||Mexico Information Technology Report Q3 2010 - New Market Report Published
||Official Wire, http://www.officialwire.com/main.php?action=posted_news&rid=191217
||Thursday, July 29, 2010
Electronic and Mobile Government, Citizen Engagement, Internet Governance
||Jul 30, 2010
Mexico's IT spending is forecast to grow at a compound annual growth rate (CAGR) of 9% over the 2010-2014 period, although with strong variation between sectors and regions. Mexico City and its surrounding area accounts for at least 50% of total Mexico IT spending, but Mexico's under-penetrated south east and Pacific regions are expected to offer growth opportunities over the five-year forecast period.
IT spending is expected to outpace GDP growth, with drivers including rising PC penetration and growing PC affordability, and US corporate demand for IT outsourcing. IT spending as a percentage of GDP at around 1.4% remains well below OECD levels and We project that per capita IT spending will rise from US$108 to US$163 by 2014.
Industry Developments ; Government spending is expected to grow in 2010, but individual projects will continue to be affected by budget uncertainties. One priority in 2010 is spending on IT equipment such as PCs, software, electronic blackboards and projectors for schools. In August 2009, the government launched a new wave of austerity cuts necessitated by the economic downturn, with US$6.4bn in cuts made in that month alone. Areas of spending at the federal level include integrated enterprise resource planning (ERP) and back office systems and e-services platforms and interfaces. However, it is unclear to what extent continuing tight credit conditions and fiscal pressure will ultimately impact on government IT spending should the economic recovery falter.
Fiscal pressures were behind a federal government proposal last year to end financial assistance for companies that end in technology. The proposal, heavily criticised by Mexican IT association Canieti, threatened to eliminate the provision of federal funds to cover 30% of companies' investments in innovation and technology development.
Competitive Landscape ; PC vendors are focused on opportunities in the small and medium-sized enterprises (SME) sector. Dell has said that around 30% of its Latin American region revenues now derive from SMEs. The company has launched new models in its low-cost Vostro line, aimed at the SME segment, as well as government and educational institutions. Meanwhile, through Dell Financial Services, Dell has also attempted to help smaller businesses overcome capital outlay constraints to investment in IT.
One result of the economic crisis may have been to accelerate adoption of cloud computing solutions such as Software-as-a-Service (SaaS). The Chilean unit of Microsoft has a target of more than 1,000 companies using its Microsoft Online Services offerings within the next year. Meanwhile, European giant SAP has also targeted SMEs with its online delivery solution, 'Business All-in-One Fast-Start', as part of a partnership with HP.
Many Mexico market computer hardware vendors have adapted their strategies to take advantage of increased sales through resellers and retailers. The Mexico market is dominated by a number of IT wholesalers which are mainly active in the larger regional markets, while for the moment less developed regions are served by smaller local distributors.
Computer Sales ; Mexico's computer hardware sales are estimated at US$5.4bn in 2010 and are projected to reach around US$8.1bn in 2014. There remains considerable latent potential as the current low level of computerisation is low, with PC penetration estimated at below 25%. Growing broadband penetration, including 3G mobile, will drive the PC market. Netbooks will remain a growth driver here, with their main attraction for price-sensitive consumers and small businesses being their low-cost relative to fully featured notebooks, although this advantage is being reduced. The SME segment is expected to be a significant opportunity for netbook vendors. Most netbooks currently retail in Mexico in the US300-US$500 price range, however, adding to pressure on average PC prices.
Software ; The Mexican software market is projected to reach US$2.2bn in 2010, from US$2.0bn in 2009, with imported software accounting for at least 80% of the total. Last year the recession led some companies to cut IT budgets or look to defer systems updates, with most spending coming from existing clients, and an emphasis on maintaining existing applications. Overall, however, business software was one of the IT market segments less affected by the slowdown.
Software spending should have an upwards trajectory as the government turns its attention to overcoming Mexico's long-standing under-investment in this area. In 2009 the most popular applications remained basic ERP, and supply chain management (SCM) solutions, while business intelligence and security software should provide growth opportunities, including more spending on networked security solutions.
IT Services ; The IT services market is projected at around US$4.0bn in 2010. Despite near-term economic exigencies, the market should ultimately grow at a CAGR of 11% through 2014. In 2010, however, much will depend on the speed and sustainability of global economic recovery.
The increasing number of multinational companies operating in the market is an important driver for spending. Opportunities also reside within the SME sector, where companies are trying to use computing resources more effectively. Meanwhile, Mexico is becoming an increasingly important hub for provision of business process outsourcing (BPO) and other outsourcing services.
E-Readiness ; The World Economic Forum's latest annual survey found Mexico continuing to make steady progress on network indicators. The survey had Mexico climbing six positions in the rankings from 55th. The report attributed the improvement to the adoption of more efficient electronic strategies for digital networks and infrastructure connection nationally and regionally.
The potential for new broadband technologies to take hold in Mexico is high, with the energy utility owning fibre-optic infrastructure and WiMAX licences expected to be auctioned in 2009. With Cofetel taking a more combative stance to Telmex, we believe that there is a good chance that new operators will enter the market and be responsible for strong growth.
E-Government ; The 2008 UN e-government survey found that Mexico had the most advanced e-services development in Latin America, due to a 'strong national government portal', which encouraged online consultations between government and citizens.
Recent state and municipal statistics have highlighted gradual progress in the implementation of egovernment in Mexico at a federal and state level. In 2001 the government launched an e-government initiative that prioritised providing health, education and other government services online, as well as the development of e-commerce. Since then, however, funding has rarely been sufficient for much progress to be made given the substantial task involved, and state and municipal governments are increasingly seeking to launch their own initiatives. Many states are seeking funding from the private sector to make good gaps in public funding.
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