BMI's Executive Summary

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Market Overview

The Brazilian IT market is by far the largest in Latin America and is projected to grow at a compound annual growth rate (CAGR) of 11% over the 2007-2012 period. The total value of spending on IT products and services should pass US$20bn in 2008 and US$30bn by 2012. Despite soaring sales in the PC sector in 2007, a PC penetration rate of less than 25% indicates plenty of room for growth. The overall economic outlook is constructive for growth in IT spending with BMI projecting that the economy should expand by approximately 4-5% on an annual basis throughout the forecast period. This growth is lifting millions into a middle class for whom computers are no longer beyond reach.

The retail sector should continue to dominate in terms of PC sales and register strong growth due to a greater range of financing options for consumers, and more flexible terms from retailers. Other drivers for the retail sector include the cheaper US dollar, tax breaks on PCs, and a shrinking 'grey market', now down to below 40% of PC sales from 60% in 2005.

Government spending will become an increasingly important factor, with IT now central to the government's Growth Acceleration Plan (PAC) which calls for the percentage of GDP accounted for by IT to rise to 1.5% by 2010 from the current 0.5%. However, despite a new buoyancy about corporate spending in 2007, Brazil's company IT spending is still thought to lag behind global peers. Moreover, a number of risks delimit our forecast scenario, including the effects of a possible global economic downturn.

Industry Developments

The Education Ministry revealed that as of the end of 2007 Brazil's government had equipped some 27,000 public schools with computer labs. Around 9,000 more public schools were equipped with computer labs in that year. There is still a long way to go however to achieve the goal of 119,000 public schools equipped with computer labs by 2010, representing a strategic opportunity for vendors. In November 2007 President da Silva announced plans to invest as much as US$23bn in the science and technology component of the government's Growth Acceleration Plan (PAC). The vast amount of money is earmarked for innovation and technology projects and must be spent between now and 2010. A key objective of the PAC is to build more digital awareness and facilitate more citizens to access computer and internet over the next few years.

Competitive Landscape

Brazil's booming PC market is attracting further investments from global vendors after the grey market share of overall sales continued to fall in 2007. The market leader remains local giant Positivo Informatica with a share of close to 15% followed by global vendors HP and Dell. The share of the grey market fell to below 40% last year from around 60% in 2005. Positivo has been the sales leader in Brazil for the last 13 quarters, but Dell is the leader in the corporate segment and has pledged that investment in 2008 would be higher than in 2007.

Turning to the software segment, fierce competition has seen a wave of consolidation with a trend for vendors to look for niche companies with vertical specialisations such as Informage, a software supplier in the Health area recently bought by local company Datasul. Oracle has also been attempting to grow through a series of recent acquisitions. SAP, meanwhile, is focusing on the SME sector now and claims demand for ERP solutions is increasing some 10-12% a year.

In the IT services segment, IBM has the biggest market share in Brazil and is growing faster than the market. In recent years HP, Accenture, IBM and EDS have been among those setting up new software development hubs, often in São Paulo state, to take advantage of the developing offshoring opportunities.

Computer Sales

BMI is projecting that Brazil's computer and accessories market will have a CAGR of at least 10% over the 2007-2012 period. Computer sales in 2007 were put at US$6.9bn, and should reach the US$10bn mark by 2011. Annual computer sales are currently at around 9mn units a year, and increasing at upwards of 20% a year, putting Brazil on course to become one of the biggest computer markets in the world. The main driver of growth is the retail sector where consumers are benefiting from a greater range of financing options and more affordability. There is a sizable grey market, although evidence suggests that this has fallen in recent quarters to below 40% of unit sales.

Software

Brazil's software market is estimated to have been worth US$2.8bn in 2007, and the figure for 2008 is expected to come out at a little more than US$3.2bn. Software CAGR for 2007-2012 is projected at around 11%. Software is beginning to gain ground in Mexico, despite high annual software piracy losses. The software sector's current high single-digit growth is being driven partly by increasingly strong demand for ERP solutions from SMEs. Software piracy was estimated to account for 60% of software in 2006, but the fall of 4% in that year was seen as encouraging.

IT Services

Brazil's IT services market is estimated to have grown around 12% in 2007 to just short of US$7bn, with similar or slightly higher growth expected in 2008. For a developing market, the percentage of IT market revenues generated by services is high at around 38%, which corresponds more to developed market levels. IBM has already estimated that 54% of its country revenues come from IT services, slightly more than its global average. One driver for the market will be the government's intention to develop Brazil's capabilities in the BPO area and capture a larger global market share. Brazil has an ambitious plan to become of the world's top IT outsourcing destinations by 2010. Brazil will have to overcome a number of challenges to achieve this, however.

E-Readiness

The World Economic Forum ranked Brazil 53rd in the world in its most recent survey of 'degree of preparation to participate in and benefit from information and communications technology', ranking Brazil fourth in the region behind Chile, Barbados and Mexico. According to BMI estimates, the number of Brazilian internet users reached 36.2mn in 2007, representing 20% of the population. The percentage of broadband subscribers in the general population however was only 3.2%.

CONTENTS

Executive Summary

• Market Overview
• Industry Developments
• Competitive Landscap
• Computer Sales
• Software
• IT Services
• E-Readiness

SWOT Analysis

• Brazil IT Sector SWOT
• Brazil Business Environment SWOT

Market Overview

• Government
Authority
• Background.
• Hardware
• Software
• Services
• Industry Developments

Industry Forecast Scenario

• Table: Brazil's IT Industry – Historical Data And Forecasts (US$mn unless otherwise stated)

Macroeconomic Forecast

• Table: Brazil – Economic Activity

Competitive Landscape

Company Profiles

• Positivo Informatica
• Dell (Brazil)
• Microsoft

BMI Forecast Modelling

• How We Generate Our Industry Forecasts
• IT Industry
• Sources