Indonesia information technology report q3 2015

Q3 2015
www.bmiresearch.com
INDONESIA
INFORMATION TECHNOLOGY REPORT
INCLUDES 5-YEAR FORECASTS TO 2019
ISSN 1750-5070
Published by:BMI Research
Indonesia Information Technology Report
Q3 2015
INCLUDES 5-YEAR FORECASTS TO 2019
Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: April 2015
BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
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© 2015 Business Monitor International Ltd
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DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.
Indonesia Information Technology Report
Q3 2015
INCLUDES 5-YEAR FORECASTS TO 2019
Part of BMI’s Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: April 2015
BMI Research
Senator House
85 Queen Victoria Street
London
EC4V 4AB
United Kingdom
Tel: +44 (0) 20 7248 0468
Fax: +44 (0) 20 7248 0467
Email:
Web:
© 2015 Business Monitor International Ltd
All rights reserved.
All information contained in this publication is
copyrighted in the name of Business Monitor

International Ltd, and as such no part of this
publication may be reproduced, repackaged,
redistributed, resold in whole or in any part, or used
in any form or by any means graphic, electronic or
mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.
DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.

CONTENTS
BMI Industry View 7
SWOT 9
IT SWOT 9
Wireline SWOT 11
Political 12
Economic 14
Operational Risk 16
Industry Forecast 18
Table: IT Industry - Historical Data And Forecasts (Indonesia 2012-2019) 18
Macroeconomic Forecasts 25
Economic Analysis 25
Industry Risk Reward Ratings 30
Industry Risk Reward Index 30
Table: Asia Pacific Consumer Electronics Risk/Reward Index - Q315 32

Market Overview 33
Hardware 33
Software 42
Cloud Computing 46
IT Services 51
Industry Trends And Developments 55
Regulatory Development 60
Table: Key Ministers And Departments 60
Competitive Landscape 64
International Companies 64
Table: Lenovo Indonesia 64
Table: Intel Indonesia Corporation 65
Table: Microsoft Indonesia PT 66
Table: IBM Indonesia 67
Table: Foxconn Technology 68
Local Companies 69
Table: Performance PT Multipolar Technology Tbk (MLPT) 69
Table: Walden Global Services (WGS) 70
Table: Aprisma Indonesia 71
Table: ALTiUS ERP 71
Company Profile 72
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Sigma 72
Regional Overview 76
Asia Pacific 76
Demographic Forecast 79
Table: Population Headline Indicators (Indonesia 1990-2025) 80
Table: Key Population Ratios (Indonesia 1990-2025) 80
Table: Urban/Rural Population And Life Expectancy (Indonesia 1990-2025) 81

Table: Population By Age Group (Indonesia 1990-2025) 81
Table: Population By Age Group % (Indonesia 1990-2025) 82
Methodology 84
Industry Forecast Methodology 84
Sources 85
Risk/Reward Index Methodology 86
Table: It Risk/Reward Index Indicators 87
Table: Weighting Of Components 88
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BMI Industry View
BMI View: In 2015, we expect the drag of rupiah depreciation to be outweighed by the upside from strong
economic growth, a low PC penetration rate, enterprise and public service modernisation and an emerging
middle class. Balancing these trends, we forecast IT spending to increase to IDR176.3trn in 2015, up 15.1%
from 2014, with the IT market estimated to account for 1.5% of GDP. Looking over the medium term, we
identify retail hardware, enterprise software and cloud computing as growth opportunities. However, there
is short-to-medium term downside if the Indonesian growth story is derailed by regional or global economic
headwinds.
Headline Expenditure Projections
■
Computer Hardware Sales: IDR100.5trn in 2015 to IDR142.0trn in 2019, at a compound annual growth
rate (CAGR) of 9.5% in local currency terms. Even after strong growth in recent years a high hardware
spending growth rate should be maintained in Indonesia with plenty of spare capacity due to new entrants
to the market 2015-2019 as household incomes rise.
■
Software Sales: IDR29.18trn in 2015 to IDR56.64trn in 2019, at a CAGR of 18.5% in local currency
terms. Piracy is a major drag on software market growth, but new legislation could help reduce the drag
from 2015, pushing the software growth rate higher as enterprise modernisation initiatives gather pace.
■

