ASEAN
22 March 2014
Indonesia’s Booming ICT Outlook
Indonesia’s ICT Outlook is booming, writes Frost & Sullivan's Nitin Bhat.
Indonesia’s ICT Outlook is booming, writes Nitin Bhat, Partner, Information & Communication Technologies Practice, Asia Pacific, Frost& Sullivan.
Indonesia should have been the other “I” in the so-called BRIC country classification that has been in vogue since its premiere by Goldman Sachs. While the country’s growth potential across sectors is quite significant, the case in point is the ICT sector.
With a population that is larger than those of Brazil and Russia, Indonesia enjoys a higher GDP per capita than India; its wireless penetration rate also exceeds those of India and China. Even in a global recessionary environment of 2009, the overall ICT industry in Indonesia grew by a whopping 29 per cent. The Enterprise ICT Market in 2010 is estimated at US1.3Bn. This is expected to increase to US3.4Bn in 2015 which represents a CAGR of 21.7%.
The biggest sector in the ICT industry in Indonesia is the telecommunications sector, especially the mobile industry. Indonesia has 11 wireless operators —seven mobile and the rest ‘fixed’ wireless (GSM & CDMA) — far more than any other Asian market, with the exception of India. The major mobile operators are Telkomsel, Indosat, and Excelcomindo (XL). There are several small challengers such as Hutchison CP Telecom Indonesia, Natrindo Telepon Selular (Axis), Mobile-8, and Smart Telecom. The Fixed Mobile Access (FWA) operators are Flexi (Telkom Indonesia), Bakrie Telecom, StarOne (Indosat), Hepi (Mobile-8), and Sampoerna Telecom.
Indonesia’s connections penetration level rose to 80 per cent in 2009 and crossed the 100 per cent level in 2012. Based on current trends with multi-SIM, Frost & Sullivan projects that total connections will increase from over 192 million in 2009 to 290 million in 2015. Total market revenues of US$7.5 billion in 2009 should rise to $9.8 billion in 2015.
Indonesia had a total of 298.6 million mobile subscribers in 2012, representing a penetration rate of 119.9%. The market is expected to continue growing to reach a penetration rate of 147.7% by the end of 2017. Total mobile communications revenue in 2012 amounted to US$14.2 billion and should reach US$20.3 billion by 2017.
The ICT hardware market is the second biggest segment in Indonesia. BMI breakesdown figures as:
- Computer hardware sales: US$4.2bn in 2012 to US$4.7bn in 2013.
- Software sales: US$687mn in 2012 to US$800mn in 2013
- IT services sales: US$989mn in 2012 to US$1.1bn in 2013
As Indonesia is an emerging economy, the low PC penetration and the even lower usage of ICT in businesses augurs well for the growth of the hardware segment: revenue could reach $5.5b by 2015. Both the mainstream multinational hardware vendors and emerging Asian and local vendors, with their upcoming hardware offerings, will be contributing to the growth of the market.
The Software and IT Services market in Indonesia was worth around $1b in 2009; it is projected to grow at the fastest rate in the sector to reach $1.7 billion in 2015. Currently, the software and IT services penetration in Indonesia is significantly lower than in many other countries in the region, hence presenting an even greater opportunity for growth in the future. The market is served by a mix of multinational and local vendors; the latter is expected to garner an increasingly higher proportion of the growth.
The overall ICT sector in Indonesia is expected to grow at a CAGR of 9 per cent over the next three years, therefore presenting huge opportunities for both current and new players.
• Value-added services such as speed boosters, mobile commerce and mobile content.
• Increasing popularity of handheld devices with the growing affordability of smartphones and tablets.
• Greater adoption of ERP solutions and increased propensity towards non-pirated software is definitely expected as economies like Indonesia mature and transition from lower labor cost industries and need to improve cost efficiencies and track productivity
• Demand for system integration, along with increases in outsourcing and usage of professional IT services.
Given the size of the country’s population, the robustness of the ICT sector in 2009, and the expected healthy economic growth in the future, Indonesia’s ICT sector offers significant opportunities for the existing players, as well as organisations looking to enter the market. However, in order to capitalise on this opportunity, players have to understand the context of the cultural and business environment paradigm that includes “skin in the game”, credible local presence, and ability to understand the relatively long gestation period in closing the business.
Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.
Media contact, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it.
Indonesia should have been the other “I” in the so-called BRIC country classification that has been in vogue since its premiere by Goldman Sachs. While the country’s growth potential across sectors is quite significant, the case in point is the ICT sector.
