United states information technology report q3 2010

Q3 2010
ISSN
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
Q3 2010
INCLUDES 5-YEAR FORECASTS TO 2014


Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Publication Date: July 2010

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CONTENTS
Executive Summary 5
SWOT Analysis 8
US IT Sector SWOT 8
United States Telecoms Market SWOT 9
US Political SWOT 10
US Economic SWOT 10
US Business Environment SWOT 11
IT Business Environment Ratings 12
Americas IT Business Environment Ratings 12
Table: Regional IT Business Environment Ratings 12
Latin America Regional IT Markets Overview 15
United States Market Overview 22
Government Authority 22
Overview 23
Hardware 25
Tablet Notebooks 28
E-Readers 29
Software 29
Operating Systems 29
Business Software 31
Services 32

Verticals 32
Segments 33
Industry Developments 34
Industry Forecast Scenario 36
Table: US – IT Sector (US$mn Unless Otherwise Stated) 38
Internet 39
Table: Telecoms Sector – Internet – Historical Data And Forecasts 39
Macroeconomic Forecast 41
Table: United States – Economic Activity 45
Competitive Landscape 46
Hardware 46
Software 48
Business Software 50
IT Services 52
Company Profiles 54
HP 54
Dell 56
Microsoft 58
IBM 60
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Country Snapshot: US Demographic Data 61

Section 1: Population 61
Table: Demographic Indicators, 2005-2030 61
Table: Rural/Urban Breakdown, 2005-2030 62

Section 2: Education And Healthcare 62
Table: Education, 2002-2005 62
Table: Vital Statistics, 2005-2030 62
Section 3: Labour Market And Spending Power 63
Table: Employment Indicators, 2001-2006 63
Table: Consumer Expenditure, 2000-2012 (US$) 63
Table: Average Annual Wages, 2000-2012 (US$) 64
BMI Methodology 65
How We Generate Our Industry Forecasts 65
IT Industry 65
IT Ratings – Methodology 66
Table: IT Business Environment Indicators 67
Weighting 68
Table: Weighting Of Components 68
Sources 68

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Executive Summary
Market Overview
US spending on IT products and services is forecast to reach US$629.3bn by 2014.
In BMI’s core forecast scenario, US spending on IT goods and services will reach US$511.4bn in 2010
and then advance at a compound annual growth rate (CAGR) of 6.5% over our five-year forecast period.
BMI has upwardly revised its forecast after the first quarter of 2010 brought strong growth in US PC
shipments and signs of improved confidence in some IT-spending verticals.
A major IT services demand driver will be organisations looking for help to utilise efficiencies from

cloud computing models such as software-as-a-service (SaaS) and infrastructure-as-a-service (IaaS).

Other key market drivers are expected to include:
! Growing fixed and mobile broadband penetration
! Product innovation such as tablet notebooks, e-readers and feature-rich netbooks
! Technology innovation such as GPS and services
! Business model innovations such as virtualisation
! Economic recovery
Businesses are likely to remain cautious in 2010, but upgrade cycles should accelerate in the second half
of the year, boosted by sales of Windows 7. The recession may have had a lasting impact on the IT
market by creating the conditions for the popularity of low-cost netbooks and notebooks and
encouraging consideration of new IT delivery models such as SaaS. In the light of these and other
changes, major vendors have also adjusted their competitive strategies.
Industry Developments
In August 2009 the federal government reported on its 2009 calendar year IT spending.
In full-year 2009, total IT spending including all federal IT investment was measured at US$74.2bn, up
1.99% on the previous year’s total of US$72.8bn. In 2010, budgeted federal IT spending is set to rise to
US$78.4bn.
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The Federal Government’s Stimulus Bill, which required the use of electronic healthcare records (EHS)
by doctors by 2015 is expected to be a major driver of investment in this area.

Competitive Landscape
! The US PC competitive landscape is dominated by two big domestic vendors, Dell and HP,
which together have at least 50% of the US market.

In April 2010 Apple finally launched its long-awaited iPad and achieved worldwide sales of around 2mn
units within the first two months. Rival vendors such as HP and Dell have all announced or shown their
own tablet products, while smartphone makers Research In Motion (RIM) and Samsung are also
expected to compete in this segment.

One current driver of acquisitions in the IT services space is vendors positioning themselves to compete
for the cloud computing services market. In May 2010, IBM moved to improve its position in this
emerging area by purchasing California-based company Cast Iron Systems for an undisclosed sum.

Meanwhile, the government remains a key vendor target. In May 2010, HP achieved one of its most
recent local market successes 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$115.5bn in
2010, with mid single-digit growth compared with 2009.
US PC sales grew strongly in Q110 and BMI estimated that the market was on course for full-year total
PC sales of 77mn. In the first quarter of the year, sales were boosted by a revival of the business PC
market, which is expected to gather pace in the second half of the year.