IT Services Sales: IDR46.63trn in 2015 to IDR91.12trn in 2019, at a CAGR of 18.7% in local currency
terms. Improvements in network infrastructure and increased awareness among local enterprises will
ensure strong growth in cloud service adoption, which we expect to be a key demand driver for IT
services 2015-2019.
Key Trends And Developments
In the Q3 update, BMI has added an analysis of household income trends in Indonesia to the IT market
forecast, as well as analysis of the wider APAC medium-term story in the regional overview. Household
income trends provide additional context to our economic outlook, with particular relevance for retail
hardware vendors positioning for medium-term growth. In 2015, Indonesia remains a highly price sensitive
market, a view derived from local retailer and vendor reports, and illustrated through the predominance of
USD1,000-10,000 households at around two-thirds of the total in Indonesia in 2015. We consider sub-
USD5,000 households to be external to the IT market due to insufficient purchasing power, but as our
forecast shows, we expect this group to reduce in size by around 50% by 2019, which will deepen the IT
market, albeit predominantly at the low value end of the market.
Another enabler for the development of Indonesia's IT market alongside rising incomes are the investments
being made in supporting infrastructure. Under the 2014-19 Indonesia Broadband Plan, up to IDR278trn
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(USD23.2bn) is to be invested in extending wireline broadband services to 30% of the urban population and
6% of the rural population, while mobile broadband services are to be rolled out to 52% of rural
consumers. Approximately 10% of the ambitious project will be financed by the state, meaning that the
onus will fall squarely on Indonesia's wireline and mobile operators. The most significant actor is
incumbent operator PT Telkom Indonesia, which plans to triple its investment in broadband in 2015 as
part of its support for the new initiative. It will spend IDR45trn (USD3.7bn) installing public Wi-Fi hotspots
and backhaul transmission facilities and augmenting its fibre-optic backbones and satellite footprints in its
bid to boost take-up of converged services.
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SWOT
IT SWOT

SWOT Analysis

Strengths
■
Large potential market with population of 252mn at the end of 2013, and forecast to
reach almost 267mn in 2019.
■
The market may be entering a faster stage of 'catch-up' growth. It is forecast to grow
quicker than most other Association of Southeast Asian Nations (ASEAN) markets
over the forecast period.
■
Local presence of major global vendors in terms of sales and production, providing
linkages for local start-ups and entrepreneurs.
Weaknesses
■
Underdeveloped telecommunications infrastructure, due to years of government
control and slow progress in deregulation.
■
History of recent political instability.
■
High piracy rate continues to be a drag on the software market, with the highest
piracy rate in the region and slow progress in reducing incidence of unlicensed
software.
■
Indonesia overtook China as the largest source of cyber attack traffic in 2013, with
cyber threats becoming an increasingly important issue for domestic users as well.
Opportunities
■
Booming mobile and e-commerce market, creating demand for devices and
enterprise retail solutions.

■
Investment in telecoms and datacentre infrastructure should lay the foundations for
rapid growth of cloud computing services, with small- and medium-sized enterprises
considering a particularly attractive target group.
■
New copyright law in 2015 should help reduce incidence of software piracy.
■
Computer ownership is low, but rising incomes and wider internet access will enable
period of rapid 'catch-up growth'.
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SWOT Analysis - Continued
■
Strong demand for tablets and low-cost laptops from a youthful population and
booming economic performance.
■
IT services, with local telcos investing heavily in data centres, networks, machine-to-
machine communication and cloud computing services.
Threats
■
Continuing lack of government action to support increased PC penetration and
internet access, or drive ICT sector development.
■
Regional economic instability could derail economic growth.
■
Cyber security risks, both from criminals and state actors, could undermine
confidence in networked infrastructure; ie, cloud computing and IoT.
■
Data sovereignty and content control initiatives from the government could bring it
into conflict with ICT vendors.

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Wireline SWOT

Strengths
■
Fixed-wireless offers a balance between fixed line and mobile at affordable prices and
has experienced strong demand, helping to boost overall fixed-line subscriber figures
in an otherwise slowing market.
■
Increased competition in the fixed-wireless market following the award of nationwide
licences to Bakrie Telecom and Smartfren.
Weaknesses
■
Limited competition in the fixed-line market with Telkom dominating with an 80%-
plus market share.
■
Low teledensity rates, especially in the fixed-line sector.
■
Limited available capital via loans could hinder further progress of the broadband
market.
■
Poor fixed-line infrastructure means limited internet accessibility in rural areas.
Opportunities
■
Plenty of opportunities for broadband growth, with a higher number of operators
awarding contracts to the likes of Nokia Siemens Networks and Ericsson.
■
Submarine cable projects are on the rise, connecting Indonesia to regional peers such
as Hong Kong and then onwards to Singapore and Vietnam.

