United states information technology report q1 2011

Q1 2011
Published by Business Monitor International Ltd.
www.businessmonitor.com
INFORMATION TECHNOLOGY REPORT
ISSN 2041-7101
Published by Business Monitor International Ltd.
UNITED STATES
INCLUDES 5-YEAR FORECASTS TO 2014
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UNITED STATES
INFORMATION
TECHNOLOGY
REPORT Q1 2011
INCLUDES 5-YEAR FORECASTS TO 2015


Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: January 2011

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CONTENTS
Executive Summary 5
SWOT Analysis 8
United States IT SWOT 8
United States Political SWOT 8
United States Economic SWOT 9
United States Environment SWOT 9
IT Business Environment Ratings 10
Latin America 10
Table: Regional IT Business Environment Ratings 13
Latin America IT Markets Overview 14
United States Market Overview 21
Government Authorities 21
Overview 22
Hardware 24
Software 28
Services 31
Industry Developments 32
Industry Forecast Scenario 35
Table: US IT Sector Overview, 2007-2015 38
Internet 39
Table: Telecoms Sector – Internet – Historical Data & Forecasts 39
Macroeconomic Forecast 41
Table: United States – Economic Activity 43
Competitive Landscape 44

Hardware 44
Software 46
Company Profiles 52
HP 52
Dell 54
Microsoft 56
IBM 58
Country Snapshot: US Demographic Data 59
Section 1: Population 59
Table: Demographic Indicators, 2005-2030 59
Table: Rural/Urban Breakdown, 2005-2030 60
Section 2: Education And Healthcare 60
Table: Education, 2002-2005 60
Table: Vital Statistics, 2005-2030 60
Section 3: Labour Market And Spending Power 61
Table: Employment Indicators, 2001-2006 61
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Table: Consumer Expenditure, 2000-2012 (US$) 61
Table: Average Annual Wages, 2000-2012 (US$) 62
BMI Methodology 63
How We Generate Our Industry Forecasts 63
IT Industry 63
IT Ratings – Methodology 64
Table: IT Business Environment Indicators 65
Weighting 66

Table: Weighting Of Components 66
Sources 66

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Executive Summary
Market Overview
 US spending on IT products and services is forecast to reach US$671bn by 2015.
US spending on IT products and services is forecast to grow to US$552bn in 2011 and reach US$671bn
by 2015. BMI has downwardly revised its forecast after US PC sales grew slower than expected in
Q310, following growth in H110 that was rapid by any standards. Growth slowed amid consumer and
business concerns about a jobless recovery.
A major demand driver will be private and public sector organisations looking for help to utilise
efficiencies from cloud computing models such as Software-as-a-Service (SaaS) and Infrastucture-as-a-
Service (IaaS). 2010 saw a number of government agencies at federal and local level launch cloud
strategies and pilot programs.
Other key market drivers are expected to include:
 Growing fixed and mobile broadband penetration.
 Data centre consolidation and virtualisation
 Product innovation such as tablet notebooks, e-readers and feature-rich netbooks.
 Technology innovation such as GPS and services.
 Economic recovery.
 Industry Developments
 GSA first federal agency to move all email to a cloud-based system
In December 2010, the US General Services Administration (GSA) became the first federal agency to
move email to a cloud based system for its entire organisation. As the first transition of its kind, the

GSA’s move is seen as a landmark that could influence other agencies who have previously held back
from similar moves due to security or service concerns.
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In 2010, budgeted federal IT spending was set to rise to US$78.4bn, from US$74.2bn in 2009.In 2010,
the Obama administration called on federal agencies to develop strategies to simplify and where possible
combine often sprawling IT operations so as to reduce costs. Guidelines published in 2010 by the Office
of Management and Budget called for agencies to initiate data centre consolidation programs to help cut
US$3bn from the federal budget.
Competitive Landscape
The US PC competitive landscape is dominated by two large domestic vendors, Dell and HP,
which together account for at least 50% of the US market.
In 2010, most PC vendors reported renewed growth as businesses proceeded with purchases delayed from
2009. Despite an overall fall in PC shipments in 2009, many vendors leveraged demand for notebooks
and netbooks into continued growth. Meanwhile, the contest for top spot between HP and Dell continued.
HP exemplified the recovery trend experienced by most vendors, with a 12% rise in revenues from its
Americas region in Q310 to US$14.2bn.
2010 saw increasing competition between vendors for a growing number of public sector cloud contracts.
The GSA picked web-based Google Apps to replace IBM Lotus Notes as the provider of email and
collaboration software for its 17,000 full-time employees and contractors. In October 2010, New York
City announced an iniative to bring Microsoft’s BPOS (Business Productivity Onine Suite) to around
30,000 city employees.
The government remains a key vendor target. In May 2010, HP achieved one of its most recent local
market succeses with the win of a US$41.6mn contract from the US Department of Homeland
Security. In September 2009, HP’s EDS unit won a US$30mn contract from the US Department of the
Treasury’s Office of the Comptroller of the Currency (OCC) to provide and maintain computing

resources and mobility services.

