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(Last updated: 21 May 2008)
Trends and opportunities
The market
With Mexico having plenty of room for potential progress on a range of ICT indicators, including computer penetration and e-government, it is expected that the total value of the IT market will increase from US$10 billion in 2007 to around US$16.9 billion in 2012, according to BMI Research. IT spending as a percentage of GDP at less than two per cent remains well below OECD levels and an increase number of federal and state government initiatives are looking to stimulate more activity.
Demand is growing in all sectors, especially in small and medium enterprises, which again will benefit from government initiatives and education, where substantial new funding has been announced. However, in the current global economic climate, Mexico’s overarching reliance on being external factors, particularly in the US presents a significant downside risk. Overall, the Mexican IT market is expected to grow at nine per cent over the 2007-2012 periods, rather faster than GDP growth over the forecast period, although with strong variation between sectors and regions.
Meanwhile in September 2007 the Mexican Government asked congress to approve a budget of US$445 million to expand a program to integrate federal education resources. The IT program, which is called Enciclomedia, is run by the education ministry and aims to integrate resources such as text books and virtual content and activities. The requested 2008 funding represents a rise of 39 per cent from the 2007 allocation of MXP3.55 billion.
Projections
With Mexico having plenty of room for potential for progress on a range of ICT indicators, including computer penetration and e-government, it is expected that the total value of the IT market will increase from US$10 billion in 2007 to around US$16.9 billion in 2012. IT spending as a percentage of GDP at less than two per cent remains well below OECD levels and an increasing number of federal and state government initiatives are looking to stimulate more activity. Demand is growing in all sectors, especially among SMEs, which again will benefit from government initiatives, and education, where substantial new funding has been announced.
Various central and regional government plans to increase IT investment and improve the ICT penetration will have an impact. In August 2007 the government outlined an overall policy framework for economic development which included themes such as more and better government e-services, and support for the SMEs. The government has also announced a US$445 million 2008 budget for a project to introduce ICT into the education sector.
Special focus: financial sector
Mexican banks and financial services companies are among some of the country’s most significant IT spenders, with consolidation, competition, and compliance with new international guidelines fuelling the trend. In recent years, several foreign-owned banks such as Spain’s BBVA and Canadian Scotiabank Inverlat has been operating aggressively in the market, spurring local competitors to ramp up spending on IT as they compete for customers.
With a wave of hardware and infrastructure installations in the past few years, the focus is now shifting to software and services, as companies look to enhance productivity and improve offerings to customers. Compliance and risk management applications are among the top sellers, with the need to manage compliance with Base II capital guidelines, and legislation tightening up corporate governance standards. Another trend is for banks of all sizes to outsource the hosting, management and maintenance of software and hardware.
E-readiness
According to the Social Research Institute of the National Autonomous University of Mexico (UNAM), one in five people in Mexico now have Internet access. This means that the ratio has doubled in a decade from one in 10. As always, income is strongly correlated with access to Internet. Eight of 10 people defined as living in 'marginal conditions', do not have access to the web, according to the survey.
Recent figures from the National Statistics Institute (INEGI) claimed that the number of computers in the country increased 11.9 per cent from 2001 to 2006, from 23.6 million. Other data has revealed that 26.6 million Mexicans have access to a computer (60 per cent in an educational context, 30 per cent for work). The report, also from INEGI says that IT is becoming increasingly central to Mexicans lives, even outside major cities.
Opportunities
Computer sales
It is forecasted that Mexico’s computer and accessories market will have an increase of around nine per cent over the 2007-2012 computer sales were put at US$3.9 billion, and should pass US$6 billion by 2012. The growing popularity of Internet and broadband access is providing strong support for PC sales, with around one million of an estimated 1.7 million PC units sold in Mexico last year being purchased bundled with leading telecommunications company Telmex’s Internet service. The biggest barrier to higher PC penetration remains low annual average incomes, of about US$5,000 a year, and financing has long been a bottleneck to faster growth of PC penetration.
Software
The total software market in 2007 was valued at US$1.8 billion, with imported software accounting for at least 80 per cent of the total, and the figure for 2008 is expected to come out at around US$2.1 billion software for 2007-2012 is put at around 12 per cent, with sales outpacing general IT market growth. As the government turns its attention to overcoming Mexico’s longstanding under-investment in this area there should be more opportunities. The software sector’s current high single-digit growth is being driven partly by increasingly strong demand for enterprise resource planning (ERP) solutions for SMEs.
The software sector current high single-digit growth is being driven partly by increasingly strong demand for ERP solutions from SMEs. A lack of IT infrastructure is thought to contribute to the high failure rate among SMEs in many parts of the country. The business intelligence sector is another strong performer, with sales of databases growing steadily. Looking forward, systems management and security software should provide opportunities in 2008, with growing demand or more sophisticated security solutions.
In terms of verticals, public and financial sectors, healthcare, the chemical industry, utilities and SME’s are seen as the ones with the most growth potential. Spending has been rising in the financial sector as banks, insurance companies and other firms look to enhance productivity and improve customer experience. The industrial and services sectors have also seen high growth such as construction, transportation, and the hotel and restaurant sector.
The limited share of commercial software in Mexico’s total IT investment, at just 10.3 per cent, has attracted concern from some analysts. In terms of the domestic industry, Mexico’s main software geographic centres are located around Mexico City and three technology parks in Monterrey and Guadalajara, the latter city enjoying the label of Mexico’s 'Silicon Valley'. All four locations possess a sizeable pool of existing technology companies and labour, good telecommunications infrastructure, as well as tax and other incentives for investors.
IT services
The IT services is estimated to have grown around 12 per cent in 2007, to a value of around US$3.2 billion, with similar or slightly higher growth expected in 2008 and throughout the forecast period. Indeed, the IT services sector has been increasingly steadily for the last 10 years, with the increasing number of multinational companies operating in the market being and important driver for spending. |