■
Solid economic outlook led by domestic demand should aid growth of the telecoms
industry.
Threats
■
Uneven development between urban and regional areas could be further
exaggerated, with current broadband contracts centring on the larger islands of Java
and Sumatra.
■
The cost of PCs and tariffs could place internet and broadband services out of the
reach for the majority of Indonesians.
■
Growing preference in the consumer segment for mobile broadband solutions.
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Political
SWOT Analysis

Strengths
■
Indonesia managed a successful transition to democracy in 2004. In addition, the
2009 parliamentary and presidential elections passed peacefully, signalling the
consolidation of the democratic process. Despite a lengthy challenge by Prabowo
Subianto, 2014's elections also passed peacefully, resulting in the election of Joko
'Jokowi' Widodo.
■
The military's role in politics has gradually been reduced. The prospects of a military
coup - which seemed a real possibility in the late 1990s and early 2000s - have
diminished substantially. As the military's role in politics continues to wane,
Indonesia's political stability should likewise improve.

Weaknesses
■
Indonesia's domestic political scene is characterised by a proliferation of minority
parties and formal and informal coalitions are necessary to govern and legislate.
Moreover, the efficiency of state institutions is encumbered by bureaucracy and
corruption. Prospects for reform are beset with numerous challenges, such as the
long-running practice of politicians promising government positions to campaign
supporters.
■
The country was impacted by separatist rebellion and ethnic violence in the late
1990s and early 2000s, which took great efforts to bring to heel. In the event of a new
economic crisis, calls for regional secession could re-emerge.
Opportunities
■
Indonesia has built a more stable democracy following peaceful handovers of
executive power dating back to the early 2000s. We expect this trend to continue to
bolster political stability over the coming years.
■
Indonesia's status as the world's most populous Muslim country leaves it well
positioned to speak out on global Islamic issues and act as a bridge between the
Middle East and the Asia Pacific region.
Threats
■
Regional militant group Jemaah Islamiah poses a lingering threat to security in
Indonesia. Jemaah Islamiah is blamed for a series of attacks, including the Bali
bombings of October 2002 and the Jakarta bombings of July 2009.
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SWOT Analysis - Continued
■

The fact that Indonesia subsidises basic goods means that when the government
raises prices, there is a risk of public unrest, or at least a political backlash.
Additionally, Indonesia's population is extremely young, with more than 50% of
Indonesians younger than 30. Younger populations have historically been a predictor
of political instability.
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Economic
SWOT Analysis

Strengths
■
Indonesia's strategic location between the Indian and Pacific Oceans and its
adjacency to major east-west trade routes make it an important economy in the
region. Indonesia is also resource-rich and is the world's largest producer of palm oil.
■
Indonesia has a low cost and large supply of available labour resources. Its labour
force, the fourth-largest in the world, is also one of the world's youngest.
Weaknesses
■
Indonesia's economy is not growing fast enough to reduce unemployment, with the
rate still relatively high at 5.9% as of Q314. Many are forced to work in the informal
sector. Of particular concern is the youth unemployment rate, which is five times the
overall rate.
■
Indonesia's physical infrastructure is considered sub-standard. The archipelagic
nature of the country makes it difficult to weave national infrastructure together.
Despite an ambitious infrastructure revitalisation plan, the country currently compares
unfavourably with its Association of Southeast Asian Nations peers.
Opportunities

■
Indonesia could attract much-needed foreign investment by strengthening its
business environment, particularly through reform of its unreliable legal system.
■
Indonesia stands to benefit from the rise of Islamic financing, having adopted new
legislation in early 2008 designed to tap into this rapidly expanding sphere. With an
overall market share of only 3%, growth prospects for Islamic banking in the world's
largest Muslim country are enormous.
Threats
■
Production at Indonesia's ageing oil fields has been in decline since the mid-1990s.
The country has therefore become a net importer of crude oil in recent years, putting
downward pressure on its current account position. The resumption of the Cepu field,
which occurred in late 2009, may help to alleviate Indonesia's dependence on foreign
oil given its small boost to production output, but we expect this bounce to be short-
lived.
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SWOT Analysis - Continued
■
Indonesia is perceived as one of Asia's riskier destinations. This leaves the economy
vulnerable to sudden capital outflows at times of risk aversion, which can lead to
sharp swings in the currency.
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Operational Risk
SWOT Analysis

