INDONESIA DIGITAL TRANSFORMATION

OUTLOOK BRIEFING 2016

Indonesia Enterprise ICT Outlook 2016

Abhishek Chauhan
Consulting Director, Digital Transformation Practice

1
 Enterprise IT Services Market Trends
Economic factors and industry factors are contributing to build some strong trends
for 2016

1 Managed services & Outsourcing growing

Number of large Managed services/ Outsourcing deals ( 20 Mn
USD +) increasing in Indonesia
Local players gaining more prominence

2 Cloud services adoption is increasing

SaaS increases as small enterprises look to Cloud providers
SMEs increasingly looking at IaaS to improve their turnaround

3 Network to application transition

More deals on applications rather than traditional Network
Traditional Hosted on premise applications moving to Cloud model

4 Data centre demand growing

Co-location will still drive the overall Indonesian DC market
Increase in Managed Hosting driven by Application hosting
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 Trend 1:
Managed services & Outsourcing growing
Drivers for Managed services & Outsourcing

Growing Economy China

The IMF projects Indonesia will be at the top India
3 fastest economic growths among G20 Indonesia
countries1 Saudi Arabia
Argentina 2017
Total trade grew at 45% between 2010-2015
In 2015, 70% of the total population is Russia 2013
estimated to be in middle income class, Turkey 2012
growing from 37.7% in 20032 Mexico
Korea
Brazil
0.0 2.0 4.0 6.0 8.0 10.0
35
Growing Investment 30
Other Services
Investment in Indonesia is on a record high Real Estate, Ind. Estate & Business
$28.9 billion in 20014 which is forcing Activities
25 Transport, Storage & Communication
players to expand their IT needs in a
significant manner 20
Electricity, Gas & Water Supply
FDI coming in areas manufacturing, Other Industries
communications & real estate and these 15
Metal, Machinery & Electronics
are areas where Managed services &
Outsourcing will grow 10 Chemical & Pharma
Food Industry
5
Primary Sector
-
Note: 1. International Monetary Fund; World Economic Outlook Database, 2010 2011 2012 2013 2014 2015E
2. Bank Indonesia and Indonesia Statistics Agency) 3. The ASEAN Business Advisory Council Survey on ASEAN Competitiveness We Accelerate Growth
Trend 2:
Strong growth for cloud services creating a hybrid IT environment
Current Adoption Future Growth Potential
Cloud services market in US$ Million (2015 20)
Cloud Services Adoption Total = 366
93.5
85% IaaS 11

56%
Adopted 41% PaaS
Not 44%
adopted
56%
SaaS 320
SaaS IaaS PaaS Total = 61
6
N = 150
2
53
2015 2020
Cloud services current adoption shows tremendous potential for future growth. Moving on, Hybrid IT
environment will be the norm across enterprises.
Current adoption patterns shows a strong focus on SaaS (Software as a service) and SaaS will continue
to remain dominant UC&C to be #1 apps adopted. This may be attributed to greater ease of adoption of
SaaS, a large SMB population that has access to enterprise class IT for the first time, and higher pricing
potential vis--vis other services.
IaaS to move from T&D to production environments and custom apps

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Trend 3:
Shift in managed services spending from network to application centric

Limited availability of application related skills in Indonesia is driving an up

spurt in demand for managed application services.

Trends & Observations

Business implications
ERP, CRM and SCM will form bulk of Enterprise Software sales
Managed Security, Mobility, M2M and BI to grow rapidly due to
faster adoption from Large Enterprises 11. ICT service providers need
IT Transformation Projects and Mobility requirements from SME to provide affordable, best-
to drive DC and Cloud services in-class Enterprise
Solutions & Cloud offerings
Trends by Verticals
Shift towards in-country manufacturing will drive growth for
2
Managed Infrastructure, Managed Enterprise Solutions, etc. 2. Prioritise key vertcals like .
BFSI will focus on Datacentre & Managed Services (strong focus BFSI, E&R, Manufacturing,
on security) to address existing/ new government regulations on F&B, etc
Data Compliance & Security
Public Transportation infrastructure projects will drive demand for
Managed Infrastructure, Managed Network & Mobility solutions 3. Successful ICT players will
3 depend on the ability to
tailor solutions to address
ITSP Trends by Enterprise vertical-specific
Skilled ICT workforce and high ICT usage will led to demand for requirements from both
Enterprise Desktop, Enterprise Mobility and localized ICT Large Enterprises and SMEs
solutions across verticals

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Trend 4:
Continued growth in Datacentre demand
Aspect Co-Location Managed Hosting

Pure space rental, with Rental of servers and

Space
power and cooling optional storage

Focus on facilities and One of the key aspects of

Facilities
enterprise to manage IT Security is the responsibility
of the DC Service provider
Need to have in-house skills
Outsourcing and time spent on managing Flexibility and scalability,
and updating especially in IaaS model

