Argentina Information Technology Report Q1 2013

BMI has warned of the risk of a substantial currency devaluation, which would have an impact on theaffordability of IT products and services. However, there will still be opportunities. As well as growinginterest in cloud computing, the second largest IT market in the region has strong growth fundamentals,including rising PC penetration, rising incomes and a high-tech-focused national development plan. Thegovernment's computers for school programme will also continue to provide a boost, with 1.15mnnetbooks to be procured in the third phase in 2012. However, government measures to support thedomestic IT industry, such as the luxury goods tax on imported goods, have a strong influence on themarket.

Headline Expenditure Projections

Computer hardware sales: US$2.46bn in 2012 to US$2.50bn in 2013, +2% in US dollar terms. Forecastin US dollar terms downwardly revised due to macroeconomic factors and analyst modification asdomestic PC production continues to increase.

Software sales: US$570mn in 2012 to US$600mn in 2013, +5% in US dollar terms. Forecast in USdollar terms downwardly revised due to analyst modification, but small and medium-sized enterprise(SME) demand for enterprise resource planning (ERP) applications should continue to grow, particularlyin relatively untapped provincial areas.

IT services sales: US$1.8bn in 2012 to US$1.9bn in 2013, +7% in US dollar terms. Forecast in US dollarterms downwardly revised due to macroeconomic factors and analyst modification, but IT servicesrevenue is expected to grow faster than the market as a whole, with organisations looking for help toutilise cloud computing.

Risks/Rewards Rating: Argentina's score was 54.2 out of 100.0. Argentina ranks sixth in the Americasregion in our latest RRR table, slightly ahead of Peru, but behind its regional peers Chile and Brazil.

Despite the country's high country structure score, Argentina's relatively small IT market andcorrespondingly low IT market score influenced its ranking.

Key Trends & Developments

The IT market is expected to grow by around 4% in 2013, as persistent high inflation andslowing economic activity take their toll on both business and consumer demand. We believethat this trend will continue throughout 2013, as consumers and businesses remain hesitant aboutmaking large IT purchases, and significant import restrictions limit sales.

Educational tenders and government tenders are a major feature for the market. 2013 shoud seethe completion of the third phase of the Program Conectar Igualdad for delivery of PCs toschools, which was due to deliver 1,154,000 netbooks to schools across the country. As of H212,government figures indicated that delivery was lagging behind target. According to governmentdata, in the first eight months of 2012, only around 230,000 netbook were delivered to schools.

The second phase of the programme was completed in March 2012.

New cloud computing offerings and increased competition in this segment should fuel furtherdemand from end-users to utilise this technology. Telefónica was among local market players tolaunch new cloud services for SMEs in 2012. In addition to cost savings, businesses will look toboost efficiency and increase flexibility of response to customer needs. There should be potentialfor ERP solutions in sectors such as energy and transport.