LA IDC - Top Ten Predictions 2011

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Filing Information: January 2011, IDC #LA11330

Executive Information: Top 10 Predictions

T O P 1 0 P R E D I C T I O N S

I D C L a t i n A m e r i c a P r e d i c t i o n s 2 0 1 1

Ricardo Villate IDC Predictions Team - Latin America

P R E D I C T I O N S

1. Seeking renovation, Latin America will continue to grow at a fast pace in 2011

2. The race to cloud-readiness will create a mainstream market in 2011

3. Data Center ‘cloudification’ will kick-off the most important infrastructure build out

in years

4. A wave of application modernization will create an accelerated opportunity in the

software and services markets

5. Social everything: Latin America enterprises will ride the social web wave in 2011

6. Everything mobile: Content-to-device will explode through multi-interface

ubiquitous solutions

7. Fueled by device and traffic explosions, the race to 4G will bring new names to

the mobile services scene

8. Coexistence will be the new convergence in market adjacencies, challenging

dual partner/competitor relationships

9. Governments will step on the gas of ICT adoption

10. Improving fortunes will foster new growth and opportunity outside the traditional

megacities

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#LA11330 ©2011 IDC

T A B L E O F C O N T E N T S

Predict ions 1

In This Study 1

IDC Predictions Team – Latin America ..................................................................................................... 1

Situation Overview 1

Future Outlook 2

Latin America's Top 10 Predictions for 2011 ............................................................................................ 2

1. Seeking renovation, Latin America will continue to grow at a fast pace in 2011 ............................ 2

2. The race to cloud-readiness will create a mainstream market in 2011 .......................................... 3

3. Data Center ‘cloudification’ will kick-off the most important infrastructure build out in years ......... 5

4. A wave of application modernization will create an accelerated opportunity in the software and servicesmarkets .............................................................................................................................................. 6

5. Social everything: Latin America enterprises will ride the social web wave in 2011 ...................... 7

6. Everything mobile: Content-to-device will explode through multi-interface ubiquitous solutions ... 9

7. Fueled by device and traffic explosions, the race to 4G will bring new names to the mobile services scene .......................................................................................................................................................... 11

8. Coexistence will be the new convergence in market adjacencies, challenging dual partner/competitorrelationships ...................................................................................................................................... 13

9. Governments will step on the gas of ICT adoption ........................................................................ 15

10. Improving fortunes will foster new growth and opportunity outside the traditional megacities ..... 17

Essential Guidance 19

Learn More 20

Related Research ..................................................................................................................................... 20



©2011 IDC





©2011 IDC #LA11330

I N T H I S S T U D Y

This study is part of a series of publications around the world that IDC creates every

year in which its leading analysts share their opinion about the next year's outlook for

the IT and telecommunications markets in the Latin American region. With the

collaboration of more than 100 analysts across Latin America, this document explores

the facts and driving forces that are expected to transform the marketplace during

2011 in the form of a list of 'Top 10 Predictions'.

Alejandra Mendoza, Alejandro Florean, Alexandre Goldman, Augusto Bidart, Bruno

Freitas, Carlos Calegari, Cesar Longa, Cristina Rivas, Daniel Zegarra, David Ayvar,

Diego Anesini, Diego Valer, Eduardo Dubin, Elizabeth Perez, Federico Amprimo, Jay

Gumbiner, Joao Bruder, Jocelyn Galan, Juan Seminara, Lorena Vega, Luis

Rodriguez, Marcelo Leiva, Mariana Zamoszczyk, Maricela De La Cruz, Matias

Berardi, Natalia Vega, Oliver Aguilar, Oscar Guzmán, Patricio Soto, PatrickMelgarejo, Pedro Hagge, Reinaldo Roveri, Reinaldo Sakis, Ricardo Villate, Romina

Adduci, Waldemar Schuster, Yazmin Gutierrez, Yliana Chiu.

S I T U A T I O N O V E R V I E W

No doubt, Latin America ended up the crisis in a great shape. After a good year in the

region, in terms of economic growth, it is expected that the year 2011 will see a lower

but still healthy growth, especially for those countries not closely tied to the U.S. and

Europe. Latin America will remain in the attention of companies seeking global

expansion and high growth geographies.

IT investments in the region will grow in 2011 driven by eager consumers, growth in

enterprises, and government focus on technology, outpacing developed economies’

growth, and reaching 74 billion dollars, or a 6.3% year-over-year increase. 2011 will

witness a new wave of policy-making around the reducing of the ‘digital divide’, state

modernization, fiscal transparency and e-government that will stimulate the IT

industry of the countries where they take place.

Solutions that were in the early adopter stage will continue reaching more and more

companies, generating a mainstream market. Not only, cloud-ready offering will

continue to accelerate, making it the center of gravity of investment, marketing, and

partnering decisions; but also, social platforms will begin to capitalize on their

massive user base to become an effective marketing or consumer channel for

enterprises.

The IT environment, on the other hand, will change: a boom of data center

transformation projects will reshape the IT infrastructure ecosystem in Latin America.

We will also witness an evolution of the partner/competitor landscape in Latin

America as providers are pressured to provide turnkey solutions that require

movement to adjacent markets.



2 #LA11330 ©2011 IDC

On the consumer side, an expanding middle class with higher discretionary incomes

and a continuing appetite for consumer electronic and IT devices, will raise the level

of IT investments in the region. Moreover, the expansion of the retail outside the

traditional cities to a ‘tier 2’ metropolis, will bring greater opportunities for vendors,

distributors and resellers to sell more hardware and software, as well as IT and

telecom services.

A growing focus on content, delivered through multi-interface ubiquitous devices, will

lead to a diversification of video offers, a war on content creation and distribution, and

an explosion of Internet-distributed content fueled by the increasing use of mobile

high-speed connections. 4G networks, expected to be tested and deployed in the

region in 2011, will change the way we store, consume and produce information in a

mobile environment.

F U T U R E O U T L O O K

!""#!

