Q4 2011 www.businessmonitor.com aUStraLIa information technology Report INCLUDES BMI'S FORECASTS ISSN 2041-7160 Published by Business Monitor International Ltd. AUSTRALIA TECHNOLOGY REPORT Q4 2011 INCLUDES 5-YEAR FORECASTS TO 2015 Part of BMI's Industry Report & Forecasts Series Published by: Business Monitor International Copy Deadline: October 2011 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 © 2011 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 Q4 2011 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 CONTENTS Executive Summary . SWOT Analysis . Australia IT Sector SWOT Australia Political SWOT Australia Economic SWOT Australia Business Environment SWOT . IT Business Environment Ratings 10 Table: Regional It Business Environment Ratings . 13 Asia IT Markets Overview 14 Australia Market Overview 21 Government Authority 21 Background 21 Hardware . 21 Software . 24 IT Services . 26 Industry Developments 28 Table: Computers For Schools Programme, Phase Two – Planned Spending By State . 30 Industry Forecast . 31 Table: Australia's IT Sector – Historical Data & Forecasts (US$mn Unless Otherwise Stated) . 33 Industry Forecast Internet . 34 Internet 34 Table: Telecoms Sector -- Internet -- Historical Data & Forecasts, 2008-2015 34 Macroeconomic Forecast 36 Table: Australia – Economic Activity, 2008-2015 . 38 Competitive Landscape . 39 Computers . 39 Software . 41 IT Services . 42 Internet Competitive Landscape 44 Table: Australia Dial-Up And Broadband Internet Subscriptions, 2009-2010 45 Table: Australian Broadband Market, June 2009-June 2010 48 ADSL2+ . 48 Naked DSL . 50 WiMAX 50 National Broadband Network Update 52 Company Profiles . 55 HP Australia 55 SAP (Australia) 56 Country Snapshot: Australia Demographic Data . 58 Section 1: Population . 58 Table: Demographic Indicators, 2005-2030 58 Table: Rural/Urban Breakdown, 2005-2012 . 59 Section 2: Education And Healthcare 59 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 Table: Education, 2002-2005 59 Table: Vital Statistics, 2005-2030 59 Section 3: Labour Market And Spending Power 60 Table: Employment Indicators, 2001-2006 60 Table: Consumer Expenditure, 2000-2012 (US$) 60 Table: Average Annual Wages, 2000-2012 61 BMI Methodology . 62 How We Generate Our Industry Forecasts 62 Transport Industry . 62 Sources . 63 © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 Executive Summary Market Overview Opportunities in consumer, government and business sectors will drive growth in the Australian IT market marking a second year of strong recovery. BMI forecasts the market's total value at US$20.8bn in 2011, projected to reach US$25.7bn by 2015. New services such as cloud computing will pay a large part in the market's continued growth drigin spending on IT services. The government's six-year cloud computing strategy has been joined by a number of private and public sector organisations launching their own initiatives. EMC Australia signed several large organisations up to its Service Provider Program in October 2010, including Telstra, Macquarie Telecom and Dimension Data. Several factors underpin our forecast of a 5% 2011-2015 CAGR for the Australian IT market. Government tenders will drive considerable spending in years to come. Banks will continue to need to spend on regulatory compliance, and intense competition in the retail sector is spurring spending on customer relationship management (CRM) and back-office systems. Competition and new service platforms in the telecoms sector are driving the key IT spending segment. Industry Developments In 2010, the Australian federal government announced a six-year plan to transfer government agencies' computing systems to a public cloud environment. According to the plan, public cloud adoption for public-facing websites is scheduled to begin in 2011, with pan-governmental integration taking place from 2012 onwards. However, the plan requires government agencies to notify the Department of Finance Deregulation of their intention to move to the cloud. In November 2010, the Australian Senate passed a bill to restructure Telstra, to increase competition as Telstra's infrastructure is incorporated in the new National Broadband Network (NBN). The NBN project aims to connect 93% of the population by 2017 and rectify a situation that has led to Australian broadband charges being ranked the fifth most expensive among Organisation for Economic Cooperation and Development (OECD) countries. In 2010, government projects in sectors such as e-government, healthcare, and education drove significant opportunities for IT vendors. The Australian government announced plans for a standardised reporting system scheme, while the National E-Health Transition Authority has set the goal of creating a paperless environment in Australia's health sector, including public hospitals. Company News Telecoms service providers in the Australian market are investing in infrastructure to provide cloud computing services. In Q111, telecoms company Telstra, in partnership with consulting leader © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 Accenture, launched a 45-day free trial of its cloud infrastructure for government agencies. Meanwhile, rival telecoms company Optus already claims a number of high-profile customers for its trial services, including property