Computer Sales
The US addressable market for PCs and accessories is estimated by BMI at US$129.3bn in 2011, with
single-digit growth compared with 2010.
US PC sales slowed in Q310 but BMI estimated that the market was on course for full-year total PC sales
of 83mn units. In QH10, sales were boosted by a revival of the business PC market, which was expected
to gather pace in the second half of the year.
One additional driver of increased sales and lower prices is the move of telecoms operators into the PC
retail space. Notebooks are the fastest-growing PC market segment and are estimated to have accounted
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for more than 60% of unit sales in 2010. However, netbooks and notebooks face competition from other
formats such as smartphones from Palm, RIM and Apple, as well as tablet notebooks.
Software
The US software market is estimated at US$158.8bn in 2011, with single-digit growth from 2009.
Software CAGR for 2011-2015 is projected at around 5.9%, as the addressable market grows to around
US$199.7bn. A combination of enterprise objectives such as cost reduction and greater efficiency should
combine to encourage the adoption of cloud services in 2011.
Drivers of demand for enterprise software include increasing operational efficiency, coordinating global
supply chains and modernising logistics and warehouse functions. More investment can be expected to be
in utility software and serviced-oriented architectures rather than traditionally packaged PC software.
IT Services
The US IT services market is forecast at US$241.5bn in 2011, with vendors reporting a more stable
market.
IT services spending is expected to grow by 5.9% in 2011, building on a stablilsation of the market in the

previous year. Spending on IT services is quite closely correlated with GDP growth, which is bad news in
a recession but better news in a recovery.
One opportunity will be organisations looking for help with to utilise efficiencies from cloud computing
such as SaaS and IaaS, as organisations look to save money on IT investments. National and local
government is one vertical where strong interest in cloud services is being expressed.

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SWOT Analysis
United States IT SWOT
Strengths
 The largest IT market in the world, with spending forecast to pass US$552bn in 2011.
 Despite the challenging trading conditions, overall IT spending is still expected to
remain in positive growth territory.

Weaknesses
 During the recession in 2009, customers postponed projects and reduced short-term
spending, particularly in areas such as consulting and software development.

Opportunities
 Demand for new IT strategies to take advantage of innovations such as virtualisation,
data centre consolidation, and cloud computing
 As economic woes ease, IT vendors should see more growth from traditional big-
spending sectors such as banks, financial services, retail and manufacturing.
 The growing popularity of mobile broadband networks is driving netbook sales.
 New business models such as SaaS and virtualisation will continue to make progress.

Threats
 There is a risk that recovery could be anaemic in 2011, in which case spending on
technology could have another hard year.
 A large federal budget deficit could lead to pressures on public sector IT spending.



United States Political SWOT
Strengths
 The US is an undisputed superpower, and therefore occupies centre stage in most
international diplomacy. Long-standing democracy with vigorous and open political
debate; the US continues to attract large numbers of immigrants committed to
citizenship and self-advancement.

Weaknesses
 Political debate between Republicans and Democrats has historically shown a
tendency to become more polarised and divisive. As today’s superpower, the US
attracts the enmity of a wide range of political groups opposed to the current
international status quo.

Opportunities
 The changing political mood (as evidenced by the popularity of unconventional
candidates in the 2008 presidential election, including Obama’s), and the widespread
dissatisfaction of the voting public, may encourage both major parties to experiment
with more consensual approaches to certain policy areas.

Threats
 The perception of inflexibility and bias in US foreign policy, particularly in the Middle

East, may stiffen opposition and at worst provide fertile recruiting ground for radical
anti-US groups such as al-Qaeda. Partly as a reaction to foreign policy difficulties, US
public opinion may return to isolationist and protectionist modes.



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United States Economic SWOT
Strengths
 The world’s largest economy with an impressive record of entrepreneurial dynamism,
innovation and a high research and development spend. Despite some threats to its
reserve status, the US dollar is treated as an international currency, meaning that
investors around the world are prepared to hold US debt. Because of this, the US is
uniquely able to run large fiscal and current account deficits.

Weaknesses
 Despite the dollar’s role as an international currency, excessive US debt levels are a
risk. A decision by Japanese and Chinese central banks to reduce their larger dollar
holdings could cause sharp falls in the value of the US currency. Low savings rate by
US households on a historic basis, although this has begun to reverse.