The crisis (what crisis?) came and went. The recovery has come and gone. In 2011,

Latin America will have to rise to the challenge of showing real growth, on par with

other emerging regions of the world. The International Monetary Fund forecasts Latin

American GDP growth to decelerate from 5.7% in 2010 to 4.0%, as the ramp-up of

inventory rebuilding ends. However, higher than expected domestic demand and

increased attention from global investment will sustain a curve of growth for most

countries, albeit only a few of them with higher growth in 2011 than in 2010.

Heterogeneity in growth in Latin America will reflect the variation of economicbehavior around the globe, as countries with closer ties to the U.S. such as Mexico,

and those in Central America and Caribbean will witness slower growth than those

with higher trade levels with Asia, such as Chile, Brazil, and Peru, for example. But

Latin America has a tough job ahead, as global capital will remain scarce and other

emerging regions in Asia, Eastern Europe, Middle East and even Africa are expected

to show impressive growth rates in 2011.

In the IT arena, Latin America will continue to outpace developed economies’ market

growth in 2011 fueled by eager consumers, growth in enterprises, and government

focus on technology. This ‘trifecta’ of sorts will continue to build momentum for

technology adoption, but still not as strong as that felt during the 2006-2008 period.

The Latin America IT market is expected to grow 6.3% in 2011, representing a total

spending of 74 billion dollars (currency in constant dollars of 2009), and up from 69.6

billion dollars in 2010.

Consumer spending growth in Latin America will continue to be fueled by an

expanding middle class with higher discretionary incomes, and a continuing appetite

for consumer electronic and IT devices. For example, smart-phones shipments will

grow 70% in 2011 against a 2010 which already saw the market more than double,



©2011 IDC #LA11330

and PC shipments will grow 2.6 times faster than in the developed world (USA-

Canada, Western Europe, Japan). Hardware investment will grow 4.7% in 2011 in

Latin America.

Fast-paced business solution deployments will provide accelerated growth of

enterprise spending, particularly in IT services (9.1% growth in 2011, 3.9 times faster

than in developed economies) and packaged software (8.2% growth and 2.3 times

faster).

And as governments continue to focus on growth investment, large infrastructure

deployments will continue to drive public sector ICT investment (see prediction 9 for

details on that).

Latin America will undoubtedly remain in the attention of companies seeking global

expansion and high growth geographies. The ICT industry being an industry of

multinational corporations, it is expected that vendors will have to increase their focus

on the region. As they do this, they must understand that driving the growth will be

forces of renovation of a region seeking to reinvent itself to compete in the next

decade. These forces will mean a renovation of the infrastructure in search of cloud-readiness and of a network prepared for higher speeds and traffic capacity; a

renovation of the applications in search of real-time business processes; and a

renovation of governments and cities showing symptoms of long-term growth desires.

All of this will be happening amidst an explosion of consumerization, where

‘everything mobile’ and ‘everything social’ will once more threaten to remodel the

landscape oftechnology integrators, distributors, resellers, and channels around the

region.

$"#%!""

Latin America is not Cloud-ready. Most servers are not virtualized. Most data-centersare not automated. Cloud adoption in Latin America will continue to show signs of

incipiency, but an accelerating uptake will create an inflection, generating a

mainstream market in 2011. A majority of companies,60% of medium and large

companies by the end of 2010, lacking enough understanding of Cloud and how to

approach it, will be reluctant to plan Cloud initiatives during the beginning of 2011.

However, a minority of early adopters has tripled in numbers throughout the last 12

months. According to IDC’s CIO surveys on Cloud adoption, starting in 2010, 3.5% of

medium to large companies (all those with more than 100 employees) were showing

some kind of investment intention around Cloud, be it consideration, pilot use, or

actual implementation of Cloud services. But by the beginning of 2011, this number

has increased to 14%, creating an unstoppable snowball effect of word-of-mouth in

the IT professional community. This daring crowd of organizations ramping-up Cloud

experiments or initiating Cloud strategies, will be a critical test-bed for success

stories, generating positive feedback and market momentum, in parallel with the

Cloud offering acceleration of 2010 in the region.

‘Becoming cloud-ready’ seems to be the Cloud mantra, where focus on consolidation,

virtualization, and automation continue to be the center of attention for enterprises,

and portfolio alignment, the center of attention for service providers.



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IDC predicts the Public Cloud services market in Latin America to surpass 200 million

dollars in 2011 and continue to grow at a CAGR of close to 60% over the next five

years, reaching the billion dollar mark by 2015.

By the end of 2011, Latin America will be driving towards cloud-readiness at full

speed, fueling private cloud investment, and possibly incubating the emergence of

regional mega-data centers under the anticipation of a mainstream public cloud

services market beyond 2012.

Cloud services will not only affect business model changes, but also service

standards. Traditional outsourcing and hosting operations will require new levels of

stability, until now only available to a small number of enterprise-class companies.

IDC expects hosted service providers to embark on a wave of investment in cloud-

enabling technologies like service automation, information management, automatic

provisioning of processing and storing capacities, automatic metering, and others that

are quickly becoming si-ne-qua-non conditions for cloud services provisioning.

Latin America will begin 2011 with more than 14% of all servers shipped being

virtualized and with virtualization in one of the top three priorities in most CIOagendas, thus enabling a wave of private cloud initiatives and demand.

Focus on public cloud services is still more incipient, with predominant traction for

AaaS (application-as-a-service), and mostly on collaborative applications, content

management, and vertical applications. According to IDC Latin America’s first SaaS

Tracker, all three of these markets grew close to 30% in the first half of 2010, and are

only expected to accelerate in 2011 and beyond, topping the growth rankings of all 15

SaaS markets tracked by IDC.

The Latin America public cloud platform-as-a-service (PaaS) market is one of the

most hotly contested and watched markets in the cloud service domain, as many

vendors are running initiatives in order to align their portfolio to the PaaS offering. Theformula for success at the high end segment of PaaS is a combination of hardware

and software deployed at scale with management capabilities so that any type of

workload can automatically be handled efficiently and securely within the desired

service level agreement (SLA). Among the PaaS markets tracked by IDC, the fastest

growth in 2011 is expected in data access, analysis, and delivery functionalities.