company Savills and South Australia's Royal District Nursing Service (RDNS). In H111, one of SAP's largest Australian partners, Oxygen, launched a new SAP Software-as-a-Service (SaaS) offering that it called 'Oxygen on Demand.' The solution was touted as a 'total SAP' cloud solution, offering flexibility and speed-of-deployment. Many of SAP's Australian clients, including Fairfax Media, Australia Post, CGU Insurance. and the Commonwealth Bank of Australia, already use cloud computing as a means of providing services. In 2010, the release of Apple's iPad opened a new competitive battleground in the PC market, with Apple's rival vendors planning to release their own tablet devices. Apple is expected to continue to dominate tablet sales in the Australian market, with the Apple iPad 2, while the price of the entry-level original iPad is now down to about AUD445. However, the number of competitor tablet devices from the likes of Samsung, Lenovo, HP, Acer, Dell, and Asus is expected to grow in 2011. Computer Sales Australian computer hardware sales are projected at US$9.2bn in 2011, with the popularity of tablets helping to keep demand buoyant after a strong PC market recovery in 2010. Sales are forecast to grow to around US$10.3bn by 2015, with drivers including new form factors, government programmes, and growing broadband penetration. More than 90% of Australian households now have a PC and consumers appear willing to spend on upgrading their notebook computers; it is also becoming more popular to purchase a second household PC. Small businesses comprise more than 99% of all Australian businesses and slightly more than 50% of business PC sales. Software Software is expected to account for about 17% of the Australian IT market in 2011, with estimated spending of US$3.5bn. As the focus moves from hardware to services and solutions, the share of the market accounted for by software will continue to rise through 2015, with businesses seeking greater leverage from their investments. Given many businesses' focus on controlling costs, cloud computing models have also grown in popularity and spread beyond initial core application areas. Over the forecast period, enterprise resource planning (ERP), CRM, and other e-business products will be increasingly popular with the small and medium-sized enterprise (SME) market, as companies look to enhance productivity through automating essential functions. IT Services IT services are expected to account for about 40% of the domestic IT market in 2011, at US$8.1bn. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 Demand picked up in 2010 with the revival of several IT projects that had been shelved as a result of the economic slowdown, and IT services are forecast to be one of the most dynamic sectors in the Australian IT market. In 2011, sectors such as government, telecoms, healthcare, and banking should continue to supply demand for implementation, consulting, and managed services. Regulatory compliance will continue to require spending by banks, and intense competition in the retail sector is spurring spending on CRM and back-office systems. E-Readiness Many alternative Australian internet service providers (ISPs) are in the process of expanding the coverage of their ADSL networks. Other broadband service providers, including Unwired, are rolling out WiMAX networks, which will help to ensure greater choice and flexibility in the type of broadband connection available. Australia is above the OECD average in terms of businesses purchasing online (49% versus 33%) and selling online (27% versus 17%). The central component of the government's ICT strategy and overall domestic economic policy is the construction of a National Broadband Network. The programme is expected to drive economic growth and foster the creation of a digital economy. The government has projected GDP gains of 1.4% after five years from the broadband project. Despite these investment commitments, our outlook for Australian broadband growth continues to be cautious. This is based partly on delays that have characterised government and operator efforts to address the problem of low broadband coverage in rural parts of Australia. Meanwhile, fixed penetration rates in urban areas are already very high. © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 SWOT Analysis Australia IT Sector SWOT Strengths ƒ ƒ ƒ ƒ 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 ƒ ƒ Australia has a relatively mature domestic market, with relatively slow growth rates. Sensitive to volatility in the global economy. Opportunities ƒ 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. ƒ ƒ ƒ Threats ƒ ƒ 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. Australia Political SWOT Strengths ƒ ƒ 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 ƒ 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 ƒ 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 ƒ 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 Canberra is Washington's 'deputy sheriff' in the region. ƒ © Business Monitor International Ltd Page Australia Information Technology Report Q4 2011 Australia Economic SWOT Strengths ƒ ƒ 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, especially to China. Weaknesses ƒ 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. ƒ Opportunities ƒ ƒ Threats ƒ ƒ ƒ 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. Australia Business Environment SWOT Strengths ƒ ƒ Weaknesses ƒ ƒ Opportunities ƒ ƒ Threats ƒ ƒ 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 more than 22mn, the domestic consumer base is small by regional standards. Australia is currently in talks with China, Malaysia, the Gulf Co-operation Council, Japan and South Korea regarding potential bilateral free trade agreements and it is also considering similar agreements with India. 