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Este informe no está disponible en español. CARIBBEAN BUSINESSSoaring Into CyberspacePuerto Rico embraces information technology, leading Latin America in rate of market growth and sales per capita. Spurred by skyrocketing government and individual demand for new computers, this $648 million industry has no place to go - but up.BY JOSE MARTINEZNovember 30, 2000
If it’s true–as economists point out–that competitiveness in today’s global environment depends on the level of investment in information technology infrastructure, then Puerto Rico seems to be getting ready for the ride. Puerto Ricans are buying more personal computers, printers, monitors, software and other Information Technology (IT) products than just about anyone else in the Western Hemisphere. Leading the growth in the local IT industry last year, was the personal computer (PC). According to IDC, the Puerto Rico PC market grew by 32.3% from 1998 to 1999. When compared to the rest of Latin America, which only achieved 17.9% growth in the same period, the island’s potential is obvious. For the first half of 2000, the PC market in Latin America grew approximately 38.9% compared to the first six months of 1999. At 84.9%, the growth rate in Puerto Rico, for the same period, was more than double that of Latin America. Experts pin most of that growth on the significant purchase of notebooks by the Education Department in fiscal year 2000. The government of Puerto Rico has allocated approximately $500 million to the Department of Education to buy 120,000 PCs for schools, 50,000 for administration and laboratories, and another 37,700 notebook computers for teachers. Once the purchases are finalized, the student to computer ratio will be six students per computer, a number that is half the ratio of the continental States. Rates of growth of the IT industry in P.R. are impressive. According to industry research firm International Data Corp. (IDC), the local IT industry is expected to grow 26% this year. For 2000, local IT investment is estimated at $648 million, compared with $513 million in 1999–an increase of $135 million or 26%. Last year’s performance followed even greater growth the previous year. Between 1998 and 1999, local IT investment grew a whopping $154 million–or 32%–making Puerto Rico one of the fastest growing markets south of the United States. "This means that, besides these important investments by the Education Department, the Puerto Rico market seems to be growing faster than most countries in Latin America," said Emerson Gibin, emerging markets analyst for International Data Corp. (IDC) Latin American. "It seems that many vendors are focusing on Puerto Rico as one of the biggest markets in Latin America at the moment." "IDC estimates that 139,000 personal computers (PC) were shipped to Puerto Rico in 1999. This equates to 32% unit growth in the number of units over 1998," said Andrew Newman, manager emerging markets IDC Latin America. "Our estimates point out that the market could grow more than 50% by the end of 2000." Newman also added that Puerto Rico end-user spending for the PC market totaled $233 million in 1999, growing by 16.7% over the previous year. The disparity between the growth rates in the number of units and dollar value is the result of aggressive pricing from major international vendors, especially Compaq and Dell. Ordinarily, industry experts consider Puerto Rico a mature market similar to that of the continental States. "Growth rates for Puerto Rico are much closer to the U.S. market than to the aggressive expansion typically seen in Latin America and the Caribbean," said Newman. "However, due to major projects in the Department of Education, Puerto Rico PC market growth rates will be well above the norm for the next five years. Assuming all publicly announced bids go through, IDC estimates a five-year compound annual growth rate of about 16%. For the next three years, however, the growth could be double that rate." The Players Compaq continues to dominate the Puerto Rico market for notebook, desktop, and PC servers, increasing its leadership in the market over the past year. The company has invested heavily to establish a strong local presence on the island. "We have experienced growth for the past two years and expect it to continue," said Abelardo Ruiz, president and general manager of Compaq Computer Caribbean Inc. "We had a slight dip with the Y2K bug, but sales for the first six months have been great." Ruiz also added that PCs would evolve into new devices, like Compaq’s new iPac PC. "These new-generation computers, or Internet appliances, have features most home users need, and leave out unnecessary options," added Ruiz. The easy to use systems have only basic computing power, and a small size. The limited features reduce cost, making them more appealing to a broader market. Compaq also expects a steady growth in the Intel-based small server market, aimed at small to medium size companies. Compaq also launched its Internet direct sales for