Amidst some concerns around security, bandwidth, and, in the more traditional

societies, privacy, IDC expects service provider offering alignment to continue in

2011, with telcos betting big on cloud’s promise of a preeminent position in the

delivery of IT, particularly to the SMB ecosystem, thus aiming to become the IT

channel of the next decade. Parallel to that, most hardware and software vendors will

orbit their strategies around Cloud, making it the center of gravity of investment,

marketing, and partnering decisions.

IDC expects big names such as Microsoft, IBM, HP, SAP, Oracle-Sun, Telefonica,

and many others to launch large campaigns around Cloud at the beginning of 2011

(some of them are already happening), to back up their service launches that

occurred during 2010, and other service offerings that for sure will be announced this



©2011 IDC #LA11330

year. The difference in 2011 is that a lot of that messaging will be supported by local

examples of companies that are already showing results of Cloud implementations.

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After acceleration in the expansion of virtualization solutions across the region in thepast years, IDC predicts the beginning of a second phase of virtualization adoption

where a wave of companies who have been trying out virtualization in test and

development environments and non-critical applications will build virtualized

environments for critical applications. IDC’s latest CIO survey among medium- and

large-sized companies in Latin America shows that half of the companies that are

using virtualization already use it on production application environments. This data

also shows that companies are more encouraged to deepen their virtualization

approach and this will set the groundwork for a more dynamic, holistic approach for

infrastructure build-out.

Major enterprises, especially in industries like telecommunications, banking and

manufacturing, are facing a spurt of data and information growth along with aconstant pressure on energy and IT management. IT organizations inside these

companies are realizing the need to evolve into a business unit capable of offering

internal SLAs for other business units with measurable costs for their services, and

also demonstrate the value they provide against public cloud options. CIOs of these

companies are well aware they need to re-think the way they are managing their

organizations, and many of them are already evaluating going towards a more

automated and self provisioning IT organization.

For 2011 IDC expects a boom of Data Center transformation projects in the region.

These projects initiate a path towards a more mature Cloud computing evolution that

will begin with a strong demand for private Cloud technology implementations. As

private and service provider data centers in the region evolve towards a state ofcloud-readiness (see Prediction # 2), higher standards of connectivity, energy and

heat management, and storage and compute provisioning will create a demand for

smarter infrastructure hardware and software in all geographies. IDC is already

seeing different smart infrastructure arising in the market, designed and built to

address specific processing business needs from the very beginning of its production,

thus one can expect to see more workload engineered systems optimized for

Database, OLTP, Business Intelligence, Collaboration and so on taking some space

from the more traditional, commoditized standard infrastructure approach.

IDC expects data center transformation to continue to impact the configuration of the

product offering. IDC is already seeing vendors in Latin America re-configuring their

infrastructure offering including equipment (from processing and storage to

telecommunications), virtualization, management, consulting and services. Vendors

such as Cisco and Hitachi selling servers, Dell acquiring more storage network

equipment providers, HP acquiring 3PAR for massive DC storage, and Huawei selling

storage are examples of companies preparing for this change. Multi-vendor alliances

will continue in order to address the needs of the Data Center transformation path

and their different approaches are already being offered in the region. During 2011

IDC expects companies in the energy management business like Emerson, Eaton,



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and APC reaching out to traditional IT vendors for a closer alliance through their

extended partner ecosystem, and strengthening their own partnerships with large

data center integrators in Latin America.

The IT infrastructure ecosystem in Latin America will continue to reshape itself during

2011. Users will continue to re-engineer the information processing strategies in the

data center; vendors will continue to re-position with a more holistic and integral

approach; and channels will re-assess their competency and responsiveness with

farther reaching end-to-end solutions. At the center of it all, the term ‘cloud’ will

continue to be used and over-used to sell and market everything around the data-

center.

+!",!"""

#*$!

IDC expects that a strong move towards application modernization will bring a wave

of growth in software investment during 2011, contributing 7.3 billion dollars of

investment and 3 points of market growth to the combined software and services

markets in Latin America.

Organizations in Latin America are focused on aligning core systems to business

strategy, customer-facing application requirements, supply chain management flows,

and increased visibility of "order to cash" processes, restructuring their application

assets to enable greater adaptability and flexibility to meet new business

requirements. In 2011, companies will keep enhancing the functionalities of their core

systems in order to adapt more dynamically to market changes such as those lived

during 2009. Interest will be placed in application enhancements to obtain more

business alignment. Terms like SOA, BPM, will go beyond the mere definition and

take action into what’s called the application modernization era.

Multinational expansion of local companies becoming regional companies, and astrong merger and acquisition activity, has led to obvious requirements for better

system interconnection, application streamlining, financial reports consolidation, and

data source integration among branches. IDC understands Application Modernization

as the software and services offering that address the following characteristics:

Migration: The move from obsolete applications to new software packages (it can

be a rehost or replatform of old apps).

Renewal: By restructuring old code to new frameworks or even developing new

applications.

Consolidation: Both applications or data into centralized and automated

Application modernization tends to be the best approach to consolidate best practices

the market has been adopting over the last years (such as SOA, BPM, business

analytics and even application life-cycle management technologies). These concepts

have brought the market better ways to attend to business requirements in renewed

platforms that fulfill the need to have pervasive systems for better decision making.



©2011 IDC #LA11330

Organizations undergoing application modernization will tend to invest heavily in

business analytics as the offering has improved considerably in terms of scalability,

availability and performance features after a long run of consolidation through

mergers and acquisitions on the offer side. The business analytics software market is

expected to grow 10.6% during 2011 and is among the fastest growing markets in

Latin America.

IDC’s perspective on the quality and life-cycle tools market is expected to grow 6% in

2011 recovering fast from a 2% growth in 2009. Quality and life-cycle tools are

solutions that guarantee quality assurance and application life cycle management

processes. This software component is crucial to the whole application modernization

trend, due to increased awareness into best practices and methodologies, as well as

the impact on Governance, Risk and Compliance needs.