Strengths
■

There has been significant progress made in recent years towards achieving universal
primary education due to major government investment.
■
There are some diversification options for supply chains with road and railway
networks on the main island of Java. It is also the location of several airports and the
country's most important seaports.
■
The domestic financial market is well developed, providing opportunities for portfolio
investment, access to credit and links to international finance centres.
■
Indonesia has a lower rate of violent crime than some neighbouring countries.
Weaknesses
■
Low enrolment and attainment levels at secondary and tertiary education levels,
particularly in rural areas.
■
The transport network is severely underdeveloped on most islands of the Indonesian
archipelago, including the large and resource-rich territories of Sumatra, Kalimantan
and Papua.
■
Opportunities for foreign direct investment are limited by a variety of restrictions on
foreign ownership of businesses in Indonesia.
■
Criminal gangs retain some degree of influence and cause disruption to legitimate
business activity.
Opportunities
■
An expanding pool of technical workers can be found in Indonesia's larger cities.
■
A more positive outlook for Indonesia's economy over the medium term is indicative

of the opportunities for investment in the country.
■
Tariff and non-tariff trade barriers to trade with the country's neighbours are lowered
due to Indonesia's membership of the Association of South East Asian Nations
(ASEAN) Free Trade Agreement.
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SWOT Analysis - Continued
■
Membership of ASEAN will continue to foster greater cooperation between South
East Asian countries, improving the response to terrorism and reducing the risk of
interstate conflict.
Threats
■
Strong population growth will place further pressure on the struggling education
system.
■
Growth in water and energy-intensive industries will increase the strain on the utilities
infrastructure and lead to heightened risks of shortages disrupting business activity.
■
Porous borders, lack of police funding, and costly and slow legal processes mean
that intellectual property (IP) protection is likely to remain lax despite the broad
coverage of IP legislation.
■
The significant presence of Western interests means that terrorist attacks are likely to
continue to affect foreign workers and businesses.
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Industry Forecast
Table: IT Industry - Historical Data And Forecasts (Indonesia 2012-2019)

2012 2013 2014e 2015f 2016f 2017f 2018f 2019f
IT market
value,
IDRmn
104,241,202 136,390,387 153,180,044 176,310,231 201,169,973 228,730,260 257,092,812 289,743,599
IT market
value, %
of GDP
1 2 2 2 2 2 2 2
Computer
hardware
sales,
IDRmn
64,838,028 83,198,136 90,376,226 100,496,832 110,643,485 121,227,038 131,117,334 141,974,363
Personal
computer
sales,
IDRmn
50,281,890 64,403,677 69,571,619 76,930,325 84,221,821 91,756,745 98,678,906 106,239,416
Software
sales,
IDRmn
15,740,422 20,526,753 24,202,447 29,179,343 34,802,405 41,285,812 48,333,449 56,644,874
Services
sales,
IDRmn
23,662,753 32,665,498 38,601,371 46,634,056 55,724,083 66,217,410 77,642,029 91,124,362
e/f = BMI estimate/forecast. Source: BMI
BMI made a minor upward adjustment to the Indonesian IT market growth forecast, building on our already
bullish outlook for 2015 and medium-term trends. We forecast a compound annual growth rate (CAGR) of

13.6% 2015-2019, with total IT market sales expected to reach almost IDR290.0trn (USD22.3bn) in 2019.
Our positive medium-term outlook is based on Indonesia's potential for rapid catch-up growth through
benefits derived from developments at the global level; ie, declining device prices and cloud services,
enabling it to outperform the growth rates achieved by now developed markets in earlier stages of
development. In addition to technological trends, our bullish outlook also draws on our in-house Country
Risk team's assessment of economic trends. These favourable trends have attracted significant inward
investment, which will add to growth momentum over the forecast period.
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2015 Outlook
BMI forecasts IT market growth of 15.1% in 2015 in local currency terms, with total market value expected
to reach a value of IDR176.3trn. The strong economic outlook is fundamental to our IT market forecast as
Indonesian consumers remain optimistic about job, finance and spending prospects. We forecast real GDP
growth of 5.3% in 2015 and 4.8% real private final consumption growth. Furthermore, we forecast a
slowdown in rupiah depreciation against the dollar in 2015 compared to 2012-2014, although it will remain
a drag on growth by eroding the purchasing power of Indonesian households and enterprises in global
product markets.
IT Market Growth
(2012-2019)
Indonesia - IT market value, IDRmn
2012 2013 2014e 2015f 2016f 2017f 2018f 2019f
0
100,000,000
200,000,000
300,000,000
400,000,000
e/f = BMI estimate/forecast. Source: BMI
The largest component of the Indonesian IT demand continues to be for computer hardware sales, but
they are forecast to underperform software and services growth rates in 2015. Nonetheless demand growth
will remain robust as a result of income growth and the relatively low penetration rate - ensuring demand