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. Corporate taxes for foreign investors in Australia remain higher than in other states, 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 Q4 2011 in exchanges where its competitors were already operating. It claimed it did not have regulatory certainty from the Australian Competition and Consumer Commission (ACCC) that it would not be forced to resell the service to its competitors. This was despite several public statements from the ACCC that ADSL2+ would not be made a declared service. The move will provide broadband speeds of up to 20Mbps for up to 2.4mn homes and businesses across the country. After a standoff with the government, which lasted for more than a year, Telstra activated its ADSL2+ broadband network in February 2008. In August 2009, Telstra announced that it had completed trials of download speeds up to 100Gbps over a fibre-optic infrastructure, using equipment provided by Nortel Networks. It is understood that download speeds will range between 70Mbps and 100Mbps, while average upload speeds will be 2Mbps; the comparatively slow speed of the latter rate is understood to be due to technical limitations. The operator said, in November 2009, it is unlikely to make further investments in ADSL2+ technology. It upgraded its 1,856th ADSL2+ enabled exchange and has indicated that this is the last of its investments in copperbased internet technology. Other operators that have been deploying higher speed xDSL technology include Internode. In March 2009, Internode launched its 'Extreme' symmetric high-speed digital subscriber line (SHDSL) services in Adelaide, targeting medium-sized businesses. The service offers uplink and downlink speeds of between 5Mbps and 40Mbps. In April 2010, Internode announced that it had extended its ADSL2+ coverage to more than 550 exchanges. According to Impress Media, the telecoms company has rolled out the services in 'all exchanges where (competitive) ADSL2+ DSLAM providers are present'; its footprint is said to cover about 70% of the country's population. The revelation came as the operator announced the launch of a new, simplified, broadband tariff known as 'Easy Broadband,' which it said was designed to offer a jargon-free plan for subscribers looking for value for money. The service costs AUD49.95 (US$46.04) per month if bundled with Internode's fixed-line 'Nodeline' service, and those customers in areas where the telecoms company has deployed ADSL2+ Annex M technology can receive upload speeds of up to 2.5Mbps. Nextgen Networks, the broadband network unit of Leighton Contractors, was awarded a contract in December 2009, to build all six backhaul links for the Australian government's National Broadband Network (NBN). Under the contract, Nextgen will connect 100 regional towns to ADSL2+ based highspeed broadband services over the next 18 months. The project will require the installation of about 6,000km of fibre optic cables that will connect almost 400,000 people living in so-called broadband 'notspots', where broadband infrastructure is lacking. Nextgen claims that the first four links will be completed in under a year. The platform will have an initial capacity of 10Gbps and can be upgraded in 10Gbps increments as additional wavelengths are cut over. In the meantime, Nextgen has signed up regional broadband provider Nextep as its first ISP customer for the new network. Nextep, a subsidiary of NEC of Japan, is to install DSL access © Business Monitor International Ltd Page 49 Australia Information Technology Report Q4 2011 multiplexers (DSLAMs) at 60 locations, through which it will offer wholesale ADSL services. Other ISPs are to be signed up over the coming months. Perth-based ISP Westnet is to expand its ADSL2+ services across New South Wales, Western Australia, Queensland and Victoria in a AUD5mn plan to offer broadband access to customers in remote regions, reports TeleGeography. Areas expected to be offered services include Geraldton, Kalgoorlie, Bluff Point and Katanning in Western Australia; and Hunter, North Coast and South Coast in New South Wales. Naked DSL In June 2010, Telstra revealed that its broadband subsidiary BigPond had started a four- to six-week trial of naked DSL services with a view to assessing customer demand. According to ZDNet Australia, Telstra is testing two different naked DSL products, including an enhanced version, offered under the 'Pure DSL' banner, which allows customers to receive incoming calls and make outbound emergency calls. While Telstra is also offering traditional naked DSL with no dial tone, it noted that there would be no additional cost for the version allowing limited call access in order to ascertain the importance of the extra feature. Only one tariff will be available as part of the trials, with Telstra