With a population that is larger than those of Brazil and Russia, Indonesia enjoys a higher GDP per capita than India; its wireless penetration rate also exceeds those of India and China. Even in a global recessionary environment of 2009, the overall ICT industry in Indonesia grew by a whopping 29 per cent. The Enterprise ICT Market in 2010 is estimated at US1.3Bn. This is expected to increase to US3.4Bn in 2015 which represents a CAGR of 21.7%.
The biggest sector in the ICT industry in Indonesia is the telecommunications sector, especially the mobile industry. Indonesia has 11 wireless operators —seven mobile and the rest ‘fixed’ wireless (GSM & CDMA) — far more than any other Asian market, with the exception of India. The major mobile operators are Telkomsel, Indosat, and Excelcomindo (XL). There are several small challengers such as Hutchison CP Telecom Indonesia, Natrindo Telepon Selular (Axis), Mobile-8, and Smart Telecom. The Fixed Mobile Access (FWA) operators are Flexi (Telkom Indonesia), Bakrie Telecom, StarOne (Indosat), Hepi (Mobile-8), and Sampoerna Telecom.
Indonesia’s connections penetration level rose to 80 per cent in 2009 and crossed the 100 per cent level in 2012. Based on current trends with multi-SIM, Frost & Sullivan projects that total connections will increase from over 192 million in 2009 to 290 million in 2015. Total market revenues of US$7.5 billion in 2009 should rise to $9.8 billion in 2015.
Indonesia had a total of 298.6 million mobile subscribers in 2012, representing a penetration rate of 119.9%. The market is expected to continue growing to reach a penetration rate of 147.7% by the end of 2017. Total mobile communications revenue in 2012 amounted to US$14.2 billion and should reach US$20.3 billion by 2017.
The ICT hardware market is the second biggest segment in Indonesia. BMI breakesdown figures as:
- Computer hardware sales: US$4.2bn in 2012 to US$4.7bn in 2013.
- Software sales: US$687mn in 2012 to US$800mn in 2013
- IT services sales: US$989mn in 2012 to US$1.1bn in 2013
As Indonesia is an emerging economy, the low PC penetration and the even lower usage of ICT in businesses augurs well for the growth of the hardware segment: revenue could reach $5.5b by 2015. Both the mainstream multinational hardware vendors and emerging Asian and local vendors, with their upcoming hardware offerings, will be contributing to the growth of the market.
The Software and IT Services market in Indonesia was worth around $1b in 2009; it is projected to grow at the fastest rate in the sector to reach $1.7 billion in 2015. Currently, the software and IT services penetration in Indonesia is significantly lower than in many other countries in the region, hence presenting an even greater opportunity for growth in the future. The market is served by a mix of multinational and local vendors; the latter is expected to garner an increasingly higher proportion of the growth.
The overall ICT sector in Indonesia is expected to grow at a CAGR of 9 per cent over the next three years, therefore presenting huge opportunities for both current and new players.
Potential business prospects
Some of the key opportunities moving forward include:• Value-added services such as speed boosters, mobile commerce and mobile content.
• Increasing popularity of handheld devices with the growing affordability of smartphones and tablets.
• Greater adoption of ERP solutions and increased propensity towards non-pirated software is definitely expected as economies like Indonesia mature and transition from lower labor cost industries and need to improve cost efficiencies and track productivity
• Demand for system integration, along with increases in outsourcing and usage of professional IT services.
Ideal playing field for astute players
With the fourth largest telecommunications market in the Asia-Pacific, which is one of the fastest-growing in the hardware, software and services sector, Indonesia definitely stands out as an economy that can be the extra “I” in the BRIC classification.Given the size of the country’s population, the robustness of the ICT sector in 2009, and the expected healthy economic growth in the future, Indonesia’s ICT sector offers significant opportunities for the existing players, as well as organisations looking to enter the market. However, in order to capitalise on this opportunity, players have to understand the context of the cultural and business environment paradigm that includes “skin in the game”, credible local presence, and ability to understand the relatively long gestation period in closing the business.
Acknowledgements and contacts
This article was authored by Nitin Bhat, Partner, Information & Communication Technologies Practice, Asia Pacific, Frost& Sullivan.Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and achieve best-in-class positions in growth, innovation and leadership. The company's Growth Partnership Service provides the CEO and the CEO's Growth Team with disciplined research and best-practice models to drive the generation, evaluation, and implementation of powerful growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with Global 1000 companies, emerging businesses and the investment community from 40 offices on six continents. To join our Growth Partnership, please visit http://www.frost.com.
Media contact, please email This email address is being protected from spambots. You need JavaScript enabled to view it. or This email address is being protected from spambots. You need JavaScript enabled to view it.