Frost & Sullivan outlines investment opportunities in Indonesia ICT sector

26 July 2018 4 min. read

In a white-paper for the UK’s Foreign Office with respect to investment prospects, the research and strategy consultancy Frost & Sullivan has conducted an analysis of the ICT market of Indonesia, finding exponential growth in eCommerce and digital services.

The UK’s Prosperity Fund, under the auspices of the Foreign Office, seeks to promote sustainable economic growth and prosperity in recipient countries while creating inbound and outbound investment opportunities for international and UK companies.

With a focus on identified countries with significant untapped potential, the Foreign Office recently commissioned the global research and strategy consultancy Frost & Sullivan to undertake a review of the Indonesian information and communications market (ICT).

Indonesia ICT forecast for cyber, digital and telecomsIn the resultant white-paper, Frost & Sullivan (which has twelve offices across Asia including a bureau in Jakarta), has reported a local ICT sector which last year underwent year-on-year growth of 9.8 percent, climbing from a worth of 37.3 billion in 2016 to $37.3 billion for 2017.

The digital services market meanwhile is predicted to grow at a CAGR of ~38 percent to 2020, jumping from $1.88 billion to $9.53 billion, while over the same period the cybersecurity sector of Indonesia is projected to rise from $573.5 million to 750.5 million at a CAGR of ~5.5 percent.ICT Readiness Index, IndonesiaCurrently, Indonesia ranks 73rd out of 139 countries on the overall ICT Readiness index (according to the World Economic Forum data used in the report), and while the nation has slightly slipped to in many of the subindices between 2014 and 2016 – such as ICT usage (dropping nine places in the rankings) and infrastructure (down 20 spots), the key areas of improvement were in political and regulatory environment and economic climate.

In addition, as the report notes, Indonesia is undoubtedly primed for market growth, with the world’s fourth largest population – of which 40 percent are under 40 years of age – and an expected rise to over 90 million middle-class citizens by 2020. Tellingly, while the number of internet users has grown from 89 million in 2015 to ~105 million last year, there is still approximately 60 percent of the population yet to venture online, and urbanisation is expected to increase from roughly 55 percent to 65 percent of the population by 2025.Indonesia digital services market forecast, 2017–2022Those who are online are increasingly engaged, with Indonesia boasting the third fastest growing eCommerce sector in the ASEAN region – behind Vietnam and the Philippines – and it's projected to increase from ~$2 billion in 2016 to ~$4.6 billion in 2022. This growth, the consulting firm says, will likely “prompt a shift towards more cloud-based eCommerce web hosting and website applications”, with the country’s digital services, and particularly the cloud market, set for rapid growth in turn.

In terms of investment prospects for digital service providers, the report concludes; “The opportunity for UK companies to expand their footprint exists in Indonesia… UK companies can serve the market by deploying data services and upselling data centre and cloud services as part of their ICT offerings to Indonesian customers. Furthermore, UK companies can leverage Big Data analytics by using cloud services and introducing this capability to Indonesian enterprises.”

The growth strategy consultancy does however temper immediate expectations for potential investors with a cautionary note; “Digital services are still relatively new in Indonesia, and there is a shortage of skilled people with IT expertise in data analytics, cloud management and cybersecurity. Cloud security remains a concern for many companies in Indonesia. Enterprises have reason to be concerned about security risks, which include unauthorized access to applications and data leaks, particularly in a shared cloud environment.”