offering downlink speeds of up to 20Mbps with a 25GB data usage limit for AUD59.95 (US$50.11) per month on a 24-month contract. Initially the offer will only be available to 'a few thousand' customers. At the end of the pilot programme, it is understood that Telstra will also assess whether to offer the service to wholesale customers in the future. In March 2009, Optus unveiled plans to start offering naked DSL subscriptions, allowing customers to have a broadband connection without having to rent a traditional telephone line. Optus says the service, which includes a 7GB data download cap, is priced at AUD59.99 (US$38.30), or AUD49.99 when bundled with an Optus mobile plan. The company also announced separate plans allowing for month-tomonth subscriptions as opposed to a standard 24-month contract. Internode and iiNet were the first ISPs to offer naked DSL in Australia. Following a four-month trial, alternative operator Internode launched its 'Naked ADSL2+' service at 450 exchanges in March 2008. Internode's service launch followed the conclusion of a network sharing agreement with Optus Wholesale, which increased Internode's network footprint of 100 ADSL2+ equipped telephone exchanges to 450 across Australia. Internode is investing AUD3.5mn in the expansion of high-speed internet services across rural Australia. WiMAX Although xDSL services still account for by far the greatest number of broadband connections -- and the bulk of new broadband subscriber growth -- there are signs that alternative technologies such as WiMAX are set to gain greater prominence. Some analysts have suggested that the total market for WiMAX services in Australia could be worth US$123.6mn by 2012. © Business Monitor International Ltd Page 50 Australia Information Technology Report Q4 2011 In January 2009, BigAir launched its WiMAX network in Perth in Western Australia. The deployment covers 30km around the CBD or approximately 2,000km2. According to the operator, the new network delivers symmetric broadband speeds of to up 1,000Mbps. BigAir is understood to be looking for new ISPs and channel partners in the region to resell services across the new network. BigAir launched its first WiMAX services across Sydney and Melbourne in August 2007 and has since expanded to Brisbane, the Gold Coast and Perth. The point-to-point service is based on Airspan Networks' 802.16d technology, using 5.8GHz MicroMAX base stations. In September 2010, it was reported that broadband provider Internode had deployed WiMAX infrastructure to regional areas of South Australia. According to CIO.com.au, the new network covers the Riverland and Murrylands regions in the south of the country. Internode previously rolled out WiMAX networks in late 2007, on the Yorke Peninsula, west of Adelaide, and in the Coorong region to the east of Adelaide. Apart from Internode, other key players in the WiMAX sector include Unwired, whose WiMAX network provides coverage in Sydney and Melbourne. In October 2008, it was reported that Unwired had shortlisted three potential hardware suppliers, Huawei, Alcatel-Lucent Technologies and Motorola, for its WiMAX network rollout. The announcement came as Unwired prepared to upgrade from its current pre-WiMAX infrastructure that was supplied by Navini Networks. Unwired's choice of vendor differed from those initially shortlisted. The operator announced in September 2009, that it had chosen DragonWave to supply its wireless backhaul for its Vivid Wireless Perth network. DragonWave's Horizon Compact will be used for backhaul connectivity providing speeds of up to 200Mbps in the initial phase. The network launched its services in Perth in March 2010 but struggled to increase network coverage due to a lack of funding. Although the company could secure the necessary capital to expand WiMAX services, BMI believes Vivid Wireless' WiMAX network would just be a stepping stone for the firm to roll out TD-LTE services. This view is supported by Huawei Technologies' spokesman, which told Computerworld Australia it would be simple for Vivid Wireless to upgrade its network to TD-LTE from WiMAX (both of which are provided by Huawei). Meanwhile, the operator aims to provide WiMA network coverage in Melbourne, Queensland, Adelaide and Sydney. In November 2010, Vivid Wireless announced TD-LTE trials that will commence in December 2010 in areas such as inner-city Sydney around Redfern. Unwired is understood to have more than 75,000 subscribers, and the operator has spectrum for a planned deployment in other Australian cities including Brisbane, Adelaide, Geelong, Newcastle, and along the central Australian coastline. Other WiMAX broadband operators in Australia include Allegro, which claims to cover 16% of Australia's population with its network, BigAir, which operates in a number of major cities, and Austar Broadband, the broadband internet arm of pay-TV company Austar. © Business Monitor International Ltd Page 51 Australia Information Technology Report Q4 2011 In June 2010, The Australian reported that the New South Wales (NSW) government in Australia had allocated investments of AUD2.5mn to enhance the access of wireless broadband to remote communities. The government will invest until 2013 to deploy WiMAX and Wi-Fi access in nearly 200 remote communities. The government aims to fulfil the gap