IT Service providers will also be impacted as a more qualified level of expertise is

required to implement these types of solutions. System integrators will face an

opportunity to transform their application portfolios, considering traditional

applications services and the next-generation models by:

Rehosting existing legacy or packaged applications on new platforms

Upgrading systems and packages to the latest releases

Replacing and rewriting legacy applications using new languages services

Enhancing existing code to utilize latest SOA and Web services

Migrating to new packages

During 2011, software and services vendors will have to enhance, consolidate and

address their messages to position their strengths in understanding both the old and

the new, and in helping end users in their search for best practices that guarantee

adaptability and responsiveness to change.

-"*$.!""$"!)

!

After 5 years of growing adoption in Latin America, social platforms have started to

capitalize on their massive user base, becoming an effective marketing or customer

service channel for the enterprise.

With the traditional online gaming market in Latin America doubling in revenues from

just two years ago andthe advent of social media games embedded within social

media networks or even as standalone apps, these examples will only help to

accelerate the consumer adoption of social networks even further. With Latin America

often showing up on lists of the fastest growing markets for social media companies

like Facebook and Twitter, Latin America is clearly a priority for the vendors in the

social media space.

While these social platforms are just beginning to enter the enterprise space, their

presence in the consumer space will only continue to expand upon its already rapidly



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growing base. As ‘everything that can be social becomes social’, the ability to

monetize or attract more eyeballs or cents from consumers will have to increase

substantially.

Leaders of large organizations today recognize that presence in the most popular

social networks today is as important as having a website was in the late 90’s. This

sense of urgency is rapidly affecting small and medium-sized businesses as well.

Companies are leveraging the growing amount of contacts or followers to transform

the social network in an effective marketing channel allowing them to reach more

contacts that eventually will become prospects and customers or as a customer

service channel, allowing them to collect valuable feedback from their users and

attend to their requests and claims effectively. More sophisticated companies are

even redirecting users to forums in order to develop interesting topics which may

translate into future products or services.

Indeed, 2011 will be the year when social platforms will start to be widely present in

the applications portfolio of Latin American companies with a strong focus on

marketing and customer service. IDC defines the term enterprise social platforms asa software portfolio that includes:

Standalone social applications

Social analytics (socialytics) applications

Standalone social platforms

Embedded social features in existing applications

During 2011, IDC estimates the creation of a social platform market at almost 50

million dollars in Latin America, which will rapidly double in size during the year and

will continue to grow at a torrid pace over the coming years.

IDC believes companies will start investing in social platforms to monitor social

network activity, develop engagements with clients, partners, suppliers and key

constituent communities; or even to create their own social tools such as forums or

wikis. Solutions like IBM Connections, Jive, Lithium or INGage will become more and

more popular while large software vendors will acquire social software vendors to

jump-start or increase their social business footprint. Marketing services companies,

CRM and business application vendors, and their partner ecosystems in Latin

America will likely hire, acquire, or create partnerships to strengthen their social

platform understanding and value proposition. In the meantime, users will struggle to

navigate through the confusion that always accompanies the creation of a new skill inthe organization



©2011 IDC #LA11330

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The year 2010 was a year in which video content made a grand debut on multiple

devices. Fueled by interest in a region with soccer-obsessed fans for the FIFA World

Cup, the trend of accessing content of the customer’s choosing on the device that

they prefer was merely the beginning of a trend that will only accelerate in 2011, withboth the content options and interface options becoming both greater and ubiquitous

in nature. With mobile phone line penetration reaching or exceeding 100% in many

countries, coupled with options for carrier based billing, the ability to reach more

consumers will begin to accelerate.

Smart devices (interfaces) of all kinds will become ubiquitous, leading the

consumption desires of Latin Americans:

As the need for information ‘anytime, anywhere’ is felt across both consumer and

enterprise demographics, the migration from feature phones to smart phones will

continue to accelerate for the foreseeable future. While in 2009 there were 15

feature phones sold for every one smart phone in Latin America, by 2011 thisfigure will only be 5-to-1 and by 2014, it will be 2-to-1.

In the ‘big-screen device’ market, PCs are also showing similar migrations, albeit

at a more moderate rate. In 2011 there will be 1.4 notebooks (traditional as well

as netbooks) sold for every desktop in Latin America. This is in sharp contrast

from only a few years ago when in 2008 there were 2 desktops sold for every

notebook.

The tablet PC market, still incipient and considered ‘premium’ in price, is

expected to ship less than 700k in the region in 2011. But, being the ‘hot new

item’, tablets will continue to receive the majority of the attention from media and

marketing, positioning for a stronger lift-off in 2011 and beyond.

With the aforementioned penetration rates for mobile phone lines above 100% in

many countries and 160 million PCs in the Latin America installed base, the creativity

that content providers will utilize to capture and entice the eyeballs and wallets of

viewers will benefit both international firms, as well as local, home-grown experts to

help customize and create relevant content. In the upcoming years IDC expects to

see a diversification of video offers, a war on content creation and distribution, and an

explosion of Internet-distributed content. Furthermore, no longer will consumers want

devices separate from the content, but rather as an end-to-end solution that allows

them to interact with, share, and consume content in diverse ways throughout their

‘prosumer’ lives.

Hence, the TMT (Telecom – Media – Technology) ecosystem will need to become

strengthened with a balanced coexistence of different market actors:

Device vendors, bringing the terminals, interfaces, and screens for end users to

consume media

Broadcasters, who will produce and distribute content, increasingly segmenting

audiences



10 #LA11330 ©2011 IDC

Online (over-the-top, OTT) video distributors, who will enhance, integrate and

enable content access to end users, through their strong Internet marketing force

Telecommunications services providers, who will provide the “pipes”, the platform

and/ or the cloud for media to be transported, transmitted and, ultimately, shared.

In this context, telecommunication services providers will continue to work even moreclosely with broadcasting and other video content developers. The promise of higher

bandwidth availability in the years to come, which will increase accessibility to more

and more varied portals like UOL, Sinectis, Terra, and SION, among others, will

accelerate the innovation of revenue sharing models, creating a profit flow from

content developers to the channel who is, ultimately the one that possesses the

financial and marketing muscle to push content to the web. Examples of these new

services spurred from content provisioning are:

GVT in Brazil, that has launched a service called Power Music Club in

partnership with Universal Music, which provides unlimited free music streaming

to GVT's broadband subscribers.

