Market Overview Australia's IT market should continue to provide opportunities in the consumer, government and business sectors in 2011, following a strong recovery in 2010. The total size of the domestic IT market is projected by BMI to increase from US$20.8bn in 2011 to US$25.7bn in 2015.
IT spending in 2011 should be boosted by growing demand across IT spending sectors to take advantage of opportunities presented by cloud computing. In 2010 a wide range of leading Australian private and public sector organisations launched cloud initiatives and the government unveiled a six-year cloud computing strategy.
Several factors underpin our forecast of a 5% 2011-2015 CAGR for the Australian IT market. Government tenders will drive considerable spending in years to come. Banks will continue to need to spend on regulatory compliance, and intense competition in the retail sector is spurring spending on customer relationship management (CRM) and back-office systems. Competition and new service platforms in the telecoms sector are driving the key IT spending segment.
Industry Developments In 2010, the Australian federal government announced a six-year plan to transfer government agencies' computing systems to a public cloud environment. According to the plan, public cloud adoption for public-facing websites is scheduled to begin in 2011, with pan-governmental integration taking place from 2012 onwards. However, the plan requires government agencies to notify the Department of Finance Deregulation of their intention to move to the cloud.
In November 2010, the Australian Senate passed a bill to restructure Telstra, to increase competition as Telstra's infrastructure is incorporated in the new National Broadband Network (NBN). The NBN project aims to connect 93% of the population by 2017 and rectify a situation that has led to Australian broadband charges being ranked the fifth most expensive among Organisation for Economic Cooperation and Development (OECD) countries.
In 2010, government projects in sectors such as e-government, healthcare and education drove significant opportunities for IT vendors. The Australian government announced plans for a standardised reporting system scheme, while the National E-Health Transition Authority has set the goal of creating a paperless environment in Australia's health sector, including public hospitals.
Company News Telecoms service providers in the Australian market are investing in infrastructure to provide cloud computing services. In Q111, telecoms company Telstra, in partnership with consulting leader Accenture, launched a 45-day free trial of its cloud infrastructure for government agencies. Meanwhile, rival telecoms company Optus already claims a number of high-profile customers for its trial services, including property company Savills and South Australia's Royal District Nursing Service (RDNS.) In H111, one of SAP's largest Australian partners, Oxygen, launched a new SAP Software-as-a-Service (SaaS) offering that it called 'Oxygen on Demand.' The solution was touted as a 'total SAP' cloud solution, offering flexibility and speed-of-deployment. Many of SAP's Australian clients, including Fairfax
Media, Australia Post, CGU Insurance and the Commonwealth Bank of Australia, already use cloud computing as a means of providing services.
In 2010, the release of Apple's iPad opened a new competitive battleground in the PC market, with Apple's rival vendors planning to release their own tablet devices. Apple is expected to continue to dominate Australian tablet sales in the Australian market, with the Apple iPad 2, while the price of the entry-level original iPad is now down to about AUD445. However, the number of competitor tablet devices from the likes of Samsung, Lenovo, HP, Acer, Dell and Asus is expected to grow in 2011.
Computer Sales Australian computer hardware sales are projected at US$9.2bn in 2011, with the popularity of tablets helping to keep demand buoyant after a strong PC market recovery in 2010. Sales are forecast to grow to around US$10.3bn by 2015, with drivers including new form factors, government programmes and growing broadband penetration.
More than 90% of Australian households now have a PC and consumers appear willing to spend on upgrading their notebook computers; it is also becoming more popular to purchase a second household PC. Small businesses comprise more than 99% of all Australian businesses and slightly more than 50% of business PC sales.
Software Software is expected to account for about 17% of the Australian IT market in 2011, with estimated spending of US$3.5bn. As the focus moves from hardware to services and solutions, the share of the market accounted for by software will continue to rise through 2015, with businesses seeking greater leverage from their investments.
Given many businesses' focus on controlling costs, cloud computing models have also grown in popularity and spread beyond initial core application areas. Over the forecast period, enterprise resource planning (ERP), CRM and other e-business products will be increasingly popular with the small and medium-sized enterprise (SME) market, as companies look to enhance productivity through automating essential functions.
IT Services IT services are expected to account for about 40% of the domestic IT market in 2011, to US$8.1bn. Demand picked up in 2010 with the revival of several IT projects that had been shelved as a result of the economic slowdown, and IT services is forecast to be one of the most dynamic sectors in the Australian IT market.
In 2011, sectors such as government, telecoms, healthcare and banking should continue to supply demand for implementation, consulting and managed services. Regulatory compliance will continue to require spending by banks, and intense competition in the retail sector is spurring spending on CRM and backoffice systems.
E-Readiness Many alternative Australian internet service providers (ISPs) are in the process of expanding the coverage of their ADSL networks. Other broadband service providers, including Unwired, are rolling out WiMAX networks, which will help to ensure greater choice and flexibility in the type of broadband connection available. Australia is above the OECD average in terms of businesses purchasing online (49% versus 33%) and selling online (27% versus 17%).
The central component of the government's ICT strategy and overall domestic economic policy is the construction of a National Broadband Network. The programme is expected to drive economic growth and foster the creation of a digital economy. The government has projected GDP gains of 1.4% after five years from the broadband project.
Despite these investment commitments, our outlook for Australian broadband growth continues to be cautious. This is based partly on delays that have characterised government and operator efforts to address the problem of low broadband coverage in rural parts of Australia. Meanwhile, fixed penetration rates in urban areas are already very high.
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