Opportunities
 Further liberalisation of international trade through the WTO, coupled with a more
competitive dollar exchange rate, could boost export growth and help restore balance
to the US’ external imbalances.

Threats
 Intensified competition from China and other low-wage economies could accelerate
the loss of manufacturing jobs. Large growth in public spending, coupled with tax cuts,
will worsen the fiscal deficit, eventually forcing more restrictive monetary policy and
slower growth.



United States Environment SWOT
Strengths
 The US boasts the world’s largest single internal consumer market, which presents
tremendous opportunities for businesses of all types and sizes.
 Few countries offer better environments for entrepreneurial activity, with a highly
flexible labour force, a legal system that is friendly to business, and significant centres
of technological innovation (such as California’s Silicon Valley).

Weaknesses
 Much of the country’s physical infrastructure is in need of improvement, with
congested roads and airways.
 US corporate tax is, on average, among the highest in the OECD.

Opportunities
 The Obama administration is committed to improving the nation’s infrastructure, with
stimulus package funds being dedicated to that purpose.
 The US has often been the origin of new drivers of economic growth booms, and
sectors ranging from biotechnology to alternative energy are being discussed as
possible catalysts.

Threats

 Government intervention in the economy puts the country’s reputation for free
enterprise at risk.

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IT Business Environment Ratings
Latin America
Stock Market Data
BMI’s Americas IT Business Environment Ratings compare the potential of a selection of the region’s
markets over our forecast period to 2015. The ratings reflect our consideration of political and economic
risks, as well as risks associated specifically with IT intellectual property rights protection and the
implementation of government information and communications technology (ICT) projects.
In Q111 the US retains its top position in our regional rankings as the largest IT market in the region and
the world and accounts for about 25% of global IT spending. Despite the challenge from faster-growing
IT markets such as Brazil, the US is forecast to maintain its global IT market leadership position.
US PC sales slowed in Q310, amid concerns about the strength of the economic recovery. Sales had
grown rapidly in the first half of the year, boosted by a revival in the business PC market, but some
organisations remained reluctant to launch large projects. Across consumer and business segments, US IT
spending is expected to be driven by a number of factors, including the growing popularity of mobile
broadband networks, product and technology innovation as well as economic recovery.
A major demand driver will be private and public sector organisations aiming to use cloud computing
services. In 2011 there are expected to be many more contracts for provision of cloud services, following
on contracts awarded in 2011 by the cities of New York and Los Angeles, and the General Services
Administration (GSA) of the federal government. As the US economy recovers, there will be more
growth in traditional big-spending IT verticals such as financial services, retail and manufacturing.
Meanwhile, government remains a key source of projects.

The Latin American outlook remains positive in Q111, with BMI retaining its IT business environment
ratings this quarter. Low PC penetration means continued growth potential in a region characterised by
significant income and geographic disparities. In many markets, increased penetration of credit cards and
credit availability from stores, as well as a growing organised retail sector, should contribute to growth.
Brazilian IT spending is expected to be one of the best performing IT markets over BMI’s five-year
forecast period. A National Broadband Plan announced in May 2010, and modernisation ahead of Brazil’s
hosting of the 2014 FIFA World Cup and 2016 Summer Olympics, should help to drive demand for IT
products and services.
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In 2011, consumer PC sales are expected to continue to grow, thanks to economic growth and low
unemployment fuelling consumer confidence. In the first half of 2010, double-digit PC shipment growth
raised vendor hopes of a strong market performance, boosted by major government procurements at
national, provincial and municipal levels. Meanwhile, a PC penetration rate of less than 25% indicates
plenty of room for market growth.
Brazil is our second highest ranked market in North America and South America, ahead of Mexico,
which retains third position. Brazil scores higher than Mexico on market and country structure factors, but
both have strong growth drivers. Mexican IT spending is expected to grow at a double-digit compound
annual growth rate (CAGR) over BMI’s five-year forecast period. However, vendors will have concerns
about an apparent escalation in drug violence, which may affect channel activities in some regions of the
country and increase operating costs.
Brazil and Mexico account for about 75% of PC sales in Latin America, with economic growth lifting
millions into a computer-owning middle class. However, Brazil ranks higher than Mexico due to market
size and country structure environment. At twice the size of Mexico’s market, Brazil is already estimated
to be the fifth largest PC market in the world. However, Brazil’s company spending on IT, measured as a
percentage of revenues, is understood to lag behind global peers. Growing broadband penetration,