Also in Brazil, Terra has its Terra TV, an online video content service, which is

free for the user. Every video comes with advertising first, which is the revenue

source for the service.

Likewise, Sion acquired UOL-Sinectis in Argentina, to not only provide content

but also resell broadband access in Argentina (ADSL from Telefonica and

Telecom Arg.)

Another example is Mixplay, an Internet TV distributor owned by Claxson Group

(from Argentina) that distributes on-demand video content.

In the meantime, cable operators are getting ready to face these competitive threatsby making strong upgrades to their networks through Docsis 3.0. as is the example

with VTR in Chile and Telmex across the region; and introducing additional

interactive services like VOD and portal access, as in the case of DirecTV, and

Cablevisión, for example. IDC expects paid TV to maintain a healthy 10% annual

growth through 2013, while satellite TV will grow at twice that rate during the same

period.

IPTV, on the other hand, is in a very early stage of adoption in Latin America. as

regulatory barriers are lifted (something that has already happened in Chile and is

expected to happen in Brazil during 2011), IDC predicts very fast growth in this

market. IPTV subscribers are expected to grow at an annual rate of 85% until 2013.

In the center of the content and device worlds, the content-to-device, end-to-end

solution, will emerge as key value proposition for differentiation and loyalty

generation. During 2011, content-to-device solutions will become commonplace as

there seems to be no limit to our ability to consume content and media. As in the

example of mobile phone customers in Mexico that can hear content from Televisa

radio stations on the phones distributed by Telefonica, IDC expects that technology

vendors, telecom operators, and content creators and distributors will continue to find

ways to impress, and sometimes overwhelm the Latin American prosumer.



©2011 IDC #LA11330

34#")*1"$+5!"")

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The prospect of improved economic conditions, coupled with a continued explosion in

mobile data traffic, is clearly lending confidence to service providers looking to make

investments in next-generation technologies. While uncertainties remain as to

business models and the performance of new technologies, the path toward and needfor network transformation is evident.

Long Term Evolution (LTE), also called 4G, is the latest standard in the mobile

network technology, providing downlink peak rates of at least 100 Mbps, and uplinks

of at least 50 Mbps. LTE is here and promises to change the way we store, consume

and produce information in a mobile environment.

The mobile network is characterized by the phenomenon of exploding data traffic.

Packet-based traffic catching up to, and quickly exceeding voice traffic is now the

norm in more and more mobile networks across the globe and Latin America. This

has been driven by accelerated growth in mobile broadband subscribers. 2010 has

been an inflection point in the uptake of mobile broadband in Latin America: flat fee‘small screen’ subscribers, those that subscribe to mobile data plans through smart

phones, will grow 104% between 2010 and 2011, and are expected to maintain a

steep growth level through 2013. ‘Big screen’ subscribers – namely mobile broadband

plans through notebooks/netbooks/tablets – will grow 45% in 2011,compared to 2010.

The growth of this market will lead to the development of a healthy LTE market. For

2011, IDC predicts the appearance of more LTE trials and the first LTE deployments

in Latin America.

During 2010 we have already witnessed increasing traffic on mobile networks,

especially in large cities, such as Mexico City and Sao Paulo, even leading to a

saturation of these markets as service providers’ networks are not ready to face theincreases in traffic. However, the high density in population will not necessarily be the

starting point this time for carrier ROIs. In contrast to the 2G to 3G migration,

migration to LTE will have to take into consideration first the most profitable markets.

Implementations will start with high income/high density metropolitan areas, moving in

time to other areas.

IDC expects most deployments to complement existing networks. Most operators will

first deploy HSPA+ and then LTE, which will be used first for data in laptop and

netbook dongles. LTE investments by telecom operators will be a key factor helping

to sustain high investment levels, exceeding $100 million in Latin America during

2011, and still maintaining 50% growth through 2012.

As spectrum auctions are taking place during 2010-2011, commercial implementation

and, ultimately massive service release is not truly expected until late 2012-2013. But

prior to the actual market war in the battle to capture end users’ attention, an

interesting shuffle in the competitive dynamic will take place during 2011 as spectrum

auctions open up the way to new entrants. There is one clear belief that, whoever

enters the 4G market, will be with the intent to deliver content, and therefore entering

players from the media world will certainly add a new spin within the mobile

ecosystem. In the meantime, traditional mobile carriers will remain mostly concerned



12 #LA11330 ©2011 IDC

about protecting their 3G investments and will move gradually through the path of the

intermediate standard called HSPA+.

There is already one good example of this in Mexico, where Televisa won a national

LTE license, while mobile operators focused on adding new 3G frequencies in

specific geographic areas to add capacity and/or coverage to their existing networks.

What else is to be expected on this front?

GVT, the most profitable fixed telecom company in Brazil, has already expressed

its interest in entering into the mobile space. They may do so most likely by

bidding for an LTE frequency. Becoming a mobile virtual network operator

(MVNO) is another possibility for GVT in the short term.

Upon resolution of its conflict with the government, Cablevision could clearly be a

4G bidder in Argentina in 2011.

Chilean PayTV leader VTR is already playing the mobile game under 3G and

could definitely benefit from an LTE strategy.

Russian operator Yota, which entered the Peruvian market through a WiMax

technology approach, has rapidly switched to the LTE path.

Despite all this, pure-greenfield 4G deployments will likely be limited to a few cases

such as those previously mentioned, as new entrants will need guidance from a

telecom partner to succeed or even carrier managed services to secure network

performance. This will certainly present newer opportunities to infrastructure vendors

providing network lifecycle services such as Alcatel-Lucent and NSN, for example.

There is still one more fact to consider regarding the leading 4G technology: LTE

harmonizes the network on IP and shifts the operational discussion to the interplay of

applications and the network, rather than pure network optimization. The shift to LTEforces segmentation of the network into access and core, where core is dominated by

converged telecom and IT principles and access is governed by spectrum dynamics

(cost, fallibility, scarcity, etc). So here is where another opportunity arises for

consolidation and further M&A, as telecom and IT fusion already exists by leveraging

from carrier/outsourced managed services.

