Sri Lanka's local or 'addressable' IT spending has been forecast at US$ 393 million for 2011, just 2% that of India's, according to research agency Business Monitor International (BMI). Further, the researcher also claimed that the local sector could grow to US$ 742 million by 2015.
Noting that local IT expenditure is expected to improve as a result of local and regional economic recovery, BMI's findings in its July 29 published online report titled "Sri Lanka Information Technology Report Q3 2011" also stated that, despite the compound annual growth rate (CAGR) for the country's computer market experiencing back-to-back double digit increases over the past several years, with computer penetration was still only around 1%. Also emerging; "The IT market has considerable latent potential but has been handicapped over the years by the country's political instability, although things are now looking up. The restoration of peace and improvements in security have helped to release enterprise demand for IT solutions as companies look to boost efficiency."
In addition, referring to what it called the country's "very low level of Internet penetration," the report suggested that this was due to the "state of its telecoms infrastructure as a result of years of civil war. This situation has been identified by the government as a major barrier to future social and economic development.
Progress is expected over our forecast period, with Internet penetration reaching 19%, and broadband penetration 23% by 2015. In recent years, the government has announced broadband infrastructure rollout plans and has also encouraged the deployment of tchnologies such as WiMAX and Wi-Fi, but adoption remains limited."
The report also suggested that "the consumer PC segment will benefit from a further reduction in prices following the Sri Lankan government's decision in June 2010 to reduce import duties on electronic goods. A projected 2011-2015 CAGR of 17% makes Sri Lanka one of the fastest growing markets in the region, albeit from a low base." This is especially relevant as the report also stated that "Sri Lanka's addressable computer hardware market is forecast at US$ 270 million in 2011 and is projected to reach US$ 489 million in 2015. As basic infrastructure improves in areas outside Colombo, there is potential for strong growth in the north and east.
Sri Lanka's IT market will stay dominated by hardware, with spending on hardware accounting for an estimated 71% of Sri Lanka's IT spending in 2010. There is considerable growth potential as the level of computerisation is low, with PC penetration estimated at less than 5%. The average price of a PC has already dropped over the past few years to less than US$ 300, bringing computers within the reach of lower income consumers." Meanwhile, the report noted that "spending on software remains rather low, with BMI forecasting the addressable market at US$ 48 million in 2011.
The estimated 11% share of the total IT spend, accounted for by software, reflects the relative immaturity of Sri Lanka's IT market. However, the domestic software market is expected to grow at a CAGR of about 20% through to 2015.
One significant market restraint is the high level of software piracy, with nine out of 10 packages in use thought to be unlicensed. The core business software demand is for applications such as enterprise resource planning (ERP), as well as basics such as email. Local channels have estimated that there are about 400 ERP installations in the country."
At the same time, the report also indicated that IT services would "reach US$ 75 million in 2011, accounting for about 17% of Sri Lanka's total spending on IT. The market is dominated by demand from the government, finance and telecoms sectors, which account for at least half of the total.
The provision of IT services is still typically built around hardware sales, with the growing base of installed hardware and software systems the foundation for an expansion of services provision. The consulting element should become more significant ove the forecast period... Services are often comprised largely of provision of hardware and software implementation, maintenance and support, but they provide a basis for development of the market for more advanced services." |
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