including 3G mobile, will drive the PC markets of both countries.
In 2011, Mexican PC sales are forecast to remain in positive growth territory, although growth will be
lower than in 2010, which was boosted by a low base effect compared with 2009. Going forward,
Mexican government spending should grow as public sector organisations launch e-services and
supporting infrastructure. Other market drivers include rising PC penetration and growing PC
affordability, as well as US corporate demand for IT outsourcing. Close ties with the US are a long-term
driver of Mexican IT opportunities. For example, the city of Monterrey is becoming an important
outsourcing hub.
Despite business environment improvements, however, there are structural inhibitors in Mexico and
Brazil. In Brazil these include a significant digital divide and bureaucracy. Mexico has a heavily regulated
labour market, while another negative factor is the government’s austerity drive.
Meanwhile, Chile’s fourth place in our table reflects its status as one of the most developed markets in the
region. Chilean IT spending experienced negative growth in 2009, but is projected to grow at a CAGR of
11% over 2010-2014. A new government digital action plan should help to drive opportunities in the
public sector and promote wider utilisation of ICT. The recent earthquake may have diverted consumer
funds from technology to other priorities, but reconstruction offers opportunities for government agencies
to advance IT modernisation.
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Chile’s relatively high ranking, ahead of Argentina, is partly because it has the highest country risk rating
of any of the states in our Latin America table. However, PC penetration is only 18% in Chile and 22% in
Argentina, so there is considerable room for growth in both states. In sixth place, Argentina’s IT spending
is projected by BMI to grow at a CAGR of 14% in 2010-2014. Recovery after 2010 will be driven by
rising incomes, expanding retail channels and more flexible terms from retailers.
The Argentine market is dominated by the capital Buenos Aires, which accounts for about one-quarter of
computer sales. Continued growth in PC sales is expected and IT spending is driven by factors such as

greater credit availability and growing broadband penetration.
Peru and Colombia are in fifth and seventh spots respectively. Peru’s free trade agreement (FTA) with the
US will boost demand for IT products and services. The regional structure of the Peruvian market will
evolve, with slower growth likely in Lima compared with other Peruvian provinces.
Colombia’s consumer-driven economic boom of the past few years has faded, but a PC penetration rate of
about 10% is one of the lowest in the region and indicates untapped potential. Investment in data centres,
information management and security solutions are expected to be growth areas in the large company
segment. Peru and Colombia offer opportunities despite some business environment risks. Besides the
boost from the US FTA, there are opportunities in Peru in banking and financial services, telecoms, retail,
and mining sectors as well as small and medium-sized enterprises (SMEs).
Government programmes are also a factor, particularly PCs for schools. In Colombia, the government
regards ICT as a means to advance its strategic goal of helping reintegrate disaffected groups. The
Colombian government’s Vive Digital ICT development plan should help to underpin market expansion
over the forecast period.
Venezuela’s last place in our rankings reflects our judgement that the economic situation and business
environment in the country are unfavourable for IT spending growth, with the consumer-driven growth
slowing because of economic uncertainty, the collapse of oil prices and currency devaluation. The steep
devaluation of the bolívar for non-essential imports such as computers will depress spending, as
consumers grappled with erosion of real wages. There will continue to be areas of opportunity, such as
SMEs, but BMI expects another difficult year in 2011.
In H110 the growth of Venezuela’s computer shipments lagged behind other countries in the region, but
sales should still grow during forecast period, due to the government’s affordable computer programmes
and more local production of computers. The government’s 2007-2012 economic plan has a key role for
technology in development and various public bodies are launching e-infrastructure projects. Meanwhile,
the anti-private business policies of the Chávez government inhibit business investment.
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Table: Regional IT Business Environment Ratings
Limits Of Potential Returns
Risks To Realisation Of
Return

IT
Market
Country
Structure
Limits
Market
Risks
Country
Risk
Risks
IT BE
Rating
Regional
Ranking
United States 83

90

85

50

59

56

76.3

1
Brazil 72

65

69

45

44

44

61.8

2
Mexico 64

60

63

53

60

57

61.1

3
Chile 56

65

59

50

73

64

60.6

4
Peru 53

55

54

45

68

59

55.4

5
Argentina 48

70

56

45

53

50

54.2

6
Colombia 52

55

53

48

56

53

52.8

7
Venezuela 45

70

54

40

48

45

51.0

8
Scores out of 100, with 100 highest. The IT BE Rating is the principal rating. It comprises two sub-ratings, ‘Limits Of
Potential Returns’ and ‘Risks To Realisation Of Returns’, which have a 70% and 30% weighting respectively. In turn,
the ‘Limits’ rating comprises IT Market and Country Structure, which have a 70% and 30% weighting respectively and
are based upon growth/size/maturity/govt policy of IT industry (Market) and the broader economic/socio-demographic
environment (Country). The ‘Risks’ rating comprises Market Risks and Country Risk, which have a 40% and 60%
weighting respectively and are based on a subjective evaluation of industry regulatory and IP regulations (Market) and
the industry’s broader Country Risk exposure (Country), which is based on BMI’s proprietary Country Risk ratings.
The ratings structure is aligned across the 14 industries for which BMI provides Business Environment Ratings
methodology and is designed to enable clients to consider each rating individually or as a composite, which the choice
depending on their exposure to the industry in each particular state. For a list of the data/indicators used, please