Ultimately, IDC predicts LTE can be seen as a game changer in the mobile world,

disrupting into the traditional value chain by bringing new market actors to stimulate

the competitive environment.

Network quality and the ability to deliver data services at the lowest possible cost will

be fundamental to remain competitive. Effective execution of new business modelsand network transformations will also be critical. For leading service providers, this is

the time to expand the network quality gap with lagging competitors. For second-tier

players, this is the time to accelerate the process of catching up to the market

leaders.



©2011 IDC #LA11330

61!"")$!7

$""#"8"$

As pressures to compete in market adjacencies continue, we continue to witness

mergers and acquisitions in the ICT industry. Consolidation is a natural market cycle

that benefits technology, and the industry's competitive landscape has been evolving

towards consolidation over the past years. Traditional and well-established marketplayers have seen relentlessly flattening revenues, identifying the need to expend

revenue streams by moving to adjacent markets. Some examples include the areas

of:

Collaboration/unified communications: Cisco’s acquisition of Tandberg should

strengthen their video market position, at the same time that Avaya challenges its

current association with Polycom to pursue the Avaya Flare video platform

strategy.

Mobile devices and web-based content services: BlackBerry App World, putting

together developer’s applications into a portal managed by RIM. This is not a

merger but a good example of partnering. Furthermore, besides consolidation ofcompanies, there is integration and partnerships, such as Facebook, Twitter and

YouTube applications pre-installed/embedded in BlackBerry devices and other

smart phone brands, such as Motorola, Nokia, Samsung, etc.

Outsourcing/managed services: As IT companies expand their reach through

acquisitions of strong local brands (e.g. Acquisition of CPM Braxis, largest

Brazilian IT integrator/service provider by French consulting firm CapGemini in

2010), telcos continue to organically build their competency in this “adjacent”

market.

Cloud solutions: Many examples of coexistence occur when the names VMWare,

Cisco, Citrix, EMC, IBM, HP, Microsoft, Oracle-Sun, and many others are put inthe same bag. It is only natural that co-opetition will rule the game of corporate

relationships in the cloud arena for years to come.

Coexistence allows vendors and service providers to be more competitive and to

reach a higher number of customers, leveraging the best of their strengths and

ultimately improving their customer experience as they acquire solutions in a more

integrated way

All these ecosystem movements certainly impact the requirements that channels in

Latin America need to fulfill in order to deliver more complex and segmented

solutions. Vendors will need to redouble training support and certification programs.

Channels will struggle to keep up with market demands and technology evolution.

2011 will be a year of increasing multi-mode (client/partner/competitor) business

relationships. This will be the time where coexistence will become the new

convergence. IDC expects 2011 to witness an evolution of the partner/competitor

landscape in Latin America in several fronts:

Cloud: 2011 will definitely be a year where the strategies of global vendors like

Cisco, EMC and VMware coexisting together will be emulated or pushed to the

next level by local integrators like Sonda, CPM-Braxis (now CPM-Braxis-



14 #LA11330 ©2011 IDC

Capgemini), Stefanini, Politec, Promon Tecnologia, or local service providers like

KIO, Terremark, and others.

Hosting: Telcos will be looking for partnerships with niche companies that already

have some expertise and installed based on hosted services. IDC expects to see

more and more alliances and partnerships between telcos and IT service

providers, as is the case of Digitel and Daycohost in Venezuela. Carriers will

continue looking for niche competencies in areas like security (i.e. Mexis,

Micronet), application virtualization (e.g. Mas Negocio), electronic invoicing, and

others.

Video: Telcos will also be developing more video content and will close their ties

with the broadcasting business. As regulation moves forward, more acquisitions

of PayTV companies by telcos are expected, as is the case of AMX completing

the acquisition of NET during 2011. On top of their satellite TV operations,

Embratel (AMX group), for example, will conclude the acquisition of control of

NET (Cable TV company) in Brazil, and Telefonica Brazil could strengthen their

TVA cable operations. Even the rise of a consortia of different types of players

to face jointly market challenges will be occurring, as is the case of the alliance

between Telefonica, Televisa and Megacable in Mexico. Over-the-top (Internet

video) service providers are also emerging as new competitors: Yahoo,for

example, is launching Yahoo TV. IDC expects similar examples to spur in Latin

America during 2011.

Mobile space: A diversification of mobile services with a growing focus on

applications will occur and M2M (machine-to-machine services: those data plans

that interconnect computers and not humans sharing information over the

Network) offerings will start to shape up in the Latin America market. This value

chain will develop and become enhanced among device manufacturers,

application developers, system integrators and service providers. A growing

ecosystem of services provided over the Web will be fueled by the expansion of

the payment services offerings, such as Vivo (leading mobile operator in Brazil)

and PayPal (US online payments company) recent partnership announcement.

The service, planned to be launched by mid-2011, will also allow pre-paid users

to top-up their accounts via SMS. .

Convergence of vendor strategies is also expected in other areas such as

collaboration (i.e. HP and Microsoft), security (i.e. Huawei and Symantec), analytics

and many others. In the end, new market challenges make it crucial to develop an

ecosystem of partners and channels in order to ensure each provider can remain

focused in those activities that reside in their DNA and seek allies to complement their

offering while avoiding development of new skills outside their core area of

competency.



©2011 IDC #LA11330

95!""$

Public spending in the top 7 economies of the region (namely Argentina, Brazil, Chile,

Colombia, Mexico, Peru, and Venezuela) is expected to grow an average of 10% in

constant dollars for 2011 compared to 2010. This is quite significant if compared to

GDP growth figures projected at less than half of that, and suggests the increasing

importance that governments are putting in infrastructure and economic growthagendas. Unsurprisingly, Government spending on IT expected to show sustained

growth for 2011 But more importantly, after the de-emphasis of economic stimulus

policy making, public policy in Latin America will see a return to long-term growth

attention in 2011, giving special importance to technology initiatives. IDC expects that

2011 will witness a new wave of policy-making around the reducing of the ‘digital

divide’, state modernization, fiscal transparency and e-government, which will impact

the ICT industry with sustained growth in 2011 and 2012. Following is a summary of

the key government policies being implemented for 2011:

Argentina: The ministry of Planning in Buenos Aires, will launch a new 2 billion dollar

program (Argentina Connected), which includes

Extension of the backbone deploying 35,000 km of fiber, as well as a mix of other

technologies.