comes from both first-time buyers and the replacement/upgrade market. Household PC penetration reached
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15.1% in Indonesia at the end of 2012 - less than half the APAC average of 31% and below the global
emerging market average of 27.6%. This fact, when considered alongside Indonesia's large and growing
population and trajectory of rising incomes, illustrates the growth opportunity in the retail hardware market.
We forecast hardware spending growth will make an important contribution in absolute terms with growth
of 7.4% forecast in local currency terms for 2015.
BMI considers Indonesian government IT policy to be supportive of IT market growth in 2015, although
there is downside. Indonesian development policy is aiming to lift Indonesia into the ranks of the world's
top 10 economies by 2025 - a boon to ICT investment. Direct spending by the government on infrastructure
will boost the market in 2015. Government IT spending is expected to increase and continue to account for
around 25% of the IT market, while the government is also encouraging state companies to use more IT.
However, the Indonesian government's attempts to control radical content online and push for greater data
sovereignty could bring it into conflict with the interests of ICT vendors; however, this is not our core
scenario.
Data centre investment is expected to remain on its strong growth trajectory in 2015, which will open up the
market for cloud computing to a much wider user base in Indonesia. For instance, telecoms incumbent, PT
Telkom Group, expects to be operating the fourth-largest data centre business in the world, with 100,000
square metres (sq m) of capacity by the end of 2015. New tier-2 and tier-3 facilities were scheduled for
completion by YE14 and, with the completion of Indonesia's first tier-4 facility also scheduled for YE14,
Telkom already has an estimated 70,000sq m of capacity at its disposal at the start of 2015. We expect
capacity increases to result in lower infrastructure-as-a-service costs, catalysing adoption.
Market Drivers
BMI's Country Risk forecast for Indonesia is a key component of our bullish medium-term IT market
growth outlook. Real GDP growth is forecast to average 6.5% annually 2015-2019, with real private final
consumption growth forecast to be slightly slower at a 6.3% annual average. Our income stratification
forecast provides additional insight, with particular relevance for retail hardware vendors. Weak income
growth among the poorest 20% of the population will be of little consequence to the IT market, with
incomes forecast to reach just IDR10.9mn (USD991) in 2019 - meaning they will remain outside the device

market. However, strong income growth for the middle 60% and richest 20% of the population - with
forecast CAGR of 10.5% and 12.2% respectively 2015-2019 - will broaden the addressable market.
We have added an analysis of household income trends in Indonesia to provide additional context to the
income stratification forecast. In 2015 Indonesia remains a highly price sensitive market, derived from the
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predominance of USD1,000-10,000 households at around two-thirds of the total. BMI considers sub-
USD5,000 households to be external to the IT market due to insufficient purchasing power, but as our
forecast shows, we expect this group to reduce in size by around 50% by 2019, which will deepen the IT
market, albeit predominantly at the low value end of the market.
BMI believes strong income growth for the richest 20% of Indonesian bodes well for premium devices
sales, which should benefit premium oriented vendors including Apple, while the income growth for the
middle 60% of the population should deepen the market as consumers benefit from increased disposable
income and acquire first household/personal devices. We believe this second grouping is captured in our
household income forecast through the large scale migration of households from the USD1,000-5,000 and
USD5,000-10,000 bands to the USD5,000-10,000 and USD10,000-25,000 bands respectively.
Indonesia Household Income Distribution (%) LHS And Change ('000) RHS
2015 & 2015-2019f
f = BMI forecast. Source: National sources, BMI
A more active approach by the government to encourage IT development, including the establishment of the
National ICT Council, should stimulate spending through a series of infrastructure and education initiatives.
The Indonesian government's Master Plan for Acceleration and Expansion for Indonesia Economic
Development (MPEEI) states that connectivity between the islands of the country is a priority area. Major
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government infrastructure and ICT initiatives, particularly the Palapa Ring Project, have been rolled out to
create the infrastructure to support IT market growth.
Two significant government policies were announced in late 2014 with implications for IT market
development. First, Indonesia's House of Representatives passed a draft of Indonesia's new Copyright Bill
in September 2014, which will come into law in 2015. The new law is aiming to increase efficiency and

