Wednesday, August 19, 2009

Australia: The Total Size of the Domestic IT Market Is Forecast to Increase

Australia’s IT market is projected to continue to provide opportunities in many sectors during BMI’s 2009-2013 forecast period. The total size of the domestic IT market is forecast to increase from nearly US$18bn in 2008 to around US$21bn in 2013, with state information and communications technology (ICT) programmes, particularly in education, helping to compensate for deferred consumer and business IT spending .

In H109 government stimulus handouts and lower interest rates partly offset the effects of an easing in economic activity and the weaker Australian dollar. Some IT projects were cancelled or downsized, but consumer spending held up well, and the IT market remained in positive territory .

A number of factors will continue to immunise Australia against a slowdown in IT spending. Firstly, ambitious government ICT programmes, such as the government National Broadband Network (NBN) project, are already budgeted and well established. Secondly, the economic crisis will cause some companies to look to IT as a strategic device for increasing operational efficiencies .

Industry Developments The Australian IT market should receive a boost from federal and local government stimulus spending packages. The Rudd government’s five-year AUD15.1bn spending plan aims to create 133,000 jobs and revive productivity growth. Together with a AUD300mn local spending plan, the package was expected to provide a stimulus across the economy .

Healthcare was among the sectors expected to benefit in terms of IT projects. Meanwhile, in December 2008 the federal government announced an additional AUD807mn for its signature programme of installing computers in schools. Total spending committed to the programme has now reached AUD1.2bn .

Federal programmes be echoed in state government projects in areas such as education and smart cards .

Queensland Transport recently unveiled plans to introduce a new driving licence using smart card technology. Adult proof of age cards are also to be introduced, as are cards for licences for passenger transport and by a number of other licensing authorities .

Company News In 2009 the PC battleground will continue to involve competition for government tenders, particularly the computers in education programme. In April 2009 Lenovo succeeded in a tender to provide computers to New South Wales schools. This followed a previous big win for Lenovo in February, when it teamed up with a local partner to roll out 10,000 netbooks to Victoria public schools over a three-year period. The project will provide netbooks from both Lenovo and Acer to students in years five through to eight .

In 2009 wheat exporter AWB was proceeding with a AUD22bn project to upgrade its business software, with new enterprise resource planning (ERP) and customer relationship management (CRM) software being installed. Meanwhile, business software leader SAP was the selected software supplier for a AUD70mn project by leading superannuation funds administrator Superpartners .

IBM’s Australian subsidiary was remaining positive about its revenues prospects in 2009, despite some negative developments in Q109. In March Telstra reportedly reassigned parts of its six-year US$697.7mn IT outsourcing with IBM Global Services which had been signed in 2006. Telstra aimed to reduce its number of IT services providers from four, EDS, IBM, Infosys, and Satyam, to two .

Computer Sales BMI projects that Australia’s computer and accessories market will have a compound annual growth rate (CAGR) of around 2% over the 2009-2013 period. Australian computer hardware sales were estimated at US$7.5bn in 2008, and despite only marginal growth in consumer demand in 2009, should pass the US$8bn mark by 2013 .

The main drivers of growth in the PC segment will be government programmes, growing broadband penetration and greater affordability. More than 90% of Australian households now have a PC, but consumers appear willing to spend on upgrading their notebook computers, and it is also becoming more popular to purchase a second household PC. Ambitious government information society programmes could see annual computer sales approaching 7mn by 2013 .

Software Software accounted for about 17% of the Australian IT market in 2008, with estimated spending of US$3.0bn. Software sales are forecast to have a CAGR of around 8%, rising increasing to US$4.1bn by 2013. Over the forecast period ERP, CRM, and other e-business products will find increasing popularity with the small and medium-sized enterprise (SME) market, as businesses look to enhance productivity through automating essential functions .

Software piracy has fallen in Australia in recent years but remains an issue in some segments of the enterprise market. The current economic crisis may lead some organisations to cut IT budgets or look to defer systems updates, and vendors are looking to other areas, such as business intelligence, where faster growth was possible .

IT Services IT services accounted for about 42% of the domestic IT market in 2008, with spending of US$7.5bn, up from US$7.3bn in 2007. The CAGR for the segment is estimated at 5% over the 2009-2013 period. The current economic crisis may reinforce the logic of outsourcing non-core functions, as companies will be less willing to spend on in-house IT capabilities .

The economic situation, and tighter credit, is likely to have an impact on projects in some market segments. However, sectors such as government, telecoms, healthcare, and banking should continue to supply demand for implementation, consulting, and managed services .

E-Readiness Data published by the Australian Bureau of Statistics (ABS) suggest that there were 6.685mn broadband subscribers at the end of 2008, up by over 28% from 5.218mn subscribers at the end of 2007. A number of 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% vs 17%) .

The central component of the Rudd 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. Tenders for the construction of the network were lodged in November 2008 .

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. Our newly revised broadband forecast envisages broadband penetration rising to just over 37% at the end of 2009. By the end of our forecast in 2013, we envisage a penetration rate of 45%.

Australia Information Technology Report Q4 2009:

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