BMI's Executive Summary

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Market Overview

The Chile IT market is one of the most developed in the Latin America region and is projected to grow at a compound annual growth rate (CAGR) of 11% over the 2007-2012 period. While only around 1/10 the size of Brazil's IT market, the total value of Chilean domestic spending on IT products and services should pass US$2.1bn in 2007 and US$3bn by 2012. The overall economic outlook is constructive for growth in IT spending with steady economic growth of around 5% expected across the forecast period and, despite an anticipated slowdown in 2008, consumer spending is likely to be healthy. With regional leadership positions in many ICT infrastructure indicators, a PC penetration rate of around 18% indicates plenty of room for organic growth.

Government programmes provide an important context for market development in the next few years. The government's Digital Agenda 2.0 (for 2007-2010) groups together multiple initiatives to promote technology use in areas ranging from e-government to education and businesses. The retail sector should continue to perform well in terms of PC sales with growth due to higher real incomes, more financing options for consumers, and more choice. The enterprise sector represents an evolving opportunity in the forecast period with relatively low levels of investment currently relative to some countries in the region. However, a number of risks pertain to our forecast scenario with many of the government's ICT development plans and programmes still in a nascent stage. The government's plans to develop Chile as an offshoring hub are arguably somewhat late and the country may struggle to differentiate itself from larger competitors in the region.

Industry Developments

In November 2007 the Chilean government established a new council to lead its campaign to develop the country as an offshoring services location. To this end the government led by Chile's economic development body Corfo plans to invest US$11.7mn in 2008. The new council includes companies from the private sector such as Oracle, as well as government ministries and educational institutions. Meanwhile, the government has allocated US$80mn to support projects aimed at boosting internet coverage. The money will be spent in 2008-2009. Chilean IT industry association Acti will also manage US$7.5mn in new funding to support SME IT implementation projects. Turning to e-government, in late 2007 the Chilean government announced the launch of a new version of its state procurement portal Chile Compra.

Competitive Landscape

Chile's status as one of the fastest growing PC and notebook markets in Latin America is stimulating an evolution of strategic focus for many international vendors. Market leaders in Chile, where lower prices and a greater variety of payment measures are driving growth, include Dell, HP and Lenovo. With the market expanding to lower-income tier groups HP is testing demand for Linux in Chile with the release of new notebook models.

Turning to software, European giant SAP is among those enterprise software vendors positioning themselves to benefit from the introduction of International Financial Reporting Standards (IFRS) in Chile. From January 1 2009, all Chilean companies will be required by law to report financial statements according to international standards. The majority of demand in functional terms remains for ERP and supply chain solutions, and Chilean firms such as Qintech are also benefiting from the growing market.

The fastest growing segment of the IT market is expected to be IT services, and in 2007 leading local IT services company Sonda continued to win a series of increasingly large outsourcing tenders, despite wellpublicised problems with its contract for the Transantiago metro system. Global vendors are also looking to capture a larger share of the IT services market. In 2007 IBM won a five-year outsourcing contract from Telefónica Chile reportedly worth up to US$54mn. Under the deal, IBM will administer all of Telefónica's business processes via an outsourcing system.

Computer Sales

BMI is projecting that Chile's computer and accessories market will have a CAGR of at least 8% over the 2007–2012 period. Computer sales in 2007 were put at US$740mn, and should pass the US$1bn mark by 2012. The main drivers of growth in the PC segment are lower prices and greater affordability. Sales should rise some 13% in US dollar terms in 2008 to reach US$838mn. The fastest growing segment is notebook sales, which were around 600,000 units in 2007 and already account for around 50% of the market by value. Government announcements of new funding to subsidise internet coverage expansion in 2008-2009 should bring support to the PC market. Broadband service provider VTR's recent cooperation with Lenovo on a triple play bundling agreement shows the potential here.

Software

Chile's software market is estimated to have been worth US$284bn in 2007, and the figure for 2008 is expected to come out at a little more than US$322bn. Software CAGR for 2007-2012 is projected at around 12%. Software has opportunities for growth over the next few years, despite a relatively high software piracy rate. Software piracy was estimated to account for 69% of software in 2006, but last year the government mounted a more sustained campaign to reduce this. Growth will be driven by a number ofparticular factors but a particular source of opportunity in the next year is likely to be the introduction of International Financial Reporting Standards (IFRS) in Chile as of January 1, 2009

IT Services

Chile's IT services market is estimated to have grown around 16% in 2007 to a value just above US$700mn, with even higher growth expected in 2008. For a developing market, the percentage of IT market revenues generated by services is currently around 37%, high by emerging market standards but corresponding to other countries in the region such as Brazil. The majority of demand, around 75%, still comes from the large company sector, but smaller companies are also now becoming more sophisticated in their demand. Led by the financial, telecoms and retail sectors in particular there is a trend towards bigger managed service and outsourcing deals in the local market.

E-Readiness

Today Chile still enjoys some of the best telecommunications infrastructure in South America and rates highly on many regional e-readiness indicators. The World Economic Forum ranked Chile 31st in the world in its most recent survey of 'degree of preparation to participate in and benefit from information and communications technology'; the highest ranking in the Latin America region. According to BMI estimates, the number of Chilean internet users reached 5.7mn in 2007, representing 34% of the population. The percentage of broadband subscribers in the general population, however, was only 6.2% with just over 1mn subscribers.

CONTENTS

Executive Summary

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

SWOT Analysis

• Chile IT Sector SWOT
• Chile Business Environment SWOT

Market Overview

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

Industry Forecast Scenario

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

Macroeconomic Forecast

• Table: Chile – Economic Activity

Competitive Landscape

Company Profiles

• Sonda
• Dell (Chile)
• SAP (Chile)

BMI Forecast Modelling

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