Financing to local cooperatives for them to extend last mile access in small cities;

Connecting 8000 schools, providing servers, connectivity, and netbooks.;

Setting up a state-owned data center (ARSAT) to manage and distribute content

for health and education.

Distributing 3 million Linux-based netbooks among public high school students

from 2011 to 2014.

Chile: Chile’s long experience in ICT policy implementation will continue to

strengthen as focus is put on enabling citizen use of technology for education and

productivity:

E-government: save 100 million hours in in-person bureaucracy procedures,

saving, at the same time, time and expenses for the public sector. The goal is to

have over 400 public services available online

Government funding of 100 thousand tele-entrepreneurs in 4 years with trade-

related initiatives, through the use of online platforms.

Educational program (Red Enlaces) for social connectivity and creation ofcommunitarian tele-centers

Mobile connectivity (3G) program aims at connecting 1474 new rural

communities in regions XV and XII, financed by local governments together with

Entel

Aggregated demand and international arbitrage: Chilean regulator SUBTEL

together with local operators Movistar, Claro, VTR and Entel are working jointly



16 #LA11330 ©2011 IDC

to negotiate international rates. This is meant to be a Mercosur initiative which,

mediated by CEPAL, has already co-opted Argentina and is expected to bring

Brazil, Uruguay and Peru on board.

Brasil : After many discussions with private telecommunication companies,

government institutions, civil society and LAN-house owners, the federal government

of Brazil officially launched the National Broadband Plan on May 5 of 2010. Between

2010 and 2014, an investment of 15 billion reales (about 8.5 billion dollars) will bring

broadband to 4,600 Brazilian municipalities and provide internet to 75% of Brazilian

households.

The plan will reactivate the dormant optical fiber network from an old state company

called Eletronet.

In addition, the plan breathes life into Telebrás, a state telecommunications company

that’s been inactive since the telecom privatizations in the 1990s. Telebrás will be the

‘manager’ of the project, but it won’t be a 100% state service; the government wants

private companies to play a role similar to resellers, providing the service to the end

user. Telebrás will be responsible for implementing the communication network of thefederal public administration and provide support for broadband to universities,

research centers, schools, hospitals and other public institutions. Telebras has started

its bids to build infrastructure for the broadband network backhaul, while the

government has recently released the list of the first 100 cities in Brazil to be covered

by the National Broadband Plan.

In addition to the broadband plan, the Brazilian government is also following in the

mode of Peru and Uruguay in their ‘PC for every student’ initiatives. Although the

Brazilian plan is still not as finalized as many would like, IDC is still expecting nearly

half a million netbooks to ship as part of the initiative in 2011.

Mexico : The Ministry of Education is promoting a program called "HabilidadesDigitales Para Todos", with the objective to provide laptop computers for students and

teachers in 40,000 schools. The investment for this project is about 350 million

dollars.

In the past large projects were meant just for the Federal Government. In 2011 and

beyond IDC expects state and municipal governments to being more active in

providing connectivity to its inhabitants as connectivity will be one of the hot topics for

political campaigns. Municipalities with more than a million inhabitants such as

Huixquilucan and Ecatepec, have announced technology projects to provide Wi-Fi

connectivity in public schools.,

Colombia : The government's new four-year ICT plan, dubbed "Vive DigitalColombia," includes holding an auction for spectrum in the 1.7 and 2.5 GHz bands in

2011, and in the 700 MHz band by the end of President Juan Manuel Santos'

administration in 2014.

The government's goal is to quadruple the amount of broadband connections to 8.8

million in the next four years, according to ICT minister Diego Molano. The ICT plan

calls for an overall 5.5tn-peso (US$2.92bn) government investment.



©2011 IDC #LA11330

Venezuela : When CanTV was renationalized in 2007, President Hugo Chavez said

that a large part of the company's efforts would be focused on social telecom projects

to ensure the whole country has access to modern telecommunications infrastructure.

Focus on bridging the digital divide by the Chavez legislature will strengthen initiatives

in two areas:

Broadband Project: The project will extend the network to 20,000 km, providing

broadband services to more than 12 million people in 19 states, allowing access

to high definition TV, video on demand, SMS, voice and high speed internet. The

deployment is in stage eight of CanTV's national fiber network roll out, which is

being financed by the universal services fund.

Fixed voice: CanTV will focus on the provision of fixed-line and other telecom

services to the underserved population. With the inauguration of a new node -

located in the municipality of Punta Brisa de Macuto, in Vargas state - CanTV will

reportedly enable the provision of 200,000 fixed telephony lines in the area.

Cantv expects to add 620,000 new subscribers to its fixed telephony service

during 2010-2011.

Ultimately, governments will facilitate and accelerate the ICT market growth. In

telecommunications, providing connectivity in those areas where service providers

will not venture to invest; in IT infrastructure, generating opportunities to equipment

vendors, integrators, and support service providers; in homes, changing the rules of

citizen accessibility; and in schools through the expansion of computing power to the

masses; expanding the reach of the Internet and Internet services to millions of Latin

Americans.

#!""!!$#*

#$"

With 27 of the top 200 most populous cities in the world situated in Latin America, theurbanization of the region over the past 5 decades has been well documented. Yet

while the story of the poor worker from the countryside moving to the big city to make

their fortune is a tale present throughout the world, another phenomenon is also at

play in Latin America. This is the growth of the purchasing power of many of those

families, workers, and businesses, including those that have remained in those

smaller cities, towns, and villages.