Expenditure CapEx intensive model More OpEx focused

Verticals BFSI, govt. and healthcare to SMEs are leapfrogging

continue focus on co-lo directly to IaaS

Growth CAGR (2015-2020) = 28% CAGR (2015-2020) = 41%

Migration

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 ASEAN An important opportunity and a threat

Deadline for
Non-Tariff
Barriers within
ASEAN to be
eliminated
ASEAN 2020:
A Partnership
in Dynamic
Development

2020: ASEAN Vision 2020

1967: Original aims
cooperation in the economic,
social, cultural, technical,
educational and other fields,
and in the promotion of
regional peace and stability
2015: Original aims maintained but
vision enhanced An integrated and liberalized
region in terms of the trade of
A community comprised of three pillars:
goods, services, investments,
1. ASEAN Political-Security
and capital.
Community
2. ASEAN Economic Community
3. ASEAN Socio-Cultural
Community.

ICT will be a key enabler for many of the initiatives like Single port facilitation, common immigration platform
etc.
Indonesia will be the biggest market in ASEAN and hence will be closely watched for many of the initiatives

7
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 Domestic - Opportunities

Where are the growth areas where Enterprises can tap further ?

Sector Implications on sub-sector Implications for Enterprises

I. Banking Banking consolidation will create opportunities for

Intra and inter M&A
Consumer banking (e.g.,
stocks)
II. Insurance
Financial sector
Reduced role of agents
Price transparency
large scale integration as different IT systems will
need to be integrated .Consolidation will also
increase demand for Outsourcing/Managed services .
Insurance expansion will also lead to more online
Insurance selling leading to demand in hosting and
integration services as well as Data centre space

Public transport (Urban and intra-
regional)
Upgrading of national and cross-
border infrastructure
National logistics providers will
Infrastructure & benefit from regional upscaling
Logistics
Single window facilitation will ensure IT systems in
ports/shipping companies of all the countries will
need to be upgraded. First movers will have an
advantage in playing a role in other countries IT
systems.
This will also lead to spill over in IT system enhancing
and up gradation in the back end for 3rd party Freight
forwarders and logistics players and also increased
connectivity requirements

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Where are the growth areas where Enterprises can tap further ?
Sector Implications on sub-sector
Provision of green energy, smart and
international connected grids
Industry consolidation and cross-border
Energy/Utilities M&A
Water and waste management at second
and third tier cities
Local food-producers will expand their
reach to other ASEAN nations and look for
small acquisition targets. Food quality and
adoption of advanced food-technology will
Food & Retail be essential
Mid-sized retail real-estate companies are
acquisition targets
Hospital groups
Homegrown pharmaceutical sector
Healthcare
Domestic - Opportunities
Implications for Enterprises
Smart grids will lead to increase in
connectivity and demand for System
integration.
Investment in utilities will also drive system
standardization and IT system enhancement
Retail infrastructure investment in new
systems needed for ensuring food
consistency and quality across the region.
Supply chain will need to be enhanced
Acquisitions will lead to standardization of
systems
As pharmaceutical laws relax, there will be
new investments in emerging economies
which will lead to IT infrastructure up
gradation and connectivity demand.
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 Tech
Our Domain Coverage Advisory
Frost & Sullivans Tech advisory covers a wide breadth of BPO /IT outsourcing services and IT
Infrastructure / Application services and hardware

Tech Advisory

IT Infrastructure/
BPO Services IT Hardware
Application services

BPO Services Infrastructure Application IT Hardware

Services Services
Customer Service Desktop PCs &
Desktop Services Application Notebooks
Finance & Development
Accounting Data center / Networking
Cloud Services Application Equipments
Human Hosting
resourcing Network / Storage &
Communication Application Security
Procurement Services Integration
Servers
Knowledge Security & Application
Services Privacy Services Management Printers & other
peripherals
Storage Services Application
Testing

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 Tech
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Frost & Sullivan offers the following Procurement Advisory services to our buyer-side clients, who
procure services and goods from vendors

1
Client Technical
Clients Current Current Business process Feasibility Analysis
Requirement
Business Analysis analysis
Analysis

2
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Business Case Development Development Mitigation Measures
Buyer-Side Services

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Gathering & RFP Gathering TOR clarification support
Design

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Vendor Short-listing
Vendor evaluation for bid invite methodology Evaluation & Negotiation
Recommendation

5
Post Contract Relationship Contract Monitor & Review Exit Planning &
Engagement Management Management Success Handover

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 Tech
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Articulating Vendors unique value proposition for the client would emerge by effectively showcasing vendors
Vendors Value solution offerings in the context of clients specific requirements and the solutions & capabilities which
Proposition the other bidders can offer to the client

Competitors
Solution Offerings
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positioning to meet clients RFP
Customers requirements Vendors Solution
Requirements Offerings

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customers requirements from
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evaluation criteria
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Value Proposition RFP requirements and other
For Customer bidders offerings
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proposition of the vendor,
specific to the requirements of
clients RFP

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 Thank You

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