consult the appendix at the back of the report. Source: BMI
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Latin America IT Markets Overview
IT Penetration
A mixed regional picture is found with relation to internet penetration. In the US and Canada, internet
penetration in 2010 was estimated at 80.9% and 82.2% respectively. In Latin America, the highest rate in
2010 was in Colombia (48.8%), having experienced rapid recent progress on this indicator. One feature of
Latin America is that much internet access occurs outside the home. For example, recent data suggest
68% of Mexican internet users go online from places such as schools, workplaces and internet cafés.
Recent data from Peru suggest nearly 75% of internet users use a public access point.
The fastest growth in internet penetration is expected in Peru, while Brazil and Colombia will also see a
solid advance. Dial-up technology is still the dominant access method. However, the number of
broadband subscribers continues to increase, with progress expected in all markets. Brazil’s National
Broadband Plan announced in May 2010 should help to drive future growth in demand for IT products
and services.
Canada was estimated to have the region’s highest broadband penetration in 2010, of 40%, which should
rise to 60% by 2015. Broadband penetration in the United States was estimated at 27% in 2010, and is
forecast to reach 33% by 2015.
Meanwhile, in Latin American markets, broadband penetration is on course to reach as high as 24.2% in
Argentina and 18.7% in Mexico, and to pass 10% in Colombia, Chile and Venezuela within our forecast
period. In Venezuela, the recent government consultation on a new telecoms law to promote competition
may be a hopeful augur of progress.
Across Latin America, low average incomes and low PC penetration rates restrain information society
development, and thousands of towns and villages still lack access to information communication
technology (ICT). While some cities and regions stand out, there is a general pattern of underdeveloped

potential, with IT spending as a percentage of GDP well below 2% in countries covered by BMI.
However, government initiatives and growing PC affordability are now driving improvements on many
ICT indicators.
Growing affluence has brought computers within the reach of a greater proportion of the population. PC
penetration is below 25% in Brazil, but is set to rise to above 32% by 2014, while Argentina is forecast to
progress from a current rate of 24% to at least 28% in 2014. A similar situation prevails in Chile and
Mexico, where PC penetration is estimated to be less than 20% and 25% respectively. Colombia’s PC
penetration reached 12.8% as of mid-2009, surpassing the government’s previous 2010 target of 10.8%.
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BMI estimates PC penetration in Peru could reach 25% within the forecast period, from less than 20%
currently.
ICT initiatives are central to the development plans of many regional governments. In April 2010 the
Argentine government was preparing to launch a tender to provide 3mn PCs to public schools nationwide.
In Brazil, thousands of rural schools have received computers, while the government also has an
ambitious agenda to spend US$23bn on science and technology programmes as part of the country’s
Growth Acceleration Plan (PAC). Meanwhile, Colombia’s Zona Clic programme is expected to involve
the requisition of as many as 90,000 computers over the next few years.
Most governments also have a particular focus on promoting IT use by small and medium-sized
enterprises (SMEs), as Latin American SMEs typically invest less in IT than comparable companies
elsewhere. A recent study by the Getulio Vargas Foundation found that Brazilian companies on average
spent around 5.5% of revenues on IT investments, compared with 7% globally. Studies in Chile have
shown that around a quarter of companies have no computers.
Chile’s state development agency, the Corporación de Fomento de la Producción de Chile (CORFO), has
launched a programme to provide funding for projects that implement ICT for local SMEs, and similar
initiatives have been seen in Mexico and elsewhere.

