telecoms company PT Telkom and local software company PT Pesona Edukasi on an educational software development programme. Computer Sales Computer sales (including notebooks and peripherals) will be worth around US$2.5bn in calendar year 2009, according to BMI estimates, up from US$2.4bn in 2008. Growth slowed a bit in 2008 and is seen as easing further in 2009 before ticking up again in 2010. Early results from 2009 were moderately encouraging, with sales in January at a similar level to the same period of the previous year, according to industry figures. Spending on IT hardware is likely to slow from some organisations, particularly in the financial sector, or amid trading companies with exposure to export markets affected by the global economic slowdown. However, the low levels of computer penetration in both consumer and Software For 2009, software sales are projected by BMI at US$406mn, up from an estimated US$377mn in 2008, despite the continuing piracy problem, which, by the local government’s own figures, loses Indonesian software companies alone more than US$100mn a year. In 2008 Indonesia was ranked as the country with the twelve highest level of software piracy in the world, at around 84%. Application software accounts for more than 40% of the total software market currently. Within the applications segment, the single largest segment is back-office applications, accounting for around two-thirds of sales. Inventory is an entry-point application for many businesses. IT Services Indonesia’s IT services market is expected to be worth US$595mn in 2009, recording year-on-year (y-oy) growth of 15% from US$564mn in 2008, based on BMI estimates. Currently, IT services account for only 17% of Indonesia’s hardware-centric IT market sales. Hardware deployment services remain the largest Indonesian IT services category, with approximately a 20% share. Currently, opportunities are © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 mainly in fundamental services such as system integration, support systems, training, professional services, outsourcing and internet services. E-Readiness Only about 18% of Indonesians have internet access currently, translating into around 41mn users. Low telephone line density, high charges and low PC penetration are all significant obstacles. However, the picture is not all bad, as there are signs of faster growth in user numbers, and recent surveys have shown that among a very small elite, there is fast adoption (by regional standards) of broadband and a willingness to pay for video conferencing, security and other additional features. BMI estimated that there were around 1.4mn broadband users in 2007, representing a 0.6% penetration rate. The government is encouraging fixed wireless deployments, including WiMax, to bring internet to more remote areas. The government is rolling out an internet-based National Education Network, which involves 1,000 network points in five clusters nationwide and is designed to facilitate the use of internet in schools. Despite some advances in e-education, constraints remain due to poor infrastructure and lack of public awareness in a country where only 20mn people own fixed-line telephones. © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 SWOT Analysis Indonesia IT Sector SWOT Strengths Weaknesses Opportunities Threats ƒ Large potential market ƒ Market may be entering faster growth stage; forecast to grow faster than most other ASEAN markets over the review period, due to currently underdeveloped nature ƒ Computer penetration among the lowest in South East Asia, estimated at only around 1.5% ƒ Underdeveloped telecommunications infrastructure, due to years of government control and slow progress in deregulation ƒ Lack of government support. Still no unified ICT ministry ƒ History of recent political instability ƒ Legal concerns such as intellectual property rights a deterrent to foreign investment ƒ Some positive trends: computer ownership and internet access is on the rise, and government is showing signs of taking intellectual property more seriously ƒ Per-capita IT spending to increase by 50% between 2008 and 2013 ƒ Opportunities exist in services such as system integration, support systems, training, professional services, outsourcing and internet services ƒ Computer sales predicted to show faster growth than almost anywhere in ASEAN over the next few years, although from a lower base ƒ Continuing lack of government action to support increased PC penetration and internet access, and drive ICT sector development ƒ Global economic slowdown may hit key demand segments, including banks © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 Indonesia Telecoms Sector SWOT Strengths Weaknesses Opportunities Threats ƒ Fast growing mobile sector due to the emergence of greater competition ƒ Presence of key strategic investors including SingTel, ST Telemedia of Singapore, Telekom Malaysia