ICT to Indonesia
Trends and opportunities
Indonesia is the fastest growing mobile telephone market in the Asia-Pacific region, predicted to reach 391 million mobile accounts in 2015. The market is dominated by three major mobile telecommunication providers, Telkomsel, Indosat and Xl Axiata, who are competing on package inclusions such as data and price to gain customers. 95 per cent of mobile users are prepaid subscribers – the key accelerator of overall growth (Source: Business Monitor International, 'Indonesian Telecommunications Report', 17 Nov 2014).
Social networking is a fast growing sector in Indonesia which has gained popularity among the younger age groups in urban centres. Blogging is widespread, providing a powerful marketing tool for consumer businesses. In Indonesia, 67 per cent of online consumers pay attention to online advertising and 96 per cent are affected by online advertising through friends or relatives. With substantial growth in the use of social media applications, Google, Facebook and Twitter recently decided to establish representative offices in the capital city of Jakarta. Internet users are expected to reach 139 million user in 2015 (Source: The Association of Indonesian Internet Providers, ‘Internet Users in Indonesia’, Jan 2014).
Cloud services have emerged as a key plank of IT strategy for most businesses in Indonesia, especially for small and medium enterprises (SMEs). The most recent government data show 70 per cent of 56.5 million of Indonesian SMEs do not use IT solutions. Indonesia’s cloud computing market is expected to reach more than US$120 million by 2017 and that Software-as-a-Service (SaaS) would be the popular choice of Indonesians (Source: Frost & Sullivan, 'The Rise of Cloud Computing in Indonesia', Sep 2013).
Indonesian telecommunication providers remain committed to expanding their data centre businesses with the following announcements:
- In Oct 2012: Equinix, the global data centre company and PT DCI, an Indonesian company, their intention to build a 65 000 square feet data centre in Jakarta.
- In Mar 2013: Supra Primatama Nusantara planned to invest US$50 million in data centre building. (Source: Business Monitor International, Indonesian Information Technology Report, Q1 2015).
- In Feb 2013: XL Axiata partnered with Ericsson in a machine-to-machine (M2M) developments.
- In Jul 2014: Telkom sigma (a subsidiary of Telkom Indonesia) and Dimension Data collaborating on the development and provision of end-to-end data centre services to local and global enterprises. By the end of 2015, the Telkom group expects to be operating the fourth-largest data centre business in the world with 100 000 square metres of capacity (Source: Frost & Sullivan, 'The Rise of Cloud Computing in Indonesia', Sep 2013).
IT services in Indonesia are estimated to grow at 16.6 per cent in 2015, an important trend behind the rapid expansion of the IT services market is the improvement of ICT infrastructure. In Sep 2014, Telstra and Telkom Indonesia formed a joint venture (JV) to provide network application and services (NAS) to Indonesian businesses, Australian firms operating in Indonesia and multi-nationals. The JV will offer an integrated end-to-end service by enabling NAS to be bundled with Telkom's connectivity, which will be sold via Telkom and Telstra's enterprise sales teams (Source: Business Monitor International, Indonesian Information Technology Report, Q1 2015).
In the higher education market, Indonesia is predicted to grow five times from US$3 billion to US$15 billion by 2030 (Source: e27, Ed-Tech Startups in Indonesia Helping Fill Education Need-gap, Apr 2014). The advent of technological advancements in education has provided a number of benefits to the institutions as well as corporate trainers such as multi-modal training, online tests and tutorials and live video streaming. By 2017, ten countries in Asia will be spending more on Mobile Learning than on eLearning: India, Laos, Nepal, Malaysia, Indonesia, Cambodia, Pakistan, Bangladesh, Sri Lanka, and Thailand. (Source: Ambien Insight Research, Abstract: The Asia Mobile Learning Market: 2012-2017 Forecast and Analysis, Mar 2013).
Indonesia has one of the slowest internet connection speeds in the Asia-Pacific. Indonesia's complex geographical island structure (over 17 000 islands) makes the build-up of cable infrastructure difficult and costly. Following Presidential Decree No 96 Year 2014, The Indonesia National Development Planning Agency (BAPENNAS) launched the Indonesian Broadband Plan (IBP) 2014 – 2019 in mid-October 2014. This IBP is defined as Internet connectivity with the ability to send voice, images and data at one time (triple-play) with a minimum speed of 2Mbps for fixed network and 1Mbps for mobile access. This goal is to be achieved through linking broadband with other priority sectors in the economy, namely e-Government, e-Health, e-Education, e-logistics and e-Procurement (Source: State Ministry of National Development Planning (Bappenas), Ministry of Planning / Bappenas Indonesia Launches Broadband Plan 2014-2019,Oct 2014).
Indonesia requires a bigger budget and therefore required a collaborative funding from the private sector to enable the development of its broadband infrastructure.
Indonesia’s e-commerce market is fast becoming one of Asia’s most attractive destinations for investment. Among the most promising areas of e-commerce in Indonesia are electronic goods and online fashion.
However cyber security threats are of increasing concern for the development of the Indonesian e-commerce market. In October 2013 Akamai produced its latest State of the Internet report and found Indonesia was the largest source of cyber-attacks, overtaking China (despite a far smaller base of IP addresses). This opens the door to firms ready to bring in capital, technology and security solutions who are willing to work with local companies to launch their own e-commerce arm. Growth demand for digital content applications would be on secured transactions, payment security systems and delivery services, particularly in mobile platforms.
