Boston, MA -- (ReleaseWire) -- 03/07/2014 -- We expect the Indonesian IT market will be a regional outperformer over the medium term, on the back of strong economic growth, a low PC penetration rate and an emerging middle class. Retail hardware, enterprise software and cloud computing are expected to be key drivers of medium-term growth. The retail market will be the major driver of growth, with PC penetration estimated at below 10% in 2012, meaning there is significant growth potential from first-time buyers and upgrades/personal devices. However, vendors face short-term challenges in the form of a depreciation of the rupiah, which has raised the cost of dollar denominated hardware and software imports. In the immediate future, IT spending is forecast to increase to IDR69.7trn in 2014, up 12.3% from 2013, with the IT market accounting for 0.67% of GDP.
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Headline Expenditure Projections
Computer Hardware Sales: IDR49.0trn in 2014 to IDR75.4trn in 2018, at a compound annual growth rate (CAGR) of 11.3% in local currency terms. Short-term growth will be limited by rupiah depreciation, but availability of low-cost tablets will maintain positive growth. We expect stronger medium-term growth as the economic environment becomes more supportive.
Software sales: IDR8.6trn in 2014 to IDR15.6trn in 2018, at a CAGR of 16.1% in local currency terms. Government initiatives to reduce piracy, including a roadshow to bring down illegal software use, will boost medium term spending - but in the short term the key demand driver will be enterprise software deployments.
IT Services Sales: IDR12.0trn in 2014 to IDR20.2trn in 2018, at a CAGR of 14.0% in local currency terms. Our forecast has been downwardly revised, but a key growth area is cloud services, which could be worth more than IDR15.5trn by 2018.
Key Trends & Developments
In the short term an important trend impacting the development of the IT market is the depreciation of the rupiah, putting upward pressure on the price of imported hardware and software. For instance, in September 2013 global PC market leader Lenovo announced plans to raise prices of its PCs by about 20% in Indonesia. This will lead to some deferred sales in the PC market, where consumers remain highly price sensitive. An additional trend could be additional momentum granted to lower-cost tablets, particularly from local and regional OEMs producing devices running Google's Android OS.
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