Market Growth And Drivers
Across the Americas, vendors reported that
demand was up in the enterprise segment in
2010, reinforcing relatively robust consumer
demand in many markets. Both North American
and Latin American IT markets were affected by
the global economic slowdown in 2009, as
tighter credit conditions led to deferred IT
spending by consumers and businesses.
In the US and Canada, as the recession eases,
vendors should see more growth in other
traditional big-spending IT verticals such as banks and financial organisations, retail and manufacturing.
With a wave of mergers and acquisitions expected in the banking industry in the wake of the fallout of the
financial crisis, more opportunities should be generated. Key IT market drivers will include growing
mobile and fixed broadband penetration, product innovation such as feature-rich netbooks, technology
innovation such as GPS technology and services, and economic recovery. In Canada the consumer
segment should remain a bright spot, with a steadily improving unemployment situation supportive of
consumer confidence.
2010 IT Market Sizes

US$mn*

* estimate. Source: BMI

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Lower prices, a greater range of financing options for consumers and more flexible terms from retailers
are the main growth drivers for PC sales in Latin American markets. The fundamentals of growing
affordability and rising PC penetration should help keep regional markets in positive territory during the
forecast period.
Government programmes to deepen and broaden ICT access will drive IT spending growth in some
markets, while others face a climate of fiscal austerity. In some countries such as Colombia, government
programmes and growing computer affordability will support more spending on IT products and services.
However, given the uncertain economic environment and large deficits faced by the Ontario government,
among others, vendors will need to provide public sector clients with ways to reduce costs by driving
efficiencies.
In 2010 PC vendors across the region will focus on new form factors, such as smaller notebooks that blur
the distinction between a notebook and a netbook. Following the launch of Apple’s iPad, tablet
notebooks are also projected to be a growth area in 2010-2011 and will appeal to consumers who find that
smartphones are not convenient for web surfing or multimedia consumptions. Businesses will remain
cautious in 2010, but there should be a ramp-up in spending. However, there remains a possibility that the
economic recovery in some countries could be anaemic, or even that there could be a ‘double-dip’
recession, in which case tech spending could be in for another hard year.
Some structural risks pertain to our forecast scenario. Many Latin American markets, from Argentina to
Mexico, are characterised by significant income and geographical disparities. Mexico’s underpenetrated
south east and Pacific regions are expected to offer growth opportunities over BMI’s five-year forecast
period, particularly in the south east. The Argentine market is dominated by the capital Buenos Aires,
which has higher per capita income and education levels compared with the rest of the country. Brazil’s
IT market also has a distinct regional structure, with most spending accounted for by the south east
region, which includes São Paulo as well as Rio de Janeiro. São Paulo alone accounts for around 35% of
spending and Rio de Janeiro, Espírito Santo and Minas Gerais for 25%.
The impact of the global economic slowdown varied from country to country. Brazil remains on course to
become one of the top four computer markets as an expanding economy lifts millions into a middle class.
IT spending slowed in 2009 as the global credit crunch, and the more expensive US dollar, had an impact,
but the fundamentals of low computer penetration and growing affordability should keep the market on an
upward path.

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Colombia’s IT market continued to grow in
2009 as government programmes and growing
computer affordability help to sustain
spending on IT products and services.
Evaluations of virtualisation are currently
being conducted in areas such as education
and healthcare where there is particular
potential, but this is very much an emerging
sector.
Meanwhile, Chile retains some strong IT
market fundamentals including consumer affluence and a relatively favourable business environment.
There are expected to be areas of opportunities in 2010 in the government sector, with a stream of tenders
delayed from 2009. In the current global economic climate, Mexico’s close economic ties to the US
represent vulnerability as well as opportunity. There should be opportunities in key IT verticals such as
financial services, telecoms and government, with other growth sectors in 2010 set to include healthcare,
utilities and SMEs.
Aside from regional trends, particular factors are forecast to market demand in individual markets.
Infrastructure investments following 2009’s award of the 2016 Olympic Games to Rio de Janeiro is
expected to drive new Brazilian market spending on IT systems and solutions, as happened in South
Africa when it hosted the 2010 FIFA World Cup. In Venezuela the steep devaluation of the bolívar for
non-essential imports such as computers will depress spending as consumers grapple with runaway
inflation and the attendant erosion of real wages. Meanwhile, it is still too early to assess how the Chilean
earthquake and subsequent reconstruction efforts will impact on the local IT sector, but rebuilding is
expected to begin apace in H210.

The largest IT market in the region is, vastly, the United States, with spending estimated at US$526.0bn
in 2010, while Canada is a distant second with US$41.4bn. Brazil, estimated at US$21.9bn in 2008,
making it the largest IT market in the Latin American region, and a major global market in its own right.
Mexico is the second largest Latin American market with an estimated value in 2010 of US$12.2bn.
Argentina and Peru are set to be the fastest-growing markets with each projected to have 2010-2014
compound growth of 71%. The slowest growing market is forecast to be Canada, with total growth of just
17% over the five-year forecast period through to end-2014, compared with a projected 28.6% in the
United States.
Sectors And Verticals
Hardware accounts for less than one-third of IT spending in both the United States (27%) and Canada
IT Market Sizes As % Of National GDPs
2010-2014


