Government IT spend bright spot in Philippines

MANILA--Local and foreign technology providers are being urged to turn their attention to the country's public sector for lucrative business opportunities, as a new report casts a bright light on the Philippine government's IT spending.

According to the report from London-based research firm Ovum, the country will see a higher uptake of IT services in spite of the current slowdown, driven by various IT projects undertaken by the Philippine government.

In its report released Wednesday, Ovum said the Philippine government's initiatives to establish a central credit worthiness system, as well as its investments in the education sector, will likely increase demand for IT services in the country.

"While currently Philippines is a small IT services market in revenue terms, less attractive than other Southeast Asian countries such as Singapore, Vietnam or Malaysia, it offers good opportunities for vendors focused on the public sector," Deepika Chaubey, managing analyst at Ovum, said in the study.

The report comes even amid calls for the Arroyo administration to include the local industry in the country's economic stimulus efforts. The Philippine government, through the National Economic Development Board (NEDA), had not factored the IT sector in its 330 billion pesos (US$6.3 billion) stimulus package.

A number of public and private organizations, including the Commission on Information and Communications Technology (CICT) and the IT Association of the Philippines (ITAP), have highlighted this issue and sought the NEDA's clarification regarding the non-involvement of the IT sector. The tech industry is deemed a vital cog of the local economy, particularly the electronics sector, which serves as the country's top export earner.

A boost to IT services
In an e-mail interview with ZDNet Asia, Chaubey said the total IT services market in the Philippines is projected to be worth some US$1 billion. Ovum does not have an estimate on how much the public sector accounts for the overall IT market, said the analyst, who is based in Hyderabad, India.

Among Asean countries, Singapore still leads in terms of public sector IT spending, he noted. The Singapore government, Chaubey said, plans to invest over US$1.3 billion by 2010 in its Integrated Government (iGov) initiative focused on strengthening communication links between the government and its citizens.

According to the Ovum report, the Philippine government plans to invest in various projects focused on technology adoption, specifically, the development of a central credit worthiness database.

"This includes establishing a central authority for compiling data from financial institutions, to facilitate easier verification of a borrower's credit worthiness," the study said. "Once the database is fully built, there will be a sharp increase in the issuance of credit cards in the country, which will further increase demand for data management, networking and security services."

Ovum added that the Philippine government is also investing in the education sector and has initiated several technology-based programs, such as the computerization of all public schools and adoption of e-learning in the urban areas, scheduled to be completed by 2010.

For instance, the report cited the Department of Education's five-year deal with Oracle inked in October 2008, which is worth US$380 million. This project will see the deployment of Oracle's ThinkQuest online learning program across 500 public elementary schools.

"The government's intention to modernize all 6,000 public schools and several private ones, will offer numerous opportunities to IT vendors," the report noted. "Once all the public schools are computerized, the demand for Web-based learning platforms, education management systems, assessment and data services, and networking services should increase."

Chaubey said IT investments made by the Philippine government will provide significant opportunities to IT services vendors in the region, and pave the way for increased demand for IT services such as implementation, integration and security.

"As most of the Philippines-based vendors are focusing on providing offshore services, there are opportunities for global IT vendors to cater to the domestic demand," he said.

Local players want their piece
Local IT companies, however, are eyeing their share of the IT services pie.

Technology conglomerate IPVG, one of several IT providers highlighted in Ovum's report that are poised to take advantage of the increased government IT spending, said it intends to intensify its presence in the public sector domain in 2010.

IPVG CEO Enrique Y. Gonzalez acknowledged his company currently does not have a major presence in the public sector. "[But], our company certainly has plans of becoming a recognized provider in that sector... We believe there is tremendous opportunity in [this] sector," Gonzalez told ZDNet Asia.

He added that IPVG, through its communication and IT subsidiary IP Converge Data Center (IP-Converge), is in a good position to provide "Internet access services to major government offices in education, financial and insurance service, and public utilities."

The private sector, he noted, saw a slowdown in growth in 2008 compared 2007. But, he maintained that the market "was by no means sluggish".

Asked if the industry should be included in the country's stimulus package, Gonzalez said: "I believe a well-planned and -executed stimulus plan will be good for the economy, with IT as one of the priorities."

Total Information Management (TIM), another Philippine-owned tech company mentioned in Ovum's report that is currently involved in some major government contracts, declined to comment when contacted by ZDNet Asia.

Melvin G. Calimag is a freelance IT writer based in the Philippines.