and Maxis of Malaysia, Hong Kong’s Hutchison and the United Arab Emirates (UAE)’s Etisalat ƒ Security and corruption issues still make Indonesia a risky investment climate ƒ Limited mobile spectrum due to overcrowding in the sector, following government decision to open the market to greater competition ƒ Mobile broadband spectrum fees remain high for operators, reducing implementation and variety of tariffs ƒ Operators struggling with raised costs after the government forced companies to charge a fee based on costs rather than share part of their revenues ƒ Mobile market expected to surge over the coming years, reaching nearly 431mn in 2013 ƒ Popularity of mobile value-added/data services offers potential to international content providers ƒ Growth of 3G telephony will lead to investment opportunities for content providers and distributors ƒ Government registration scheme did lead to short-term fall in fixed wireless, and mobile users as non-registrants are deactivated ƒ Dominance of prepaid market leading to falling ARPU rates ƒ Mobile operators could put too much emphasis on 3G mobile network expansion when consumer demand is unproven, at the expense of 2G growth © Business Monitor International Ltd Page Indonesia Information Technology Report Q2 2009 year before, and Dell includes the country on a list of 14 priority emerging markets. The company expects the consumer segment to contribute around 20% of the company’s Indonesia income. In contrast to Dell, Lenovo’s strategy was already to focus on the consumer market with its own products while supplying IBM legacy products for the commercial market. Lenovo’s desktop computers range in price from US$490 to US$1,100 and its notebooks from US$700 to US$2,000. Dell’s overall commitment to Indonesia was demonstrated, however, when it moved its South East Asia regional headquarters from Singapore to Jakarta, and it has also set up 10 service centres in nine major cities in the country. Vendors were also stepping up initiatives to reach out to SMEs. Enterprises account for 70-80% of all sales in the country, while SMEs make up more than 90% of businesses. HP intensified its focus on SMEs in 2008 by launching several new computer portfolios specifically targeted at SMEs. Meanwhile, IBM Philippines launched a local version of its Express IT package, which offers a range of hardware, software and related services to SMEs. Prices range from US$1000 to US$150,000 and the new scheme offers various backup features. IBM Indonesia claims to service around 2,500 SME clients in various industries. For its part, Microsoft was offering an up to 25% discount to SMEs that purchased the Windows Starter Edition. Software Market leader Microsoft Indonesia reported a 30% year-on-year rise in revenues in its fiscal year 2008, well above the company’s global average of 18%. Microsoft has more than 3,500 business partners in Indonesia and has been active in IT for Education initiatives, recently announced a co-operation with telecoms company PT Telkom and local software company PT Pesona Edukasi on an educational software development programme. Microsoft founder Bill Gates visited Indonesia in May 2008 and discussed supporting the government’s programme provide low-cost computers plus software for schools. However, the government’s proposed co-operation with Microsoft and Intel on a US$200 affordable PC programme has been criticised by some parties in Indonesia. Over the years the government has made a number of attempts to promote open source software. In 2005, the government launched the ‘Indonesia Goes Open Source’ (IGOS) initiative, hoping to counter software piracy, reduce dependency on proprietary software and encourage local manufacturers. The government has also launched repeated, largely unsuccessful, campaigns to convince consumers to shift to open source. In June 2004, five ministries had signed a declaration to use open source. However, of the five, only the Ministry of Research and Technology really acted, with 92% of its computers now running on open © Business Monitor International Ltd Page 39 Indonesia Information Technology Report Q2 2009 source. The barrier appears to be the reluctance of civil servants to invest time in learning how to use the open source applications. The government has now said that it is drafting ‘new kinds of co-operation agreements’ that could be made between Microsoft and the Indonesian government. In the enterprise applications segment, leading global vendor SAP has said that it was optimistic that it could maintain its recent 60% annual growth momentum in Indonesia, despite the global economic slowdown. In 2008 the company predicted that it would surpass the 90 contracts secured in 2007. However, it admitted that most growth potential currently would come from up-selling to existing customers. Overall SAP has 350 enterprise clients in the country, spread across segments. The company