corporate clients and consumers. "Our closest competitor has a strong hold on this sales channel, but we will intensify our marketing campaigns to let the corporate and consumer clients know they can acquire Compaq systems through us, our resellers, or the Internet," said Ruiz. Dell holds second place in the Puerto Rican PC market for desktop and PC Servers. International Business Machines (IBM) holds third place in the same category. Dell’s direct sales strategy through the Internet and call centers has been successful. "As home users become more accustomed to buying over the Internet, Dell should do well in Puerto Rico. Dell is very well positioned, especially given their lean local structure," said Newman Although central to the IT industry anywhere, personal computers (PCs) themselves are not solely responsible for the outstanding growth of that industry in Puerto Rico in recent years. Companies that sell everything from computer software to peripheral hardware are also experiencing tremendous growth in the hot local market. IDC estimated that the peripherals market (printers, monitors, speakers, etc.) will grow for 2000 about 21%, or $62 million. Peripherals and PC sales are proportional, but resellers consider peripherals lower-margin and less-strategic products. According to IDC, one market to watch is printer consumables. "More and more, this is where printer vendors are finding profits," added Newman. This is confirmed by examining Lexmark, one of the leading computer printer manufacturers: its supplies department has experienced growth on par with printer sales. Last year, Lexmark, registered 288% growth in revenue from Puerto Rico sales, and expects the same for 2000. Lexmark’s growth rates in Puerto Rico revenue were the company’s highest in the world, surpassing even those in the hot and sour China market. "In five years Puerto Rico has progressed a lot and we are now dependent on technology," said Roberto Santamaria, Lexmark’s Latin America Strategic Alliance (LASA) region General Manager. "Puerto Rico has been a key market for Lexmark. We have tested our marketing strategies here, and exported the successful ones to other countries." For Lexmark, the lure of the Puerto Rico market is not only its growth rate but also the number of units sold. "Some months we even sell more printers in Puerto Rico than in Brazil, the number one market in Latin America," noted Santamaria. With a polulation of 4 million, the island is Lexmark’s second largest market in Latin America in terms of number of printers sold per-capita, followed by giants as Argentina and Mexico. Monitors manufacturers also want a piece of the action as evidence by ViewSonic, the number 1 selling monitor on the States, entrance last June. "Puerto Rico is a interesting mix of the Stateside and the Latin American markets but the balance tend to tilt more toward a U.S. based market," said Jorge Vizcaino, general manager Latin America for ViewSonic. "Besides buying basic products, people in Puerto Rico tend to go for the high-end products like 17 and 19-inch monitors. Just like in the States." So far ViewSonic has more than surpass its local sales goal, achieving a 25% increase over the projected sales for their first six months since they started to service the local market. As for software, most IT companies are experiencing growth as an increased number of businesses seek business-to-business, e-commerce, and knowledge-management solutions to expand markets and efficiency. And that includes PuertoRico. Redmont, WA-based software giant Microsoft serves the whole Caribbean from local offices, but more than half of its region’s revenues come from Puerto Rico. The 100 X 35 mile- island is the company’s fourth-largest market in Latin America. "We see Puerto Rico as a good environment in which to test new technologies before deploying them in Latin America," said Martin Taylor, general manager Microsoft Caribbean. " A solid infrastructure–better than most Latin American countries–coupled with a good market, are some of the key reasons. Most of our partners start here but later expand to the rest of the Caribbean." For Taylor, a good example is the local government’s embrace of technology to streamline operations and be enhance efficientcy. "Right now, I can say Puerto Rico is the leader in what we call e-government. The huge investment by the Department of Education on technology will also payoff on the long run," added Taylor. "Last year, Y2K compliance was the issue. It drove the software market," said Martin Taylor, general manager for Microsoft Caribbean. "Some companies upgraded software just to minimize risk. This year, companies are going for new solutions, like customer relationship management (CRM) and e-commerce. Service is where the growth is." Taylor mentioned that Microsoft would also focus more on enterprise products, like Windows 2000, Exchange server for e-mail, and SQL for databases. Likewise, Oracle–one of the leading enterprise software manufacturers–controls most of its Latin America market from Puerto Rico, which