A new study has shown that although Indonesia is shelling out more money on information technology (IT) than a dozen or so other countries, the benefits of such spending have not stretched far and wide across the archipelago.
Roger Ling, an analyst at International Data Corporation (IDC), recently said that Indonesia was the 19th largest IT spender in the world and that Indonesia’s IT spending was the biggest in Southeast Asia.
Based on data from IDC, the country spent US$10.9 billion on IT in 2011 and spending is expected to hit $12.9 billion by the end of this year, or 18.3 percent year-on-year growth.
“The bulk of the IT spending still goes on hardware, followed by services and then software,” Ling said.
“This tallies with the focus on infrastructure build-up in the country.”
Hardware spending in Indonesia reached $11.5 billion last year and is expected to rise to $17.8 billion by 2016. Meanwhile, spending on IT software and services stood at $522 million and $759 million respectively in 2011.
He pointed out that “a confluence of factors” had put Indonesia in the 19th spot, with the private and public sectors playing equally key roles in spending connected to IT services.
“Looking inward, it is clear that the government is stepping up efforts to drive the local economy, leading to the strong entrance of foreign direct investment (FDI) into the country,” he said, adding that IT vendors were keen to support the master plan for economic acceleration (MP3EI).
The master plan is a road map plotting the route the country will take to become one of the top 10 world economies by 2025. One of the points along the road is information and communication technology (ICT), which the government plans to fortify by building the necessary infrastructure.
“Externally, the focus on tapping into Indonesia as a key growth market is creating opportunities for growth,” Ling said.
However, the notable increment in IT spending has not translated into improvement in IT penetration given that IT service penetration was still focused on Jakarta and the surrounding areas.
“While Indonesia shows the highest year-on-year growth, it has one of the lowest IT-service penetration. As such, the real maturity of Indonesia as an IT-service focused country still lags far behind,” he told The Jakarta Post.
Currently, the government as well as several telecommunications companies are working on the Palapa Ring project, which when complete, will increase broadband Internet access in the 33 provinces across Indonesia.
“IT services will grow once there is a balance between end-user maturity, or demand, and vendor strategy, or the supplier side,” Ling said.
Sudev Bangah, a researcher at IDC, said that IT had also not yet penetrated into traditional sectors that would have benefited from the modern touch, such as farming.
He conceded that spending on IT was not yet on the government’s priority list as their attention was still fixed on the commodity industries, such as mining, which generated the sort of high financial returns the country sought.
The quick return on investment in the commodity sector was unlike the investment in technology, which took much longer to show a return.
“Information and communication technology may be part of the master plan, but it is taking the backseat to thriving [FDI],” he said (Mariel Grazella, The Jakarta Post).