has been targeting the financial sector, with Bank Ekonomo among recent customers, implementing SAP’s Human Capital Management solution. IT Services Major IT services vendors report a growing demand in the telecoms, manufacturing and banking sectors. Oracle recently signed an agreement with local IT solutions provider PT Sigma Cipta Caraka (Sigma) to provide outsourcing services. The arrangement will focus on providing big companies with business related software that ensures security, performance and business continuity as well as manpower. IBM won a contract from Excelcomindo to supply the telecoms company with a network fault and performance management system. Meanwhile, HP, which is currently promoting the idea of Business Technology (BT) in Indonesia, is to intensify its IT infrastructure recovery service. IBM has recently announced partnership with local firm PT Mitra Integrasi Informatika (MII) to introduce its technology and consolidate servers at its branch offices across the country. Local companies are also looking to leverage their advantages in the market. Sigma is targeting a 40% growth in its managed services business in 2008. To achieve this, the company is expanding operations, and recently spent US$7mn on a new IT Disaster Recovery Centre in Surabaya. The new facility is due to start operation in 2008. Managed services currently account for around 42% of Sigma’s total revenues, and the company is planning to expand across a number of verticals, including auto and manufacturing, as well as its core area of financial. Earlier in 2008, Telkom Indonesia acquired an 80% stake in Sigma. The giant telecoms company is hoping for synergies between Sigma’s core customer base of 170, mainly banks. Telkom said that they saw the move as the beginning of Telkom Group’s entry into Indonesia’s IT services market. The move is one of the largest IT services acquisitions in Indonesia’s history. © Business Monitor International Ltd Page 40 Indonesia Information Technology Report Q2 2009 Internet Competitive Landscape The Indonesian government has licensed more than 150 internet service providers (ISPs), although only around 40 were operating. The number of broadband users in Indonesia was estimated at around 900,000 in 2007, giving Indonesia a penetration rate of 0.4%. This has been a due to a lack of PCs, while service take-up has generally been restricted to Java resulting in uneven development. Further, with more than 250 internet cafes in Indonesia, of which the overwhelming majority are located in Jakarta, has not aided growth. That said, the PC market has been growing, and this, together with liberalisation in the sector, should lead Indonesia’s broadband market to develop further. Table: Regional Broadband Penetration Overview, 2007 Country Broadband penetration, % Regional rank South Korea 31.1 Australia 29.4 Hong Kong 26.4 Taiwan 23.6 Japan 22.3 Singapore 21.5 Malaysia 6.3 China 5.3 Thailand 4.0 Vietnam 1.2 10 Philippines 1.1 11 Bangladesh 0.5 12 Indonesia 0.4 13 India 0.3 14 Pakistan 0.2 15 Source: BMI © Business Monitor International Ltd Page 41 Indonesia Information Technology Report Q2 2009 Company Monitor IBM Indonesia Services Local Market Performance Manufacturer, distributor and provider of advanced IT solutions including In 2007, IBM’s Asia Pacific hardware, software, peripherals and data processing equipment. revenues increased by 11% to US$19.5bn. In Indonesia IBM has already won a number of customers in the SME segment. These include the Surabaya based Bank Antar Daerah and Bogor based PT Belfood Indonesia frozen food company. IBM has predicted that the SME segment will grow 94.6% by 2008. Recent Developments Presence In response to the tougher economic conditions faced by businesses, IBM was Fully owned subsidiary. promoting energy saving technologies and consolidation for data centres. IBM Indonesia also recently launched a local version of its Express IT package, which offers a range of hardware, software and related services to SMEs. Prices range from US$1,000 to US$150,000 and the new scheme offers various backup features. IBM Indonesia claims to service around 2,500 SME clients in various industries. The IBM Express programme for SMEs includes integrated solutions such as Linux based suites for banking and the finance industries, ERP solutions for manufacturing industry inventory, supply chain management for retail and services industry, and Web based applications for hospitals, health centres, drugstores and universities. Future Plans Sectors In 2006 IBM’s Indonesian business consultancy services focused on three Government, SMEs, enterprise. objectives: ERP system development, IT strategy design, and application of HCM system. © Business Monitor International Ltd Page 42 Indonesia Information Technology Report Q2 2009 Oracle Services Wholesaler of computer equipment and provider of IT services. Oracle reported strong customer