effectiveness of Indonesia's copyright system, particularly its enforcement mechanisms. The new law has
been received well by copyright owners, with the removal of ambiguity evident in previous legislation
welcomed and potentially a boost to software market spending growth. Meanwhile, Under the 2014-19
Indonesia Broadband Plan, up to IDR278trn (USD23.2bn) is to be invested in extending wireline broadband
services to 30% of the urban population and 6% of the rural population, while mobile broadband services
are to be rolled out to 52% of rural consumers.
Another potential demand driver will be organisations looking for help to utilise efficiencies from cloud
computing, such as software and infrastructure-as-a-service. The cloud computing market is currently small
in absolute terms in early 2015, but as network infrastructure improves alongside increased supply of cloud
products, BMI forecasts bullish medium term growth at a CAGR of 35.2% 2015-2019. We expect the
strategies of Indonesian telecoms operators, and global vendors such as Microsoft and IBM, will drive
medium term cloud service adoption both among large enterprises and Indonesia's huge base of small- and
medium-sized enterprises (SMEs).
Segments
BMI has a bullish outlook for the development of enterprise spending on IT products and solutions
2015-2019 in Indonesia. Due to relatively low levels of PC penetration among Indonesian enterprises,
especially among the large base of SMEs, we expect demand for desktops to be maintained for the duration
of our forecast period. However, the consumer market is also expected to remain dynamic and offer
considerable growth opportunities for hardware vendors. Demand for traditional notebooks has been eroded
by the popularity of new form factors in recent years by combination form low-cost tablets, but BMI
expects hybrids/convertibles could gain traction as prices decline over the medium term, with first-time
buyers likely to see multi-functionality as a major positive over tablets not running full versions of
operating systems.
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Indonesia GVA By Sector (%)
2015f
f = forecast. Source: National statistics, World Bank, UN, BMI
Turning to enterprise software and services enterprise demand, BMI identifies the large manufacturing,
mining and tourism sectors as potentially fruitful verticals for vendors of enterprise products and solutions.

These are expected to be the largest three contributors to IT market spend in 2015 and there are
modernisation drives underway in all three verticals. Additionally, we expect inward investment in
manufacturing facilities as wages rise in China to create demand for enterprise software deployments in
Indonesia to connect with global supply chains, as well as create efficiencies.
Meanwhile, despite cutbacks due to the financial crisis, the financial services segment will continue to be
overweight in enterprise IT spending due to the demands of the industry. Spending on regulatory
compliance and security solutions are expected to register the fastest growth. The market also remains
relatively under-penetrated, with IT implementations largely limited to transactional support. Islamic
banking also presents strong growth opportunities over the next few years.
BMI believes the healthcare IT opportunity, and other public services, will be a major contributor to growth
over the medium term. As an emerging market with a relative lack of legacy public service delivery
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infrastructure - and challenging geography combined with the demands of urbanisation - we expect IT
services vendors with innovative solutions could win major contracts in the years to 2018. Japanese vendor
Fujitsu, and a collaboration between TelkomSigma and REDtone Data Centre, are both targeting the
informatisation of Indonesia's healthcare system as major medium-term opportunities.
Telecom operators are emerging as key players in the smart services segment in Indonesia, with Telkomsel
partnering with Jasper Technologies in late 2014 for a nationwide Internet of Things (IoT) platform, while
Ooredoo, the parent company of local telecoms operator Indosat, stated in January 2015 that it is targeting
the IoT 'Smart City' opportunity in Jakarta. Subsequently, in April 2015 Indosat added to its IoT
capabilities by partnering with Swedish telecoms equipment vendor Ericsson to deploy a cloud-based
machine-to-machine (M2M) platform in Indonesia, via the Ericsson Device Connection Platform.
The SME opportunity is highly significant over the medium term, with government data showing 70% of
the 56.5mn Indonesian SMEs use no IT solutions. IT services for this segment will be dominated by basic
services such as system integration, support systems, training, professional services, and outsourcing. We
expect cloud vendors to be in a strong position to tap this demand, with cloud cost structures favourable for
SMEs versus the economics of on-site deployment.
Local players will capture a share of this growth through to 2019, but the SME market has also attracted the
attention of global leaders, for instance, in October 2014 IBM promoted it SoftLayer infrastructure-as-a-

service (IaaS) product in Indonesia to SMEs, offering server, processor, RAM, and storage in the cloud for
USD100 per month. Meanwhile, global software giant Microsoft launched the latest Office 365 SMB
software package aimed at businesses with less than 250 employees. This combination of local and global
supply should make the SME market a hard-fought battleground among vendors over the medium term.
Indonesia Information Technology Report Q3 2015
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