Notebooks are the fastest growing PC market segment and were on course to account for more than
60% of unit sales in 2009, while netbooks were forecast to account for around 15% of notebook sales.
However, 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.
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Software
The US software market is estimated at US$148.3bn in 2010, with single-digit growth from 2009.
Software CAGR for 2010-2014 is projected at around 6.2%, as the addressable market grows to around
US$188.8bn. 2010 should see a boost from systems upgrades deferred from 2009 when the economic
crisis had an impact across sectors. A combination of enterprise objectives such as cost reduction and
greater efficiency should combine to drive more adoption of cloud services in 2010.
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 estimated at US$227.3bn in 2010, with a sharp deceleration in spending
expected compared with 2006-2008.
IT services spending is expected to record growth of 6.5% in 2010, after a sharp deceleration in
2009. Spending on IT services is quite closely correlated with GDP growth: bad news in a recession.
One opportunity will be organisations looking for help with to utilise efficiencies from cloud computing
such as SaaS and IaaS, as organisations in those fields look to save money on IT investments. Federal and
local governments are one vertical where strong interest in cloud services is being expressed.



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SWOT Analysis
US IT Sector SWO

T

Strengths
! The largest IT market in the world with spending forecast to pass US$500bn in
2010.
! Despite currently challenging trading conditions, overall IT spending still expected
to remain in positive growth territory.

Weaknesses
! In 2009 customers were postponing projects and cutting back on short-term
spending, particularly in areas such as consulting and software development.

Opportunities
! Low base level of sales in H109 should allow for rapid growth at least in the first half
of 2010.
! As economic woes ease, vendors should see more growth in other traditional big-
spending IT verticals such as banks and financial organisations, retail and
manufacturing.
! Growing popularity of mobile broadband networks in the US driving netbook sales.
! New business models like SaaS and virtualisation will continue to make progress

Threats
! A risk that recovery could be anaemic in 2010, in which case tech spending could
have another hard year.
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United States Telecoms Market SWOT
Strengths
! Large proportion of households in US continues to have a fixed-line connection.
! Broadband growth remains robust despite a declining fixed-line market and falling
pay-TV subscriptions.
! Demand for faster speeds is leading to new technologies being introduced by
operators.

Weaknesses
! Fixed-line decline in 2008-2009 was faster than expected and continues into 2010.
No real respite is expected in the market.
! The recession has hit all areas of the market – even pay-TV operators have
experienced declining subscriptions.
! Popularity of mobile services reduces the need for wireline connections.

Opportunities
! New technologies such as WiMAX and long-term evolution (LTE) will see network
contracts being awarded to ensure latest products made available.
! Wireline broadband continues to offer faster download speeds than wireless options,
making it a more attractive prospect for many clients.
! Internet protocol television growth highlights opportunities for operators to bring
subscribers over a single network offering considerable cost savings.

Threats
! Problems in US economy are driving subscribers to mobile substitution faster than
ever, leading to a faster decline as subscribers look to reduce their outgoings.
! Weaker dollar has made the cost of contracts higher from external vendors.

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US 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
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), 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.

US 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, 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’s 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.


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US Business 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

Americas IT Business Environment Ratings
Table: Regional IT Business Environment Ratings
Limits Of Potential Returns
Risks To Realisation Of
Returns

IT
Market
Country
Structur
e
Limits
Market
Risks
Country
Risk
Risks
IT BE
Rating
Regiona
l
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
Argentina 48 70 56 45 46 45 52.7 5
Peru 53 55 54 45 68 59 55.4 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, with 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

BMI’s Americas IT Business Environment Ratings compare the potential of a selection of the region’s
markets over our forecast period, through to 2014. 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 ICT projects.
The US is the largest IT market in the region – and indeed the world – and accounts for around 25% of
global IT spending. Despite the challenge from 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. After three
quarters of decline, the second half of 2009 brought a return to growth in US PC shipments and signs of
improved confidence in key IT spending verticals.
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Across both consumer and business segments, US IT spending is expected to have a number of drivers,

including the growing popularity of mobile broadband networks, product and technology innovation as
well as economic recovery. The economic downturn may have accelerated the growth of outsourcing of
non-core processes and given additional momentum to IT delivery models such as software-as-a-service
(SaaS).
The Latin American economic outlook has improved in Q210 and six of the regional markets covered by
BMI have received upgrades in our Country Structure scores this quarter. Low PC penetration means
continued growth potential in a region characterised by significant income and geographical 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 bounce back in 2010, as the economy makes a strong recovery from
the recession. Brazil is our second highest-ranked Americas market, ahead of Mexico in third. Brazil
scores higher than Mexico on both market and country risk factors, but both have strong growth drivers.
Meanwhile, Chile’s fourth place reflects its status as one of the most developed markets in the region.
Chilean IT spending dipped into negative growth territory during 2009, but is expected to bounce back in
2010.
In fifth place, Argentina’s IT spending is projected by BMI to grow at a compound annual growth rate
(CAGR) of 10% over 2010-2014. Recovery after 2010 will be driven by rising incomes, expanding retail
channels and more flexible terms from retailers. Peru and Colombia are in sixth 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 Peru market will evolve, with slower growth likely in Lima
compared with other Peruvian provinces. Meanwhile, Colombia’s consumer-driven economic boom of
the past few years has faded, but a PC penetration rate of around 10% is one of the lowest in the region
and indicates untapped potential.
Venezuela’s last place in our rankings reflects BMI’s judgement that the economic situation and business
environment in the country are unfavourable for IT spending growth, with consumer-driven growth of
recent years cooling due to economic uncertainty, the collapse in oil prices and currency devaluation.
There will continue to be areas of opportunity, but BMI anticipates another difficult year in 2010.
Brazil and Mexico account for around 75% of PC sales in Latin America, with economic growth lifting
millions into a computer-owning middle class. However, Brazil currently ranks higher than Mexico on
grounds of market size, as well as country risk environment. At twice the size of Mexico’s market, Brazil

