The Colombian IT market is one of the least developed in the Latin America region, but is projected to grow at a compound annual growth rate (CAGR) of 12% over the 2009-2013 period. The market continued to grow in H109, although there was a sharp deceleration compared with 2008. H109 saw stronger than expected demand for computers, against a backdrop of a continued expansion in private credit and lower than feared unemployment.

The consumer-driven economic boom of recent years may have come to an end, with private sector lending set to slow in H209, but government programmes and growing computer affordability will support spending on IT products and services. Per capita IT spend is projected to rise by nearly 50% from US$42 in 2009 to US$62 by 2013, while PC penetration has could reach 18% within our forecast period.

The economic outlook in H209 is problematic for the IT market, as Colombia increasingly feels the effects of a subdued growth and investment outlook. Despite these factors, Colombian domestic spending on IT products and services should reach a value of US$3.2bn in by 2013. The government sees increased information and communication technology (ICT) spending as a key means to advance its central strategic goal of helping the country to reintegrate disaffected groups. Industry Developments In 2008, Colombia's government launched a 'National Plan for ITC' (PNTIC) for the period 2008-2010. Key targets include increasing the percentage of municipalities with broadband access to 70% by 2010 and increasing the number of households with broadband access to 40%.

The Ministry of Communications (Minicomunicaciones) assigned a COP1.5bn budget for PNTIC for the 2008-2010 period, the money being channelled through the Communications Fund. In early 2009, local Colombian software developers association Fedesoft said that it expected further action from the national government this year to support the domestic software industry. The government is currently working on a general software law that is on track to be approved by the end of 2009, or early 2010. The law is expected to include measures such as allowing investments in software to be amortised and depreciated like other capital investments. The government is pressing ahead with its Computers for Education (Computadores para Educar) programme, which has delivered 161,300 computers to schools since 2001 according to government data. In late 2008, 600 computers were delivered to schools in Duitama municipality.

Recently the Colombian government announced that the programme would be piloting Windows XP versions of the One Laptop Per Child (OLPC)) XO laptop. Previously the laptops supplied came equipped with Linux operating systems. Competitive Landscape In October 2009 Lenovo stepped up its campaign to penetrate Colombia's retail PC segment. The company launched a new line of desktops and laptops targeted at small and medium-sized enterprises (SMEs) and households. Lenovo planned to expand its retail sector presence through expanding channel partnerships, and the new desktop and laptop series will be distributed through companies MPS, Quorum, SED, Cubix and Makrocomputo.

In Colombia the business segment reportedly accounts for 80% of Lenovo's local sales. Fiscal year 2009 brought some changes in the structure of Microsoft Latin America, which involved establishment of some new country subsidiaries including Microsoft Colombia. Microsoft hopes that the launch of its Windows 7 operating system, scheduled for October 2009, will boost its local sales. Meanwhile, Microsoft Colombia made Colombia the second country to pilot the use of a Windows XP version of the One Laptop per Child's (OLPC) XO laptop.

In August 2009, SAP completed a major enterprise resource planning (ERP) implementation for Banco de Credito Colombia, part of the Helm Financial Services Group. Colombia is also one of four regional markets selected by SAP as prospects for its sustainability portfolio, which includes governance and risk and compliance solutions, partnering with Everis to develop this market in Colombia. Computer Sales Computer sales in 2009 are projected at US$855mn and, despite a sharp deceleration in market growth in 2009, should pass the US$1.3bn mark by 2013. Colombia's PC penetration reached 12.8% as of mid- 2009, surpassing the government's previous 2010 target of 10.8%.

The main long-term drivers of growth in the Colombian PC segment are lower prices and greater affordability. PC shipments remained in positive growth territory in H109, but the weakening economy, and peso devaluation, contributed to a slowdown. According to government statistics, 698,960 computes were imported in the first six months of 2009, up 2% from 685,317 in the same period of 2008. Notebook sales drove this growth and in H109 accounted for above 50% of PC shipments for the first time. Software Colombia's software market is projected to be worth US$325mn in 2009, and software CAGR for 2009- 2013 is forecast at around 13%. Software has opportunities for growth over the next few years, but, in the near term, strong economic headwinds will lead some companies to look to defer systems updates.

Software piracy was estimated to account for 56% of software in 2008, down considerably from the rate a few years ago. Business sentiment showed signs of a sharp decline in H109, but spending on software may receive a boost from government measures to stimulate the software sector. Most demand in the near term will be for basic solutions, such as enterprise risk management (ERM) and supply chain management systems. IT Services Colombia's IT services spending is projected at around US$674mn in 2009, with slower growth compared with 2008.

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. The economic situation is likely to have an impact this year on spending in some key IT spending verticals such as manufacturing, construction and oil. However, the global economic slowdown could increase demand for outsourcing from some US organisations. In the last year or two, there has been a trend towards bigger managed service and outsourcing deals.