until the national broadband network is built. National Broadband Network Update In recent months, the Australian government and the country's operators have been working out the terms of the country's National Broadband Network (NBN) project, a scheme that aims to deliver a universal set of broadband services to almost all Australians, regardless of where they live. In July 2010, Australian Prime Minister Julia Gillard announced that the National Broadband Network (NBN) project would reach 93% of the country's population, up from the previous 90% target. In February 2010, the government released draft legislation outlining the strategy and business model of its proposed NBN Co, a public-private company that will oversee the implementation of the NBN project. According to the government's proposals, NBN Co will be brought into existence within the next few years as an open provider of wholesale broadband accesses and services. Details of a new draft law, unveiled in February, appeared to permit NBN to operate as a retail service provider in certain circumstances. In March 2010, incumbent operator Telstra hit out at the government's recent change to the NBN proposal, announcing that it was 'very concerned' by the change that could affect negotiations over the sale of assets. Telstra had been in negotiations over the sale of assets to the government, which had promised to spend up to AUD43bn (US$38.6bn) on rolling out high-speed internet access throughout the country. Meanwhile, alternative operators had originally welcomed the idea of a shared wholesale service provider, in which Telstra would have been a participant (willing or otherwise), because it would have obligated the incumbent to offer them access to its pan-Australian fibre and broadband networks at affordable rates, making it easier to offer own-brand services direct to customers on and off their networks through a white label scheme. However, in April 2010, alternative operator Optus said that 'drastic changes' needed to be made to the government's draft legislation before it would commit to the NBN project. Optus warned the government that, unless clauses allowing the government-owned network to compete in retail markets were removed, the venture could fail to get off the ground. Amid much criticism and controversy, it was reported in June 2010, that the government had amended its proposed legislation, following the revelation that fixed-line incumbent Telstra had reached a deal with NBN Co. As reported by iTWire, Communications Minister Stephen Conroy said that the revisions to the Telecommunications Legislation Amendment (Competition and Consumer Safeguards) Bill 2009 would provide greater regulatory certainty during the transitional period when Telstra customers are migrated to the new fibre network. © Business Monitor International Ltd Page 52 Australia Information Technology Report Q4 2011 It is understood that the amendments include the provision of a clear mechanism for the Australian Competition and Consumer Commission (ACCC) to consider an enforceable undertaking from Telstra to structurally separate its business as it retires its copper network. Senator Conroy claims that the alterations made to the legislation address a number of issues that have been raised since the bill was first put forward for consideration in September 2009. Meanwhile, and also in June, it was revealed that Telstra had signed a 'heads of agreement' deal with the government regarding its participation in the NBN project. It is understood that the heads of agreement signed with the government will see Telstra lease its fixed network to the NBN, gradually phasing out its analogue copper cable network, and installing new fibre optic cables and high-speed wireless systems to replace it. Telstra's voice and broadband traffic will be migrated onto the new platform. The deal with the government is potentially worth AUD11bn, reports Telstra, which negotiated up from the AUD9bn initially tabled as compensation for projected market share losses and costs associated with network separation. Although the agreement is certainly a major milestone in realising the long-awaited NBN, Telstra's full participation is still far from assured. Central to the NBN concept is the transfer of Telstra's copper access network to the infrastructure company that will manage the NBN project. Other broadband operators with copper and fibre infrastructure will also hand over their assets to the NBN company, but, as most have only a few switches and limited transmission and access assets (many still rely heavily on Telstra's network), this does not substantially alter their business models. Telstra, on the other hand, has been earning significant revenues by opening up and leasing space on its network facilities to the smaller players. By removing this business, Telstra will have to change tactics quite significantly if it wants to keep growing, therefore its continued reluctance to fully commit to the project. Nevertheless, Telstra is understood to have a powerful incentive to remain committed to the project. The government may now allow the company to bid for next generation wireless spectrum, which would give it greater opportunities to act as a wireless broadband service provider, a market understood to be potentially more lucrative