momentum and increased total GAAP revenues of 24% to US$2.499bn in Asia Pacific and Japan (JAPAC) for its full fiscal year FY07. Local Market Performance In Fiscal Year 2007 Oracle’s Asia Pacific revenues increased 24% to US$2.5bn. Oracle reported revenues growth across many of its major product lines. Recent Developments Presence Oracle recently signed an agreement with local IT solutions provider PT Sigma Oracle Indonesia is part of Cipta Caraka to provide outsourcing services. The arrangement will focus on Oracle’s South Asia Region and helping big companies to focus core business while the IT partners optimise wider Asia Pacific Division and maintain IT units. The services provided will include business related (located in Singapore). Oracle has software that ensures security, performance and business continuity as well as about 1,700 customers across the manpower to operate the system. Oracle Indonesia is the vendor and Sigma Asia Pacific region, of which 50% the local implementation partner. are from South Asia (including Indonesia). Future Plans Sectors Oracle is already an active participant in the Indonesian market, where its Oracle has followed a similar path strategic focus is on capturing 30-35% of the sizable SME market. To achieve to that of CA and other this ambitious target, despite many other vendors competing for the same competitors in targeting the SME segment, Oracle has established close business co-operation contacts with sector by introducing its Database local organisations and institutions. Standard Edition-1 in the Indonesian market. The product claims comparable performance and security to its corporate level product but at more affordable prices, enabling SMEs to build a business information infrastructure rapidly and economically. © Business Monitor International Ltd Page 43 Indonesia Information Technology Report Q2 2009 Sigma Cipta Caraka (SCC) Services Local Market Performance SCC is a leading Indonesian IT company specialising in the banking sector, SCC achieved revenues of about offering services such as software development and customisation, network US$23mn in 2007. Following the and systems integration, managed resources and internet access. SCC is one acquisition by Telkom, Sigma is of IBM’s major channels to sell hardware to local banks. targeting revenues of US$40mn in In 2008, leading telecoms company Telkom Indonesia acquired an 80% stake 2008, a 50% increase. in SCC. The giant telecoms company is hoping for synergies between its 6,000 corporate companies and SCC’s core customer base of 170, mainly banks. Telkom said that they saw the move as the beginning of Telkom Group’s entry into Indonesia’s IT services market. The move is one of the largest IT services acquisitions in Indonesia’s history. Recent Developments Presence Following its acquisition by giant telecoms company Telkom Indonesia, SCC is 500+ employees. expanding operations, and recently spent US$7mn on a new IT Disaster Recovery Centre in Surabaya. The facility will start operation in 2008. SCC signed an agreement with Oracle to provide outsourcing services focusing on large companies, particularly in banking and telecoms. The arrangement will focus on helping big companies to focus core business while the IT partners optimise and maintain IT units. Among recent wins for the partnership, was a tender from Bussan Auto Finance (BAF), one of the leading multi-finance companies in Indonesia, to implement various Oracle applications. SCC has been an innovator in Islamic Banking, as an increasing number of Indonesian’s choose to business with banking institutions that comply with its principles. SCC has capitalised on this, with its Sigma SHARIAH product, a core banking system designed to follow principles of Islamic banking. Future Plans Sectors SCC’s management said in 2006 that the company would be strengthening its SCC is targeting 40% growth in its core role as an IT provider for banking sector, both conventional as well as managed services business in Sharia. 2008. Managed services currently account for around 42% of SCC’s revenues, and it is planning to expand across a number of verticals including auto and manufacturing, as well as its core area of financial. SCC’s flagship product is AlphaBITS, the software developed by SCC in 1989. It is a core banking system for day-to- © Business Monitor International Ltd Page 44 Indonesia Information Technology Report Q2 2009 day operations, connecting aspects like delivery channels (teller and customer services) and back office (accounting and general affairs). Developed as an industry-standard banking application, AlphaBITS offers integrated functionality with six main modules (kernel and security, CIF, retail, deposit, loan and general ledger). With integrated design architecture, AlphaBITS can be incorporated with third party applications. © Business Monitor International Ltd Page 45 Indonesia Information