alone represents more than 35% of all Latin America sales. "Right now, our main objective is to help businesses transform from the usual brick and mortar to an e-business strategy," said Gerardo Martinez, vice president of Oracle’s emerging Latin America region. Oracle Caribbean’s huge success, prompted the parent company to assign additional Latin America-wide responsibilities to local management. "At the moment, Puerto Rico is one of Oracle’s most successful subsidiaries and these new responsibilities will open new roads for local talent, said Gerardo Martinez, vice president of Oracle’s emerging Latin America region. The Future So what trend will carry the IT industry in Puerto Rico into the future, and ahead of other countries? Experts agree that the Internet will be at the center of everything, coupled with applications that take advantage of the global network. According to Taylor, one area bound to grow over the next years is the application service provider (ASP) industry. In other words: the delivery of applications through the Web. "ASPs will help small and medium size businesses break economic barriers, while providing them with top-of-the-line software," added Taylor. Taylor also mentioned that customer relationship management applications (CRM) and e-commerce would also get up to speed in the next couple of years. Recently Advanced Computer Technology (ACT), a local IT firm, launched application service provider services for local businesses using Oracle’s software. "The costs of integrating and servicing software are astronomical and can run up to 70% of an IT department budget. With this new technology, the user and IT department don’t have to deal with maintenance issues," said Gerardo Martinez, vice president for Oracle’s emerging Latin America region. Business-to-business (B2B) will also join the current business-to-consumer (B2C) websites, further fueling more hardware and software sales for businesses. Microsoft also expects household PC penetration to continue as PC prices come down which, in turn, will increase sales of Microsoft’s operating systems, Windows Millennium and Windows 2000. "This represents an enormous opportunity for Microsoft," said Taylor. The Internet is largely responsible for the booming IT market. Although somewhat behind the U.S. mainland, Puerto Rico is a considerably more advanced market for e-commerce than most of Latin America and the Caribbean. "In addition to a modern and reliable telecommunications sector, there is also higher power of acquisition than one typically sees in other parts of the region. All of this favors Internet growth," said Newman. According to local research firms, the number of Internet users in Puerto Rico will easily surpass the half a million mark in 2000. Membership in the cyber community will increase substantially when the Department of Education provides PCs with Net access to teachers and students. New technologies to boost Internet functions are also in the pipeline. Puerto Rico Telephone’s (PRT) asymmetrical digital subscriber line (ADSL) will be the flagship Internet access service for consumers, providing speeds of up to 1.5 Megabytes per second (roughly 30 times faster than current modem connections). The service should be launched in the near future for the metro area, Ponce, Mayaguez, Aguadilla, and Arecibo. Centennial of Puerto Rico also launched ADSL service in limited areas, especially in developments where it provides telecommunication services instead of PRT. Other companies, like ComputerPhone also provide ADSL service on a limited area basis. Cable companies are also gearing to launch Cable Modem service, by which cable subscribers would be able to access the Internet at very high speeds through the cable TV network. Adelphia, the parent company of Cable TV of Greater San Juan and Community Cablevision, has most of its infrastructure ready and is waiting for the Americas II submarine fiber optic cable to be completed. "To provide fast, reliable service, we need a good connection from Puerto Rico to the Internet," said Francisco Toste, vice president and general manager of Adelphia-Puerto Rico. "The Americas II submarine cable will provide more than enough bandwidth to make the service a fast one." All these developments will push the sales of new software and hardware to new heights. The affordability and availability means that more Puerto Ricans will join the virtual global community of Cyberspace. 1998 $459 million 1999 $513 million 2000 $648 million (estimate) Source: IDC-Latin America ________
Source: IDC-Latin America ________ Personal Computer Unit Growth, 1998-99 Mexico +44.5% Puerto Rico +32.2% Argentina +12.1% Brazil +11.7% Chile +20.1% Venezuela +5.5% Peru +0.02% Colombia -4.5% Ecuador -15.3% Source: IDC-Latin America ________ Puerto Rico Total PC shipments, 1999 Local Vendors/Clones 17.7% International Vendor 82.3% Total Units: 139,100 Source: IDC-Latin America This Caribbean Business article appears courtesy of Casiano Communications.
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