than the fixed broadband sector addressed by the NBN. Previously, the government said that Telstra could not bid unless it gave up its significant market power (SMP) in the fixed broadband arena. With interest in fixed telephone connections declining and usage of fixed broadband connections slowing, BMI believes Telstra's long-term future may be more sure as a mobile broadband player, particularly as rivals such as SingTel Optus and VHA will also be active in the fixedline and mobile broadband markets and regional ISPs such as iiNet and Vivid Wireless are using WiMAX as well as fixed lines to serve their broadband customers. In August 2010, it was reported that if elected in the forthcoming general elections, the Coalition, which comprises the Liberal Party of Australia and the National Party of Australia, proposes spending up to AUD6.25bn of public and private funding on broadband infrastructure upgrades, significantly less than the AUD43bn estimated for the Australian Labor Party (ALP)'s NBN. However, the plans fell through © Business Monitor International Ltd Page 53 Australia Information Technology Report Q4 2011 after the ALP successfully secured sufficient support from the rural independents to form the next federal government in November 2010. The drawn-out establishment of the NBN took a step forward after the country's senate passed competition legislation in end-November 2010 designed to structurally separate fixed-line incumbent Telstra. However, the actual separation of Telstra is still subject to the approval of the company's shareholders. The separation of Telstra's retail and wholesale functions plays a vital role in the establishment of Australia's AUD35.7bn NBN project. The cost of the high-speed broadband network was revised downwards from AUD43bn after Prime Minister Julia Gillard released part of NBN Co's corporate plan in order to gain support for the Telstra separation bill. However, the NBN is far from concluded as two bills pertaining to the regulatory framework of the NBN will be debated in the House of Representatives in 2011. The Australian government announced in December 2010 it will require AUD40.9bn in debt and equity to fund Australia's National Broadband Network (NBN) plan. The Australian Labor Party said the project is expected to generate annual returns of 7.04% based on NBN's corporate plan that includes detailed financial and operational forecasts for 30 years. According to NBN Co, the 10-year broadband project will provide employment for thousands of people and install 181,000km of passive optical network and 57,000km of transit fibre to cover 13mn premises. The bulk of NBN's funding, AUD27.5bn through equity, will initially come from the government, and a further AUD13.4bn in debt will be raised through project finance or financial markets from July 2014. The project's operational earnings will provide additional funds required during the course of construction. The NBN Co forecasts AUD20.8bn in total revenue during the construction period, with annual revenue expected to reach AUD5.8bn in FY2020/21. NBN Co expects this will increase to AUD7.6bn in 2025. In February 2011 the NBN Co bought 3.4GHz and 2.3GHz wireless spectrum held by pay-TV operator AUSTAR. The deal is worth AUD120mn and will enable NBN to deploy wireless broadband services in regional and rural areas across Australia. Further, AUSTAR intends to expand its customer base across the country through VoIP and high-speed broadband offerings, according to the operator's group director of corporate development, Deanne Weir. © Business Monitor International Ltd Page 54 Australia Information Technology Report Q4 2011 Company Profiles HP Australia Services Technology services, consulting, and integration. Recent Developments HP was the overall brand Australian PC market leader in 2011, followed by Dell. As of H111, HP had around a 20% share of the branded PC market. HP was also the combined PC market leader in 2009 and the company is continuing to focus on winning its share of government contracts. Back in 2008, HP acquired fellow US leader EDS, which subsequently announced it would cut around 75 staff from its Australian workforce of more than 6,000. By December 2008, EDS Australia claimed planned staff cuts had been completed locally. In the same year, HP bought one of Australia's most successful software groups, Tower Software, for AUD55.9mn. In September 2010 HP launched its range of TouchSmart devices Future Plans US IT leader HP is also moving to compete directly with Telstra, Optus, and Macquarie Telecom for a share of the cloud computing services market. In December 2010, HP revealed that it was opening its datacentres to local customers. HP will offer access to SAP, Oracle, and Microsoft software, providing customers with more flexibility. Performance In the quarter ended July 31 2011, HP's fiscal third quarter, the company reported revenues of US$31.2bn, a 1% increase from the same quarter a year earlier. Services and personal systems group were the largest revenue generating units for the company. Services provided faster growth, increasing from US$8.772bn to US$9.918bn over the year. Of the company's total, Asia Pacific region, which includes Australia accounted for 20% of total revenues, with revenues increasing 9% y-o-y. Growth slowed compared