is already estimated to be the fifth largest PC market in the world. Growing broadband penetration,
including 3G mobile, will drive the PC markets of both countries.
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BMI projects that Mexican IT spending will grow again in 2010, despite continued economic
uncertainties. Close ties with the US are a long-term driver of IT opportunities; for example, the city of
Monterrey is developing as an important outsourcing hub. There should also 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 small and medium-sized enterprises (SMEs).
Despite business environment improvements, 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.
Chile’s fourth place, ranking ahead of Argentina, is partly earned by having the highest country risk
rankings of any of the states in our Latin America table. However, with PC penetration of only 18% in
Chile and 22% in Argentina, there is considerable room for growth in both states. Continued PC sales
growth is expected in Argentina, where IT spending is being driven by factors such as greater credit
availability and growing broadband penetration. In both Chile and Argentina, government ICT policies
support market growth.
Both Peru and Colombia offer opportunities despite some business environment risks. Peru’s market will
receive a boost from the FTA with the US. There are opportunities in sectors such as banking and
financial services, telecoms, retail, mining and SMEs. Government programmes are also a factor,
particularly PCs for schools. In Colombia, the government regards ICT as a means to advance its central
strategic goal of helping to reintegrate disaffected groups. The Ministry of Communications assigned a
COP1.5bn budget for its National ICT Plan for the 2008-2010 period.
Investment in Venezuela is likely to remain relatively low, given the political environment, which is
increasingly adverse for private investment. However, computer shipments should still grow, thanks to

government 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
rolling out e-infrastructure projects. However, concerns remain about currency devaluation, import
restrictions and government policies on issues such as open-source software, which will require investor
caution.

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Latin America Regional 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 81.4% and 80.1% respectively. In Latin America, the highest rates in
2010 were seen in Peru (60.3%) and Colombia (45.5%), with both 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 that some 68% of Mexican internet users go online from places
such as schools, workplaces and internet cafés. Recent data from Peru suggest that 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 32%, which should rise to 39% by 2014. Broadband
penetration in the United States was estimated at 27% in 2010, and is forecast to reach 32.2% by 2014.
Meanwhile, in Latin American markets, broadband penetration is on course to reach as high as 20.9% in
Argentina and 15.5% in Chile, and to pass 10% in Colombia, Mexico 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.
E-readiness

2010e-2014f

e/f = estimate/forecast. Source: BMI

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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 around

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%. BMI estimates that
national 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
Going into 2010, across the Americas region, vendors reported that demand was up in the enterprise
segment, 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.

Broadband Penetration
(Per 100 Population)
e/f = estimate/forecast. Source: BMI

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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.
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 have 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,
with higher per capita income and education levels compared with the rest of the country. Brazil’s IT
2010 IT Market Sizes

US$mn*
* estimate. Source: BMI

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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
for whom computers are no longer beyond reach. 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.
Colombia is one market that 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 it has done in South
Africa, host country for 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$516.3bn
in 2010, while Canada is a distant second with US$39.9bn. Brazil, estimated at US$23.3bn in 2008,
IT Market Sizes As % Of National GDPs

2010e-2014f

e/f = estimate/forecast. Source: BMI

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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$11.7bn. The
next largest markets were Argentina (US$3.8bn) and Chile (US$2.3bn). 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 (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 one trend 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
IT Markets Compound Growth,

2010e-2014f, %

e/f = estimate/forecast. Source: BMI

United States Information Technology Report Q3 2010



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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. Sales of the Windows 7 operating system have the potential
to impact positively on sales in 2010, despite business caution. 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.
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.
The economic slowdown may have encouraged companies to consider cloud computing solutions such as
Software-as-a-Service (SaaS). 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 between 15% and 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 market 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.
United States Information Technology Report Q3 2010

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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
attract more investment in IT services, with sectors such as retail, distribution, financial services,
telecoms and healthcare all offering opportunities.
Market Structure (% Of Total IT Market)

2010e 2014f


e/f = estimate/forecast. Source: BMI

United States Information Technology Report Q3 2010



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United States Market Overview
Government Authority
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.
United States Information Technology Report Q3 2010



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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 Spendin
g
2009

IT Se
g
ments

(US$bn)

2009



Source: BMI forecasts

Source: BMI forecasts

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.

United States Information Technology Report Q3 2010



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BMI estimated US IT spending at around
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 is comprised of 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 one-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 Software-as-a-Service (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.

PCs: Se
g
ments

2009

Source: BMI