Philippines IT spending to reach $1.2B in ’05

Driven by niche markets like telecommunications, call centres, gaming and even small-to-medium enterprises (SMEs), total information technology spending among local companies is projected to grow this year to about US$1.2 billion, according to research group IDC.

IDC projects total spending in 2005 to increase by 12.5 per cent as new investments that entered the country last year are expected to begin putting their money in IT to support their operations.

Based on government data, foreign direct investments reached P21.7 billion in the fourth quarter of 2004 from P14.1 billion in 2003. These investments mostly came from the manufacturing sector and IT-enabled services like call centres and business process outsourcing.

Philippine IT spending projections:

  • growth of 12.5 per cent in 2005
  • annual average growth of 13.2 per cent until 2008
  • government will allocate P18 billion (US$36 million) for IT-related projects over five years
  • hardware acquisition will dominate 2005 IT spending

“The projected value (US$1.2 billion) is not as high as that for more industrialized countries, but it is nonetheless significant,” noted Manuel Ravago, research manager for IDC Philippines, during a recent forum where IDC analysts discussed local market trends.

IDC also projects IT spending in the Philippines to grow by an average of 13.2 per cent every year until 2008. Aside from the niche markets, the research group is counting on the government to help encourage spending by promoting IT use in the country.

IDC estimates that the government will allot P18 billion more for IT-enabled projects until 2010, following the P4 billion e-government fund released last year.

IT spending behavior this year is not expected to deviate from last year’s trends. Users are again seen spending most of their budgets on servers and desktop computers. IDC expects hardware to account for at least 60 per cent of the projected US$1.2-billion total spending for this year. The same spending behavior applies to both large enterprise users and smaller companies whose initial IT investments are mostly on hardware. Based on IDC figures, desktop PCs accounted for almost 30 per cent of total IT spending among SMEs last year, followed by servers, networking equipment (switches) and printers.

Based on IDC’s survey of the country’s top 100 corporations last year, more than 30 per cent of total spending went to servers and client computers (desktops and notebooks). Users also spent most of their budgets on networking equipment and packaged software, both of which accounted for 20 per cent of total spending in 2004.

“Networking becomes a key concern for users as the exchange of data and information increases,” said Jubert Alberto, senior analyst at IDC Philippines. “A lot of the companies also spent on the renewal of their software licenses.” The IDC survey also stated that the country’s largest companies placed high priority on security and storage, particularly to support disaster recovery programs.

In terms of software, users, especially telecommunication companies (telcos) and banks, have focused on solutions like supply-chain to strengthen their back-end, and customer relationship management to enhance customer services. In 2005, IDC predicts companies to channel some of their IT budgets to business intelligence and e-commerce solutions. “Companies will look at business intelligence as a key strategy in getting ahead of their rivals,” Alberto said.

While wireless became a buzzword last year, IDC’s survey showed a low uptake of wireless solutions among users. “Aside from high maintenance costs, some users see a number of the services as somewhat unreliable because the telcos launched these only last year,” Alberto said.

Related links:

Philippines eyes US$55M funding for SMEs

Philippines firms hiking IT budgets

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Jim Love, Chief Content Officer, IT World Canada

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