Colombia Information Technology Report Q3 2011

Colombian IT spending is projected to grow at a CAGR of 11% during 2011-2015 driven by government ICT initiatives, and improving infrastructure. The consumer-driven economic boom of recent years may have come to an end, but rising incomes and greater computer affordability will result in more spending on IT products and services.

The governments Vive Digital ICT development plan should help to underpin IT market expansion over the forecast period. More opportunities are likely in the transport, construction and financial services sectors, which are expected to grow robustly. Cloud computing remains a niche but interest is growing. The government sees increased information and communication technology (ICT) spending as a key means to advance its central strategic goal of helping the country reintegrate disaffected groups. Per capita IT spend is projected to rise by 45% from US$55 in 2011 to US$81 by 2015, while PC penetration has exceeded government targets and could pass 20% in our 2011-2015 forecast period.

Industry Developments

In October 2010 the Colombian government launched a new ICT policy, named Vive Digital ICT, which is intended to drive Colombias IT development over the next four years. The main elements of the plan are initiatives to broaden internet access and to develop the countrys digital infrastructure. The government will set up a technology board, led by the president, to guide the plan. Of direct interest to IT vendors are proposals under the Services component to make connection devices more affordable to the public by eliminating customs tariffs, and by making access to credit for the purchase of such terminals more flexible.

The Colombian government is reportedly considering the introduction of a tax reduction for software companies. In April 2011, ICT minister Diego Molano Vega said that the the ministry was in discussions with Colombian tax agency DIAN on ways to implement the proposal. According to reports, the government is considering a reducing the tax to 3.5% from the current 11%.

Competitive Landscape

Vendors in the Colombian market are increasingly focused on cloud computing opportunities, including in the SME segment. Microsoft foresees 30% of regional CRM implementations coming from the cloud by 2014. Meanwhile in January 2011, SAP announced that it was launching a new cloud-based solution offering for Latin American SMEs, its business suite on demand.

One significant IT market growth area is SAP-related consulting. In 2010, Chilean IT consultancy ActualiSAP announced that it was expanding into the Colombian market and would open a Colombian office this year. Meanwhile, HP has partnered with SAP on its online solution Business All-in-One Fast- Start, while Neoris has expanded its operations by establishing a new unit in Colombia. Colombia has a growing domestic software sector, and software firms have strengths in a number of areas including financial applications, digital animation and mobile and web applications. Major local vendor Productura de Software Latin America (PSL) counts among its key clients Colombias state oil company Ecopetrol, cosmetics company Avon, and Colombias largest bank, Bancocolombia.

Computer Sales

PC sales are projected at US$1.1bn in 2011, consolidating strong growth in 2010, and should reach US$1.7bn by 2015. There is considerable potential in government and business segments, where levels of investment are low by regional standards.

Colombian PC penetration reached 12.8% in mid-2009, surpassing the governments previous 2010 target of 10.8%. The main long-term drivers of growth in the Colombian PC segment are lower prices and greater affordability. Business investment is expected to trend upwards, with more foreign investment encouraging more spending on technology.

Software

Colombias software market is projected to be worth US$441mn in 2011 and software CAGR for 2011- 2015 is forecast at about 12%, market it one of the regions faster-growing markets. Software piracy was estimated to account for 56% of software in 2008, down considerably from the rate a few years ago. Vendors reported stronger business software demand growth in 2010, particularly among larger and medium companies. Most demand in the near term will be for basic solutions, such as enterprise risk management and supply chain management systems. Key sectors include banking, retail, government and consumer goods.

IT Services

Colombias IT services spending is projected at about US$927mn in 2011, with 18% growth compared with 2010. The percentage of IT market revenues generated by services is currently around 39%, high by emerging market standards and above the regional average. The majority of demand, around 75%, still comes from the large company sector.

In Colombia, several sectors have particular potential, including financial services and utilities, with Isagen and Empresa de Energia de Cundinamarca awarding some large tenders. A major factor pushing growth is the governments ambition for Colombia to emerge as a regional outsourcing and BPO centre. In the past year or two, there has been a trend towards bigger managed service and outsourcing deals.

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