Cloud computing is seen as an effective way to enhance the efficiency of IT infrastructure with a considerably faster deployment time, especially for SMEs. IT services for this segment will be dominated by basic services such as system integration, support systems, training, professional services and outsourcing. Telecommunication providers need partners for cloud services, as they do not typically have all the pieces for an end-to-end solution.
E-learning and the digital education industry is currently very niche with around 20 players existing largely in the online K-12 education, content platform and online English learning and vocational training space and virtual classroom tutoring. The opportunities lie with the many educational institutions that do not have Learning Management System (LMS). In particular language learning courses where government agencies and companies are scrambling to get their employees proficient in English.
As an emerging market with a relative lack of legacy public service delivery infrastructure, challenging geography, IT services with innovative and customised solutions to Indonesian needs such as medical records (EMR) and telehealth are potentially promising. E-learning is applied in professions including medical, public health, nursing, pharmacy and dentistry. Mobile health (mHealth) application, which is a part of healthcare practices, is expected to benefit healthcare services.
Internet Initiative Japan announced that it has reached an agreement with Biznet Networks to establish a joint venture in Indonesia in early Nov 2014. The joint venture is expected to launch with US$6 million in capital and will build new cloud service infrastructure in Indonesia and will offer public and private cloud services to local companies. (Source: BizNet, Press Release, Biznet dan IIJ Menjalankan Usaha Cloud Bersama di Indonesia, 6 Nov 2014 – Bahasa Indonesia only)
Indosat partnered with Dimension Data to offer enterprise cloud services in Indonesia. The partnership combines Indosat’s nationwide connectivity backbone infrastructure and its 10 data centre facilities in Indonesia with Dimension Data’s cloud consultancy services.
XL Axiata has partnered with six relevant cloud vendors (Huawei, IBM, Fujitsu, Microsoft, Intratec and Mandawani) to offer its upcoming X-Cloud.
Telkom Indonesia provides its cloud offering through Telkom Sigma and provides infrastructure and applications from private cloud to public cloud solutions.
Sasbadi entered into a License and Services Agreement (LSA) with one of Indonesia’s largest book publishers, PT Penerbit Erlangga. This would grant the publisher an exclusive and non-transferable licence to use its interactive online learning system i-LEARN and sell the latter’s online learning materials under the platform in Indonesia.
The University of Roehampton provides 100 per cent web based MBA and master’s degree programs in partnership with Laureate Online Education and Corllins University delivers accredited Associate, Bachelors, Masters, PhD and Certificate programs over the web.
INTI College Indonesia provides free college-prep, e-learning platforms for prospective undergraduates. BesTV New Media Co., Ltd partnered with a Telkom sister company and mobile operator, Telkomsel to targeting to work with schools by approaching their headmasters and teachers.
Fujitsu commenced marketing the introduction of its healthcare solutions in Indonesia in Oct 2014. The integrated upstream-downstream system will be targeted at hospitals, with the solution including Hospital Information System, Telemedicine (health information exchange), application optimisation services for mobile devices, client and server virtualisation, bio-stimulation and cloud based electronic medical record (EMR) systems.
Tariffs, regulations and customs
Based on the regulation of Minister of Communications and Information Technology No. 21/2013, telecommunication content providers are mandated to manage the re-registration process. This new regulation was designed to respond to issues of premium mobile subscription package providers overcharging customers in 2012 and 2013. With deadline of August 2014, 56 of 79 content providers have finally been granted a new license to operate. Some content providers were rejected new licences because of more than 49 per cent foreign ownership. The Indonesian Investment Coordinating Board (BKPM) through its latest revision of investment negative list, has stated firmly that the local ownership must be a minimum share of 51 per cent.
In Apr 2013, the authorities in Indonesia made the decision to effectively prohibit cross-border e-commerce activity, ruling that all firms will need to register a local domain if they wish to have a presence in the country. As one of the many implementing regulations mandated by the Trade Law, the upcoming government regulation (PP) on e-commerce is expected to protect the interests of parties involved in electronic transactions and provide guidance in performing e-commerce.
The government has stated its intention to clamp down and in June 2013, the Directorate General of Intellectual Property Rights launched a roadshow to raise awareness about the issue. The government will take its message about the risks of using counterfeit software into shopping malls, although a lack of enforcement capabilities continues to be a problem.
The push for data centre business in Indonesia was provided in October 2012 by the issuance of Government Regulation No.82/2012 on the management of electronic transactions and systems. The regulation mandates Indonesian businesses and others conducting electronic transactions in the country to set up data centre sites in the country.
Marketing your products and services
- a local partner is recommended for market entry
- culture adoption - understand the local business characteristics, need to think realistic, long term and flexible on business models
- it is imperative that Australian principals provide full support and commitment to local partners
- closely monitor the market to identify the latest telecomm information and regular market visits are recommended
- the market is very price sensitive, especially with intense competition with Korea, Japan and USA as the leaders in ICT market
- participate in major trade exhibitions to showcase products / services to the relevant audience to build connections and in-depth knowledge.
Links and industry contacts
Ministry of Communication and Information Technology Republic of Indonesia
The National ICT Council (DETIKNAS)
Indonesian ICT Society (MASTEL)
Association of Indonesia Telecommunication Providers (ATSI)
Indonesian Mobile Content Association (IMOCA)
Indonesian Software Association (ASPILUKI)
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