In Brazil, for example, IDC estimates that 35% of IT activity happens outside of the

state of Sao Paulo and growth there is expected at 5% to 10% points higher than in

Sao Paulo state for 2011, mainly boosted by agricultural activities, government

investments on infrastructure and geographic expansion of companies located in São

Paulo.

Helped by strong economic activity and anincreased trade of commodities in a

resource-rich region Latin America, many of these 'tier 2' metropolises now have

much higher levels of disposable income than in the past to spend on hardware,

software, and services. Some of these cities include Rosario and Cordoba

(Argentina), Concepcion and Valparaiso (Chile), Barranquilla, Cucuta (Colombia),

Valencia, Barquisimento, Maracay (Venezuela) and Leon, Tijuana, and Ciudad

Juarez (Mexico), and finally Vitoria, Santos and Campinas in Brazil. As many of these



18 #LA11330 ©2011 IDC

cities have between 1.5 and 2 million habitants with growing purchasing power, the

endeavors of manufacturers expanding there will be worthwhile.

As public safety is becoming a major concern in the North of Mexico, especially in

cities that are located on the borders with the US, investments are moving to Central

States such as Puebla, Guanajuato, Morelos and Queretáro, and also to Southern

States such as Veracruz, Campeche, Quintana Roo and Yucatan., with Cancun and

Playa del Carmen showing some of the highest growth rates. Puebla, Cuernavaca,

Querétaro and Leon are increasingly gaining share of investment as a consequence

of security issues in Acapulco and other resorts.

One of the clearest impacts of this growth in Latin America beyond the ‘usual

suspects’ of cities is the continued expansion of retailers outside the largest mega-

cities. Despite traditionally lower levels of income in these areas, the less intense

competition due to fewer competitors will lead to sustained or in some cases even

higher margins for those vendors that do target these geographical areas. From

examples as varied as Carrefour Argentina opening stores in Tandil and Godoy Cruz,

Walmart de México planning to open 71 new stores in Nuevo León over the coming 5

years, or Ripley in Peru opening new locales in Piura and Arequipa and planning to

open another 8 locations between 2011 and 2013, the retail expansion within Latin

America will remain strong in 2011 and beyond. With these additional retail locations,

IDC also expects to see continued opportunities for those vendors and businesses

that make up part of this ecosystem: the resellers and distributors that supply these

businesses, the software integrators that help all these new systems talk to each

other, and the services companies that help put all the parts of the puzzle together

seamlessly.

Depending on the maturity of the vendors in the Latin American marketplace, these

geographical expansions in 2011 will help vendors with established market footprints

like HP or Positivo maintain their growth; and vendors seeking growth with other

brands like Samsung or Dell push their gains. Vendors entering Latin America for the

first time or those considering a re-launch of their growth strategy in emerging

markets will still likely follow the same path that their predecessors have done, going

after the ‘low hanging fruit’ of the major mega-cities, while potentially forgetting about

the higher margins and less competition they might face in some of these smaller

geographical markets that aren’t part of the global press on a daily basis.

Distributors and large resellers will have to strengthen their logistical operations and

transport efficiencies as this expansion continues, and similar to 2010 it will not be

surprising to see further consolidation of the reseller channel during 2011 as the

region becomes more competitive.



©2011 IDC #LA11330

E S S E N T I A L G U I D A N C E

In 2011, as the IT industry in Latin America continues to grow and new solutions are

in their way to creating a mainstream market in the region, IT providers will need to

review their offering and re-position themselves in a more holistic and integral

approach to adapt to the new market and technology conditions.

Improving portfolio includes reviewing delivery infrastructure, upgrading systems,

rewriting applications and enhancing code to adapt to new platforms, latest

technology releases and new languages services.

'Becoming cloud-ready’ will be the mantra for IT providers in their quest to align

portfolio and infrastructure to offer cloud-ready solutions and cloud-readying

technologies.

In becoming mobile and social, enterprises, vendors, content providers and service

providers must prepare for a revolution of sorts. This social, mobile, revolution will not

happen amidst unrest, but rather amidst confusion and rapid pace of change. Being

careful not to run into the dead-ends of poor choices or fall into the pitfalls ofunsuccessful initiatives by fine-tuning the sense of agility is a competency that will be

increasingly important.

In the realm of competitive coexistence, market actors need to be proactive in the

search of partners that will allow them to provide turnkey solutions. However, be

aware not to go overboard in focus expansion. Margins will be hurt and shrink. All

actors in the IT ecosystem must realize that behind the Latin American growth will be

forces of renovation of a region seeking to reinvent itself to better compete in a global

and highly integrated environment of the next decade.



20 #LA11330 ©2011 IDC

L E A R N M O R E

: " : $

IDC Latin America Predictions 2010 (Doc # LA10103 January 2010)

IDC Predictions 2011: Welcome to the New Mainstream (Doc # 225878

December 2010)

IDC Latin America IT Spending Patterns: The Latin America Black Book Q3 2010

(Doc # LA11288 November 2010)

Asia/Pacific (Excluding Japan) 2011 Top 10 Predictions (Doc # AP6684601S

December 2010)

Worldwide Retail Industry 2011 Top 10 Predictions (Doc # GRI226393 December

2010)

Worldwide Asset-Oriented Value Chain 2011 Top 10 Predictions (Doc #MI226413 December 2010)

Worldwide Enterprise Networking 2011 Top 10 Predictions (Doc # 226467

January 2011)

!"#$$%&'

Worldwide Supply Chain 2011 Top 10 Predictions (Doc # MI226394 December

2010)

Worldwide System Infrastructure Software 2011 Top 10 Predictions (Doc #

225895 December 2010)

*

In 2011, the Latin American ICT industry will continue to evolve fueled by a variety of

forces. These forces includes a renovation of the infrastructure in search of cloud-

readiness and of a network prepared for higher speeds and traffic capacity; a

renovation of the applications in search of real-time business processes; and a

renovation of governments and cities showing symptoms of long-term growth desires.

All of this will be happening amidst an explosion of consumerization, where‘everything mobile’ and ‘everything social’ will once more threaten to remodel the

landscape of technology integrators, distributors, resellers, and channels around the

region.



* $ ;

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