2009-11-04 08:25:01 - Mexico Information Technology Report Q4 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/mexico-informa ..

Market Overview
BMI projects that Mexican IT spending will dip by 6% in 2009 to around US$12.0bn, due to current
economic uncertainties and a decline in private sector credit growth. In a challenging economic climate in
H109, consumer sentiment reached an all-time low, and business IT spending fell further, with hardware
updates particularly vulnerable to cuts. Government spending was a relatively strong area in H109, but
could be hit in H209 and 2010 by a new austerity drive.
Despite the difficult environment, there should still be opportunities in H209 in key IT verticals such as
financial services, telecoms and government. The government has responded with stimulus measures,
assisted by a US$47bn bailout package from the IMF. Spending on government IT projects was budgeted
to increase by as much as

 

 

one-third in 2009, although a new wave of austerity drives launched in Q309 is
now likely to have an impact.
Going forward, the consumer fundamentals of low household penetration of many digital devices such as
notebooks computers, and greater affordability should return the IT market to an upwards parity.
Meanwhile, growing broadband penetration, including 3G mobile, will drive the PC market. Netbooks
will be the main growth area here, with their main attraction for price-sensitive consumers and small
businesses being their low cost.
Industry Developments
In August 2009, the government launched budget cuts that seemed certain to have an impact on current
and future IT projects. Total government IT spending had been budgeted to increase this year by around
one-third in local currency terms, but this must now be in question. Areas of spending at the federal level
included integrated enterprise resource planning (ERP) and back office systems and e-services platforms
and interfaces
In the short term, most 2009 budgets had already been confirmed. However, it was unclear whether
continuing tight credit conditions and fiscal pressures would ultimately impact on government IT
spending should the economic downturn be prolonged.
Meanwhile, fiscal pressures were behind a federal government proposal to end financial assistance for
companies that end in technology. The proposal, heavily criticised by Mexican IT association Canieti,
threatened to eliminate the provision of federal funds to cover 30% of companies´ investments in
innovation and technology development.
Competitive Landscape
In H109, the main domestic PC market driver was laptop sales, an area where foreign vendors retained a
competitive advantage. The popularity of netbooks has reinforced the preference for mobility in the
Mexican market, with a wave of rival product roll-outs from vendors such as Asus, Acer, HP, Dell and
Toshiba. Local companies competing in the netbook segment in 2009 included Lanix, Blue Light and
Dextra.
In February 2009, Chinese PC giant Lenovo launched a new plant at Apodaca (Nuevo Leon) with 1,500
employees. The company plans to spend US$40mn to manufacture laptops in Mexico. The plant is
reportedly the biggest investment made by Lenovo outside China and indicates the strategic significance
of the Mexican market for PC vendors. Lenovo has also expanded its Mexican retail sector presence by
recruiting new channel partners through its principal wholesalers in Mexico: Ingram Micro,
CompuSolociones, Avnet and Exel.
In early 2009, many software vendors in the Mexican market responded to the global economic crisis by
adjusting their strategies and client focus. SAP announced plans to target its existing installed base of
large customers in Mexico with the May launch of its Business Suite 7. Meanwhile, local
software vendor Softtek identified the economic crisis as an opportunity to enhance its position as
nearshore services provider for US firms.
Computer Sales
Mexican computer hardware sales are projected to contract in 2009, with lower sales of desktops the main
driver. Mexico´s computer hardware sales are projected at US$5.7bn in 2009, down from US$6.1bn in
2008. Sales are projected to reach around US$8.3bn in 2013. In H109 there were reports of some
companies deferring replacement purchases as hardware was generally the first target for Mexican
businesses looking to make savings from IT budgets.
Despite the challenging environment for PC vendors in 2009, there are still some opportunities. In
particular, the popularity of netbooks will continue to boost sales in the notebook segment. Growing fixed
and mobile broadband penetration has driven PC sales, as mobile network operators have emerged as a
significant distribution channel for portable computers. The small and medium-sized enterprise (SME)
segment is expected to be a significant opportunity for netbook vendors in H209. Most netbooks currently
retail in Mexico in the US300-US$500 price range, however, adding to pressure on average PC prices.
Software
The software market in 2009 is projected to dip to US$2.2bn, from US$2.4bn last year, with imported
software accounting for at least 80% of the total. Software compound annual growth rate (CAGR) for
2009-2013 is put at around 12%, outpacing general IT market growth, as the government turns its
attention to overcoming Mexico´s long-standing under-investment in this area.
There were reports in early 2009 of some companies scaling back non-essential investments in software,
with most spending coming from existing clients. However, other companies view software investments
as strategic, rather than operational, reducing their vulnerability to cutbacks. In 2009 the most popular
applications remain basic ERP, and supply chain management solutions, while business intelligence and
security software should provide growth opportunities, including more spending on networked security
solutions.
IT Services
The Mexican IT services market is projected at around US$4.2bn in 2009, with spending slightly down
from last year. The economic situation is expected to be the main reason for negative growth in 2009. In
H109 there were reports of IT managers in various sectors reviewing IT spending plans. Early signs were
that only around 30% of companies were cutting budgets. However, government spending in H209 is now
likely to be less than previously expected.
Despite near-term economic exigencies, the market should ultimately grow at a CAGR of 12% through
2013. The increasing number of multinational companies operating in the market is an important driver
for spending. Opportunities also reside within the SME sector, where companies are trying to use
computing resources more effectively. Meanwhile, Mexico is becoming an increasingly important hub for
provision of business process outsourcing (BPO) and other outsourcing services.
E-Readiness
The World Economic Forum´s latest annual survey found Mexico continuing to make steady progress on
network indicators. The survey had Mexico climbing six positions in the rankings from 55th. The report
attributed the improvement to the adoption of more efficient electronic strategies for digital networks and
infrastructure connection nationally and regionally.
The potential for new broadband technologies to take hold in Mexico is high, with the energy utility
owning fibre-optic infrastructure and WiMAX licences expected to be auctioned in 2009. With Cofetel
taking a more combative stance to Telmex, BMI believes that there is a good chance that new operators
will enter the market and be responsible for strong growth.
E-Government
The 2008 UN e-government survey found that Mexico had the most advanced e-services development in
Latin America, due to a ´strong national government portal´, which encouraged online consultations
between government and citizens.
Recent state and municipal statistics have highlighted gradual progress in the implementation of egovernment
in Mexico at a federal and state level. In 2001 the government launched an e-government
initiative that prioritised providing health, education and other government services online, as well as the
development of e-commerce. Since then, however, funding has rarely been sufficient for much progress
to be made given the substantial task involved, and state and municipal governments are increasingly
seeking to launch their own initiatives. Many states are seeking funding from the private sector to make
good gaps in public funding.