with earlier quarters, but was more stable after early decreases. Presence Fully owned subsidiary. As of 2008, HP Australia had 3,028 staff, up from 2,464 in 2007 and close to 2006 levels of 3,063. HP employs more than 32,000 people across the Asia Pacific. Sectors HP is aiming to push its managed services business across the Asia Pacific region to take advantage of the growing demand for IT outsourcing. Another item on HP's current agenda is to push HP-branded services delivered by its channel partners beyond just warranty services; about 25% of resellers in Asia have this capability. © Business Monitor International Ltd Page 55 Australia Information Technology Report Q4 2011 SAP (Australia) Services Enterprise software, support, and services. Recent Developments German software leader SAP, which built its global dominance around the traditional onpremise software model, has been criticised for being slow to embrace the utility software model. In 2010, the company released its BusinessObjects BI OnDemand in Australia. SAP's full ByDesign ERP SaaS product was finally released in Australia in 2011, after a delay as the initial product was criticised following its release in the US and Germany back in 2007. In H111, one of SAP's largest Australian partners, Oxygen, launched a new SAP SaaS service called 'Oxygen on Demand.' The solution was touted as a 'total SAP' cloud solution, offering flexibility and speed-of-deployment. Heavy equipment manufacturer Komatsu has already migrated to an SAP-based cloud service after previously using Telstra, as part of a AUD35mn contract. In 2010, SAP released its BusinessObjects BI OnDemand in Australia for the first time. Despite the economic slowdown, SAP continued to win major tenders in 2009. SAP software was selected for a contract worth tens of millions of dollars from Origin Energy. SAP was also the selected software supplier for a major project by leading superannuation funds administrator Superpartners – the AUD70mn IT overhaul included new software to replace legacy systems that had become increasingly error-prone. Superpartners hired new IT staff with specific knowledge of SAP solutions. In 2009, the Commonwealth Bank of Australia was one year into a AUD580mn banking modernisation project, intended to replace 1960s-era software with new technology from SAP. Meanwhile, Woolworths announced in March 2009 that SAP would supply the software for its key merchandising systems. Other local clients in 2008 included 7-Eleven and Adelaide Brighton Limited. Future Plans Australia will remain an important market in the Asia Pacific for SAP. Due to language and cultural factors, less localisation is generally required of products already launched in the US and Western European markets, and so Australia (and New Zealand) is often an introductory point for products SAP would like to introduce in Asia Pacific. Back in 2009, SAP said it would work on overhauling its partnership plans with a more customer-focused ecosystem strategy. According to SAP, the new strategy has led to a restructuring and innovation in partner relations. Cloud computing is also a growing priority for SAP. Many of the company's Australian clients, including Fairfax Media, Australia Post, CGU Insurance, and the Commonwealth Bank of Australia, already use cloud computing as a means of providing services. Local Market In Q110, SAP reported non-IFRS software and software-related services revenues of Performance EUR1.95bn, up 10% y-o-y in constant currency. In 2009, SAP reported US GAAP revenues of EUR8.2bn, down 3% on EUR8.48bn in 2008. © Business Monitor International Ltd Page 56 Australia Information Technology Report Q4 2011 While SAP does not release detailed region figures, SAP Australia and New Zealand reported a record growth year in 2008. Overall Australian market revenue growth was 36%, with 79% growth in software licence revenues. Presence In 2009, SAP laid off around 40 people from its local staff of about 500. The firm has several hundred software partners and 1,300 service partners as well as channel partners and technology partners in Australia. Sectors In 2008, SAP reported particularly strong growth in the retail, utilities, and mining industries. Other key sectors for SAP include banking and retail. © Business Monitor International Ltd Page 57 Australia Information Technology Report Q4 2011 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 2010e 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 e/f = estimate/forecast. * Youth = under 15. Source: UN Population Division © Business Monitor International Ltd Page 58 Australia Information Technology Report Q4 2011 Section 2: Education And Healthcare Table: Rural/Urban Breakdown, 2005-2012 2005 2010e 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 e/f = estimate/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 2010e 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. e/f = estimate/forecast. Source: UNESCO © Business Monitor International Ltd Page 59 Australia Information Technology Report Q4 2011 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 2007e 2008e 2009e 2010e 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 e/f = BMI estimate/forecast. na = not available. Source: World Bank, Country data; BMI calculation © Business Monitor International Ltd