e/f = estimate/forecast. Source: BMI

United States Information Technology Report Q1 2011



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(34%). In contrast, Latin American IT markets remain hardware centric, with hardware accounting for
between 46% (in Brazil) and 68% (in Venezuela) of the total spending in these markets.
However, in all markets spending on software and services is projected to increase its share of the IT
spend in most markets by 2014. Notebook sales are growing much faster than the PC market as a whole,
with growth driven by falling prices, more features and their general popularity, while volume CAGRs of
20-30% are expected for notebooks in most markets.
In 2010, regional businesses are expected to
increase their IT investments in 2010,

despite uncertainty about a sustainable global
economic recovery. There could be a boost,
particularly in the second half of the year,
from computer hardware tenders delayed from
2009. Sales of the Windows 7 operating
system, and new Intel core technology, have
the potential to help trigger a new cycle of
hardware upgrades, although much will
depend on business and consumer confidence.
Stronger corporate demand should fuel a
revival in desktop sales in 2010.
Even PC markets such as Venezuela’s, which is being buffeted by strong economic headwinds, should
continue to perform reasonably well, with one factor in Venezuela’s case being more local production of
affordable computers. There is a sizable grey regional market, although evidence suggests that its size has
been diminishing in many places. Investment in call centres is currently driving spending on hardware.
One additional pan-regional driver both of increased notebook sales and of lower prices is the move of
telecoms operators into the PC retail space. With increasing mobile and fixed broadband penetration,
notebooks and netbooks have become popular wireless connectivity options for consumers. Netbooks and
notebooks face competition from other form factors such as smartphones from Palm, RIM, Apple and
other vendors, and tablet notebooks, spearheaded by Apple’s iPad.
Software is estimated to account for 12-19% of IT spending in Latin American markets covered by BMI,
compared with 29% in the United States. Despite the economic downturn, there are expected to be
opportunities for software vendors in most markets. The economic situation is likely to lead to further
consideration of open source solutions in some sectors.
IT Markets Compound Growth,

2010e-2014f, %


e/f = estimate/forecast. Source: BMI

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Some markets, particularly Venezuela, will be influenced by their governments’ drives to promote open
source software. Following criticism of the initial programme, the second phase of Argentina’s Mi PC
was widened to offer consumers the option of purchasing PCs with Linux operating systems. In the US
the key issue and precondition for the more widespread adoption of open source will be the development
of a support infrastructure. Customers are increasingly looking to vendors to offer support for open source
software. BMI expects this trend to continue with the development of more support infrastructure for the
most important open source applications.
In general, enterprise resource planning (ERP) and other e-business products still dominate the Latin
American enterprise software market, but vendors are also looking to other areas, such as customer
relationship management (CRM) and business intelligence, where faster growth is possible.
SaaS has enjoyed steady growth in most markets, and improved broadband infrastructure will assist the
popularisation of the rented software model. Brazil is thought to be one of the most promising regional
markets for the SaaS model, with growing demand in sectors such as retail, finance and healthcare. The
market in most countries remains relatively small, with a 2008 survey finding that only 20% of Canadian
firms were considering this business model.
The IT services segment accounts for 15% to 40% of spending in the Latin American markets covered by
BMI, compared with above 40% in both the United States and Canada. The global economic crisis had an
impact on projects in some verticals and led to negative spending growth in some markets such as
Mexico. Much will depend on the speed of the US and global recovery, with the likelihood of budget cuts
increasing the longer the slowdown lasts.
The IT services has become one of the most dynamic drivers of IT sector spending in the region, and
this has attracted greater investment from international vendors. The increasing number of multinational
corporations operating in markets such as Mexico, Chile and Brazil is in itself an important driver for

spending, while local companies are trying to use computing resources more effectively and integrate
investments made in hardware and software.
In more developed markets such as the US and Canada, a major demand driver going forward will be
organisations looking for help to utilise efficiencies from cloud computing models such as SaaS and
infrastructure-as-a-service.
Outsourcing is also becoming an important spur to growth for the IT services sector, as several Latin
American markets try to consolidate their reputations as regional offshoring hubs. One driver for many
markets will be ambitions to develop capabilities in the business process outsourcing (BPO) area and
capture a larger global market share. Brazil, for example, has an ambitious plan to become one of the
world’s top IT outsourcing destinations by 2010. Chile’s development as an offshoring location will
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attract more investment in IT services, with sectors such as retail, distribution, financial services,
telecoms and healthcare all offering opportunities.

