Kirk LaughlinPress Release, Feb 2, 2010
Argentina’s IT spending is projected to grow at a compound annual growth rate (CAGR) of 12% over 2010-2014, with spending expected to pick up this year after a sharp contraction in 2009. There were also signs of an improvement in retail demand in Q209, but a full-year decline was still expected. The Argentine IT market is the second largest in Latin America. Despite the current economic crisis, the total value of spending on IT products and services should pass US$4.0bn in 2011 and reach US$5.9bn by 2014. Per capita IT spend is seen as rising from US$92 in 2010 to US$139 in 2014 and the current PC penetration rate of around 24% indicates plenty of room for growth.
In 2010, government sector spending should be a growth area, after a quiet 2009 for government hardware tenders. Many government organisations delayed PC procurements in 2009, but the second half of the year saw things start to improve at national and provincial levels. Strong growth is expected in the PC segment this year, with a double-digit increase in shipments.
Industry Developments In October 2009, Argentina’s senate approved a controversial bill aimed at imposing new taxes on luxury items, including electronics products. The law doubled value added tax (VAT) on affected goods from 10.5% to 21%. However, after industry lobbying, notebooks and netbooks were exlcuded from the proposed tax. The government said that the intention behind the proposed tax hikes was to provide assistance to the electronics manufacturing hub of Tierra del Fuego.
Argentina’s government continued to roll out a number IT-related projects in 2009. One area of spending was computers in education, with a tender launched in August for 250,000 netbooks to be distributed to students of public schools. The budget for this programme is reportedly US$150mn which, in addition to the netbooks and 1,155 servers, also covered shipment and installation.
There has also been a drive to introduce e-invoicing by the government and throughout the economy. In H109 Argentina’s tax agency, the Administración Federal de Ingresos Públicos, announced that it was to introduce compulsory e-invoicing for independent professionals and others, starting in November. The introduction of e-invoicing is targeted mainly at professionals and companies with annual revenues of US$100,000 and above.
Competitive Landscape The consumer segment is an increasingly important PC competitive battleground in Argentina. In November 2009, Chinese PC giant Lenovo claimed to have increased its share of the Argentine market to 4% from 1.4%, thanks to consumer sales, while enterprise sales slumped. Recognising that availability of credit is an important driver for consumer demand, Lenovo has launched a credit programme for resellers. Software market-leader Microsoft Argentina expected revenues to rise 24% to around US$100mn in FY2009, which ended in June 2009. Microsoft hopes that the launch of its Windows 7 operating system, in October 2009, will boost its local sales. FY09 brought changes in the structure of Microsoft Latin America, which involved establishment of some new country subsidiaries, including Microsoft Argentina.
IT services vendors have responded to an evolving market by investing in infrastructure, developing new services and reaching out to new segments. In September 2009, Indian IT giant Tata Consultancy Services (TCS) opened a new global delivery centre in Buenos Aires, which will initially employ 250 staff. Meanwhile, earlier in 2009, IBM’s IT outsourcing centre in Buenos Aires was upgraded to global delivery centre status, as one of the top IBM IT services centres worldwide.
Computer Sales
We project that Argentina’s computer and accessories market will have a CAGR of around 9% over 2010-2014, reaching around US$2.9bn by 2014. Argentine sales of computer hardware are projected to return to positive growth in 2010, following a sharp contraction in volume sales in H109. We forecast a 15% increase in PC shipments in 2010, driven by notebooks, which were the one growth area in 2009. In H109, volume sales suffered a double-digit percentage decline, with lower sales of desktops the main driver. Despite the challenging environment for PC vendors in 2009, there were still some opportunities. Going forward, drivers should include affordable PC programmes for households and schools, as well as growing broadband penetration, retail channel expansion and the popularity of notebooks and netbooks.
Software Argentina’s software market is projected to be worth US$650mn in 2010 and software CAGR for 2010- 2014 is forecast at around 10%, despite the economic climate and high annual software piracy losses. This year should see a boost from systems upgrades deferred from 2009, when the economic crisis had an impact in public and private sectors.
Demand from small and medium-sized enterprises (SMEs) for enterprise resource planning (ERP) applications should continue to grow, particularly in relatively untapped provincial areas. The main functional category currently remains ERP solutions, estimated to account for more than 80% of the enterprise software total. However, vendors will increasingly look to applications such as customer relationship management (CRM) and business intelligence, where faster growth is projected.
IT Services Argentina’s IT services market is forecast at around US$1.1bn in 2010, with a return to double-digit growth after a sharp deceleration because of the economic contraction in 2009. For a developing market, the percentage of Argentine IT market revenues generated by services is fairly typical at around 25%, although lower than some other countries in the region where the services share is already above 30%.
IT services revenues are expected to grow faster than the market as a whole, with CAGR for 2010-2014 projected at about 14%. Led by the financial, telecoms and public sectors, there is a trend towards bigger managed service and outsourcing deals in key sectors of the local market. However, traditional services such as desktop support are still the mainstay.
E-Readiness Argentina has one of the most dynamic telecoms markets in the region, with a dramatic expansion in the number of mobile subscribers in the past few years. Fixed-line penetration is among the highest in Latin America, providing a good platform for strong growth in broadband services adoption.
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