Technology Report Q2 2009 HP Services Revenues Technology services, consulting and integration. HP has been benefiting from increasing demand in the PC segment, and is the overall market leader. HP sells upwards of US$300mn worth of products in Indonesia annually, including its printers, desktops, notebooks and PDA lines. Recent Developments Presence HP, which is currently promoting the idea of Business Technology (BT) in Fully owned subsidiary. Indonesia, is to intensify its IT infrastructure recovery service. The main driver in terms of demand is coming from the banking Industry, which has become highly concerned with DRC services. Such a service was deemed mandatory by Central Bank of Indonesia. To a lesser extent there is also demand from telecoms operators. HP Services recently provided DRC services to one telecom operator affected by the great flood hitting Jakarta recently. th In another sign of its confidence in the retail sector, HP opened its 11 Indonesian outlet in Bandung, West Java in February 2006. HP said that they expect the new store to help achieve its target of doubling its sales in the city, which currently account for about 5% of nationwide sales. Future Plans Sectors HP has said that it is to intensify its focus on SMEs in 2008 by launching Currently investing in several new computer portfolios specifically targeted at SMEs. The company manufacturing and the public is the market leader in the SME segment in Indonesia. sector. HP plans to expand to Makassar, South Sulawesi and Yogakarta in the near future. © Business Monitor International Ltd Page 46 Indonesia Information Technology Report Q2 2009 Country Snapshot: Indonesia Demographic Data Section 1: Population Population by age, 2005 Population by age, 2005:2030 (total) 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 -15.0 -10.0 -5.0 0.0 Male 5.0 10.0 15.0 -30.0 -20.0 -10.0 0.0 2030 Female 10.0 20.0 30.0 2005 Figures in millions. Source: UN Population Division Table: Demographic Indicators, 2005-2030 2005 2010f 2020f 2030f Dependent population, % of total 34.2 33.3 30.4 30.7 Dependent population, total, ‘000 75,633 78,049 79,630 85,997 Active population, % of total 65.7 66.6 69.5 69.2 Active population, total, ‘000 144,926 156,238 182,239 193,669 Youth population*, % of total 29.1 27.7 22. 20.0 Youth population*, total, ‘000 64,359 64,980 59,917 56,019 Pensionable population, % of total 5.1 5.5 7.5 10.7 Pensionable population, total, ‘000 11,274 13,069 19,713 29,978 f = forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 47 Indonesia Information Technology Report Q2 2009 Section 2: Education And Healthcare Table: Education, 2000-2005 2000/01 2004/05 115 115 Gross enrolment, secondary 59 62 Gross enrolment, tertiary 15 17 Adult literacy, male, % 94.0 na Adult literacy, female, % 86.8 na Gross enrolment, primary 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. na = not available. Source: UNESCO Table: Vital Statistics, 2005-2030 2005 2010f 2020f 2030f Life expectancy at birth, males (years) 64.6 67.0 71.4 73.5 Life expectancy at birth, females (years) 68.6 70.5 75.7 77.9 Life expectancy estimated at 2005; f = forecast. Source: UNESCO © Business Monitor International Ltd Page 48 Indonesia Information Technology Report Q2 2009 Section 3: Labour Market And Spending Power Table: Employment Indicators, 2001-2006 2001 2002 2003 2004 2005 2006 Economically active population, '000 na na na na 105,802 106,282 – % change y-o-y na na na na na 0.4 – % of total population na na na na 46.8 46.4 Employment, '000 90,807 91,647 90,785 93,722 94,948 95,177 – % change y-o-y 1.0 0.9 -0.9 3.2 1.3 0.2 – male 57,131 58,583 59,909 60,582 60,769 61,864 – female 33,676 33,064 30,876 33,141 34,210 33,313 — female, % of total 37 36 34 35.3 36 35 Total employment, % of labour force na na na na 89.74 89.55 8,005 9,132 9,531 10,251 10,854 11,105 8.1 9.1 9.5 9.9 10.3 10.5 Unemployment, '000 – unemployment rate, % na = not available. Source: ILO Table: Average Annual Manufacturing Wages, 2000-2012 (IDR) 2000 2006 2007e 2008e 2009f 2010f 2012f Wages, IDR 5,096 11,740 12,717 13,777 14,811 15,881 18,267 Wage growth, % y-o-y 30.15 15.37 8.32 8.33 7.51 7.22 7.28 e/f = BMI estimate/forecast. Source: ILO, BMI © Business Monitor International Ltd Page 49 Indonesia Information Technology Report Q2 2009 BMI Forecast Modelling 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, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable’s own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity. When forecasting for some of our industry sub-component variables, however, using a variable’s own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting. It must be remembered that human intervention plays a necessary and desirable part in all of our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not. IT Industry Forecasts There are a number of criteria that drive our forecasts for each IT variable. IT