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United States Market Overview
Government Authorities
Government Authority National Telecommunications and Information Administration
(NTIA), Department of Commerce
Assistant Secretary for

Communications and Information
Lawrence E Strickling

The Department of Commerce (DoC) regulates various information technology industry-related areas.
The DoC is host to several agencies including the National Telecommunications and Information
Administration (NTIA), which advises the president on telecommunications and information-related
issues.
• NTIA itself has several sub-bodies including:
• The Office of International Affairs, which helps to foster the ability of US IT companies to
compete abroad.
• The Office of Policy Analysis and Development.
• The Office of Telecommunications and Information Appliances (OTIA).
• Major programmes run by the OTIA include:
• The US$4.7bn Broadband Technology Opportunities Program to develop broadband services to
underserved areas.
• A programme to drive the transition to digital television.
• The Department of Commerce also hosts the National Institute of Standards and Technology,
which is a non-regulatory agency that promotes US innovation and standards.
• Various other federal government ministries are also relevant to IT vendors.
Several departments including the Department of Defense, Homeland Security, Health and Human
Services, and the Department of Commerce itself are major purchasers of IT products and services.
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The US Treasury is in charge of tax issues affecting the US industry, including such issues as R&D tax
subsidies.
The Office of E-Government and Information Technology within the Office of Budget Management is

responsible for monitoring federal IT spending across federal departments.
Overview
IT Spending – 2009e IT Segments
(US$bn) 2009e


Source: BMI Source: BMI

The US accounts for around 25% of global IT spending in terms of both size and value.
Despite continued economic uncertainty, and the faster growing IT markets of countries such as China
and India, the US is forecast to maintain its global IT market leadership position for some time.

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BMI estimated US IT spending at just over
US$487bn in 2009. As a mature market,
BMI assumes that IT services accounts for
around 44% of US IT spending, compared
with 27% for hardware and 29% for
software.

Each segment comprises several sub-
segments. In the hardware segment,
notebook computers now account for around
58% of sales, and this share is expected to
rise to 81% by 2014, pushing desktops

down to less than one-fifth of unit sales. A
major driver will be sales of netbooks,
which now account for around 12% of sales, although the netbook growth trajectory will flatten as the
price differential with fully featured notebooks becomes less significant.

Software also comprises several segments. The business software market (packaged software), including
enterprise resource management, customer relationship management, human resources management,
financial applications and so on, as well as business intelligence and other information-enabling
applications, is estimated to account for around a third of revenues. Middleware, including systems
management and database management software, accounts for between 15-20% of spending. Operating
systems of PCs, servers, and mainframes, as well as storage systems, account for around 20% of
spending. Internally developed software accounts for a declining share of the market. The software
market is being transformed with the rise of the SaaS delivery model.

The main segments in IT services include implementation, systems integration (SI), maintenance and
service, as well as higher value services such as consulting and software development, and managed
services/outsourcing.

PC Spending – Segments
2009
Source: BMI
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BMI counts most custom-developed software in
IT services. Custom-developed software has
declined in importance as packaged software has

become more specialised and customised to
particular industries, and it may now account for
around 10% of commercial software value.

The two largest IT spending verticals are
discrete manufacturing and government, which
have typically accounted for around 10% of
total IT spending each. Banking has traditionally
also accounted for a similar amount although it
remains to be seen what will happen to bank IT spending in the wake of the financial crisis. Other
significant IT spending verticals include retail, wholesale, telecoms and construction.

US consumers are sophisticated and enthusiastic consumers of consumer electronics products including
computers. According to the Consumer Electronics Association, the average US household spent
US$1,405 on consumer electronics products during the period March 2007-March 2008. Meanwhile,
BMI estimates IT spend/capita was just below US$1,600 in 2009. However, a mature market with high
penetration rates requires product and technology innovation to drive continued growth: the average US
household has 2.5 PCs.

Hardware
BMI forecasts that the US computer and accessories market will decelerate to single-digit growth in
2011. We have downwardly revised our projection after a PC sales grew by less than expected in Q310,
following a recovery in H110 that was strong by any standards. The PC market’s 2011-2015 CAGR is
now projected at 3.2% and value could reach US$172.2bn by 2015.

Market Trends
US PC sales growth slowed significantly in Q310, a period when consumer sales are usually strong and
boosted by back-to-school sales. The market appeared to be affected by uncertainty about job growth and
the economic recovery, which led consumers to delay purchases. Meanwhile, publicity about new model
releases and form factors, such as tablets, may also have contributed to a ‘wait and see’ mentality.

Annualised shipments growth dropped to mid single-digits, compared with the double-digit rates seen
earlier in the year.

PC sales had bounced back stongly in H110, but unit sales were estimated by BMI at around 17mn units
in the third quarter, with limited growth compared with the same period of 2009. The main factor was a
Software Spending – Segments
2009
Source: BMI