Page 60 Australia Information Technology Report Q4 2011 Table: Average Annual Wages, 2000-2012 2000 2007e 2008e 2009e 2010e 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 e/f = BMI estimate/forecast. Source: ILO, BMI © Business Monitor International Ltd Page 61 Australia Information Technology Report Q4 2011 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 62 Australia Information Technology Report Q4 2011 domestic industrial sector. In particular, the focus is on goods, as services not employ transport. The volumes are forecast based on the following criteria: ƒ Trends manifested through historical data; ƒ 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: ƒ Trends in historical modal split data; ƒ Evidence of government policy favouring one or more modes over others; ƒ 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 63 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. [...]... Wales Victoria South Australia Source: Official figures, BMI © Business Monitor International Ltd Page 30 Australia Information Technology Report Q4 2011 Industry Forecast Our forecasts for IT market growth in 2011 remain unchanged, with US$25.7bn expected by 2015, a 5.8% CAGR for the market The market is expected to reach US$20.8bn by the end of 2011, after a strong recovery in 2010 In 2011, BMI forecasts... announced the launch of a standardised reporting system scheme 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 31 Australia Information Technology Report Q4 2011 Market Drivers Several factors underpin our forecast of a 5% 2011- 2015 CAGR for the Australian IT market Government... International Ltd Page 28 Australia Information Technology Report Q4 2011 E-Government In addition to computers in schools, e-government projects continued to be rolled out in 2010, despite economic uncertainty In mid-2010, the Australian government expected to launch a standardised reporting system scheme The programme will involve implementation of a platform allowing business to submit reports to a range... more features © Business Monitor International Ltd Page 17 Australia Information Technology Report Q4 2011 In mature markets such as Australia and Singapore, PC sales are dominated by replacement sales In Australia, upgrades are estimated to account for at least 80% of business purchases and more than 50% in the case of households More than 90% of Australian households now have a PC, but consumers have... International Ltd Page 25 Australia Information Technology Report Q4 2011 Australia' s 'big four' banks have been at the forefront of moves towards cloud computing after revaluating their IT spend during the economic downturn Many Australian financial organisations such as the ANZ Bank and CBA have adopted some hosted software from providers such as Salesforce.com Indeed, more than 80% of Australia' s largest... crackdowns in China and the Philippines, software piracy remains above 70% in most of emerging Asia © Business Monitor International Ltd Page 18 Australia Information Technology Report Q4 2011 In 2011, sales of Microsoft's Windows 7 operating system and new Intel core technology retain the potential to help trigger hardware upgrades, although much will depend on business confidence Hundreds of large enterprises... have both seen a trend towards larger outsourcing 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 20 Australia Information Technology Report Q4 2011 Australia Market Overview Government Authority Government Authority Department for Broadband, Communications and the Digital Economy... another HKD200mn to the deployment of a Wi-Fi network covering more than 200 public venues IT Growth And Drivers © Business Monitor International Ltd Page 15 Australia Information Technology Report Q4 2011 Across the region in 2011, IT spending should 2011e IT Market Sizes benefit from improved economic circumstances US$mn and tenders, previously deferred as a result of the economic situation, although... Ltd Page 32 Australia Information Technology Report Q4 2011 Summary The hardware market is forecast to grow from US$9.2bn in 2011 to US$10.3bn in 2015, with PC sales (including accessories) forecast to rise from US$7.5bn to US$8.5bn, boosted by computer procurement for education Software spending is forecast to rise from US$3.5bn to US$4.7bn and IT services from US$8.1bn to US$10.8bn Table: Australia' s... Norman kicked off a project © Business Monitor International Ltd Page 24 Australia Information Technology Report Q4 2011 costing more than AUD50mn in May 2010, which had been postponed from 2009 due to the financial crisis The project aims to replace all of its core business systems over the next five years Software piracy has fallen in Australia in recent years but remains an issue in some segments of the . Deadline: October 2011 Australia Information Technology Report Q4 2011 © Business Monitor International Ltd Page 2 Australia Information Technology Report Q4 2011 © Business. Growth 2011e-2015f (%) e/f = estimate/forecast. Source: BMI Australia Information Technology Report Q4 2011 © Business Monitor International Ltd Page 18 In mature markets such as Australia. Asia. Australia Information Technology Report Q4 2011 © Business Monitor International Ltd Page 19 In 2011, sales of Microsoft's Windows 7 operating system and new Intel core technology