forecasting is complicated due to the fragmented nature of the market, with little transparency of vendor data and low apparent agreement between many sets of figures in terms of market definition, base © Business Monitor International Ltd Page 50 Indonesia Information Technology Report Q2 2009 and methodology. In addition, forecasts are naturally affected by consideration of a variety of internal and external political and economic factors. Within best-practice techniques of time-series modelling, BMI’s quarterly updated forecasts are improved substantially by intimate knowledge of the prevailing features of each local market. Individual variables taken into account in creating each forecast include: ƒ Overall economic context, and GDP and demographic trends; ƒ Underlying ‘information society’ trends; ƒ Projected GDP share of industry; ƒ Maturity of market structure; ƒ Regulatory developments and government policies; ƒ Developments in key client sectors such as telecommunications, banking and e-government; ƒ Technological developments, and diffusion rates; ƒ Exogenous events. Estimates are calculated using BMI’s own macroeconomic and demographic forecasts. IT Ratings – Methodology Our approach in BMI’s IT Business Environment Ratings is threefold. First, we seek accurately to capture the operational dangers to companies operating in this industry globally. Second, we attempt, where possible, to identify objective indicators that may serve as proxies for indicators that were traditionally evaluated on a subjective basis. Finally, we include aspects of BMI’s proprietary Country Risk Ratings (CRR) that are relevant to the IT industry. Overall, the ratings system, which integrates with those of all 16 industries covered by BMI, offers an industry-leading insight into the prospects/risks for companies across the globe. Ratings System Conceptually, the ratings system divides into two distinct areas: Limits of potential returns: Evaluation of sector’s size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development. Risks to realisation of those returns: Evaluation of industry-specific dangers and those emanating from the state’s political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. © Business Monitor International Ltd Page 51 Indonesia Information Technology Report Q2 2009 Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41 separate indicators/datasets. Table: IT Business Environment Indicators Indicator Rationale Limits to potential returns Market structure IT market value, US$bn Denotes breadth of IT market. Large markets score higher than smaller ones Sector value growth, % year-onyear (y-o-y) Denotes sector dynamism. Scores based on annual average growth over five-year forecast period Government initiatives and spending Denotes spending boost provided by public sector, which can be a crucial determinant of sector development Hardware, % of total sales Denotes maturity of market. A high proportion of hardware sales – compared to services/software – indicates that the overall IT market is immature Country structure Urbanisation is used as a proxy for development. Predominantly rural states therefore score lower Urban-rural split GDP per capita, US$ A high GDP per capita supports long-term industry prospects. Overall score for country structure is also affected by the coverage of the power transmission network across the state Risks to potential returns Market risks Intellectual property (IP) laws ICT policy Markets with fair and enforced IP regulations score higher than those with endemic counterfeiting Subjective evaluation of official policy towards IT development, as enshrined in statute and tax code Country risk Short-term external risk Rating from CRR evaluates the vulnerability to external shock, which is the principal cause of economic crises. Such a crisis would cut investment Short-term financial risk Rating from BMI’s CRR, to denote risk of currency crisis and stability of banking sector. The former would hit revenues in hard currency, while the latter would curtail investment funding Trade bureaucracy Legal framework Rating from CRR to denote ease of trading with the state Rating from CRR denotes the strength of legal institutions in each state – security of investment can be a key risk in some emerging markets Bureaucracy Corruption Rating from CRR denotes ease of conducting business in the state Rating from CRR denotes the risk of additional illegal costs/possibility of opacity in tendering/business operations affecting companies’ ability to compete Source: BMI © Business Monitor International Ltd Page 52 Indonesia Information Technology Report Q2 2009 Weighting Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted. Table: Weighting Of Components Component Weighting Limits of potential returns 70% – IT market 65% – Country structure 35% Risks to realisation of potential returns 30% – Industry risks 40% – Country risk 60% Source: BMI Sources Additional sources used in IT reports include national ministries and ICT regulatory bodies, national industry associations, and international industry organisations such as the International Telecommunication Union (ITU), officially released company results and figures, and international and national industry news agencies. © Business Monitor International Ltd Page 53 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... the back of the report Source: BMI © Business Monitor International Ltd Page 21 Indonesia Information Technology Report Q2 2009 Market Overview Government Authority In November 2006, Indonesia s President Susilo announced the establishment of a new guiding body to provide strategic direction for the country’s IT development The National Information and Communications Technology Council Indonesia is chaired... bearish © Business Monitor International Ltd Page 34 Indonesia Information Technology Report Q2 2009 projections for these economies suggest that Indonesia' s exports will perform poorly and not be able to drive economic growth in 2009 Indonesia' s trade minister Mari Pangestu has also warned that non-oil and gas export volumes may fall as much as 30% in 2009, with automotives and electronics to be the worst... Business Monitor International Ltd Page 11 Indonesia Information Technology Report Q2 2009 Indonesia Business Environment SWOT Strengths Indonesia is South East Asia's largest economy with a nominal GDP of US$450bn, and is the world's fourth-most populous country with almost 240mn people It thus offers investors a vast home market in which to do business Indonesia is also a founding member of the Association.. .Indonesia Information Technology Report Q2 2009 Indonesia Political SWOT Strengths Indonesia managed a successful transition to democracy in 2004 If the 2009 parliamentary and presidential elections pass peacefully, this would signal the consolidation of the democratic process... security in Indonesia JI is blamed for a series of attacks, including the Bali bombings of October 2002 and other such incidents, including in Jakarta The fact that Indonesia subsidises basic goods means that when the government raises prices, there is a risk of public unrest, or at least a political backlash © Business Monitor International Ltd Page 10 Indonesia Information Technology Report Q2 2009 Indonesia. .. restricted to richer areas such as Java, the Indonesian IT market has much latent growth potential Relatively low levels of government IT spending compared with many other states may also mean that the Indonesia IT market lacks a stabiliser that could help immunise it from the slowdown © Business Monitor International Ltd Page 20 Indonesia Information Technology Report Q2 2009 Table: Regional IT Business Environment... initiatives are followed through The Indonesian government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio of PCs to students in public schools rise to 1:20 © Business Monitor International Ltd Page 13 Indonesia Information Technology Report Q2 2009 A similarly broad range is found with respect to internet penetration India and Indonesia are now above 17% penetration,... providing telephone and IT services to all rural areas in Indonesia by 2015 The programme is being promoted by the State Ministry for the Development of Disadvantaged Regions Under the 1999 Telecoms Law, all telecoms operators and service providers in Indonesia have © Business Monitor International Ltd Page 22 Indonesia Information Technology Report Q2 2009 an obligation to universal service, but in reality... Business Monitor International Ltd Page 26 Indonesia Information Technology Report Q2 2009 Special Focus – Banks The Indonesian Software Association has estimated that the banking sector may spend over US$1.05bn on ICT in 2008, accounting for as much as 30% of spending by some estimates In recent years banking has emerged as one of the key IT market sectors, and the Indonesian Federation of Private Domestic... 2008 Around 50% of Indonesian SMEs are start-ups or have less than five employees, but many are considering expansion This will be a driver for IT spending, with firms looking to connect branch offices There is also more interest in basic security solutions © Business Monitor International Ltd Page 27 Indonesia Information Technology Report Q2 2009 Industry Developments E-Government Indonesia s Department . Publication date: April 2009 Indonesia Information Technology Report Q2 2009 © Business Monitor International Ltd Page 2 Indonesia Information Technology Report Q2 2009 ©. IBM Indonesia 42 Indonesia Information Technology Report Q2 2009 © Business Monitor International Ltd Page 4 Oracle 43 Sigma Cipta Caraka (SCC) 44 HP 46 Country Snapshot: Indonesia. Indonesia Information Technology Report Q2 2009 © Business Monitor International Ltd Page 10 Indonesia Political SWOT Strengths  Indonesia managed a successful