What 2020 has in store for the LatAm ICT market

Against a backdrop of political uncertainties and economic slowdown in many countries, the hardware, software and IT services market in Latin America is expected to end 2019 in the black and head for an even better 2020.

Research firm IDC projects a 4.8% revenue expansion for the regional IT industry next year, accelerating from 1.3% estimated for this one.

The IT “detachment” from other segments in the economy is explained by the continuous need for technological updating, automation and digitization of most companies.

On the one hand, such investments help enterprises reducing labor costs and for the maintenance of legacy systems. On the other hand, they help increase efficiency and productivity. In essence, there is not much crisis talk when it comes to digital transformation spending. 

In this sense, the biggest investment in the IT sector will be in cloud computing, big data/analytics, mobility (apps and other solutions for smartphones) and social media-related products. 

Together, those areas will concentrate 58% of IT spending next year according to IDC Latin America VP, Ricardo Villate. Cloud investments alone are expected to jump 24% year-over-year.

ARTIFICIAL INTELLIGENCE

While cloud could grow 24%, emerging technologies tend to outperform: companies’ spending in artificial intelligence (AI), for example, is projected surging 44.2 % in 2020.

In 2024, over 35% of user interfaces are expected to have AI-enabled intelligent video, speech, natural language processing, and augmented reality. 

And by 2025, more than half of new business applications in Latin America will incorporate AI, said IDC. 

TELECOM

The Latin American telecom industry, however, is expected to end 2019 with a 3.5% revenue drop, partially recovering next year with a 2% expansion, according to IDC.

In this segment, the scenario is particularly bleak in the case of smartphones.

Consultancy and research firm Gartner, for example, reported this week that global smartphone sales to end-users fell 0.4% in the third quarter of 2019, over the same period in 2018.

For full-year, smartphone sales are expected to fall both globally and in Latin America.

In Brazil, electric-electronics industry association Abinee forecasts sales to be flat compared to 2018, at 44.6mn smartphones.

“Overall, people are more cautious and taking a little longer to replace their smartphones. When this replacement occurs, it almost always ends up being for a more expensive and more advanced smartphone. That's why despite the stability in the volume of smartphones sold, there is an increase in sales revenue,” Abinee mobility director Luiz Claudio Farias said at a press conference in São Paulo.

This year, mobile phone sales revenue is expected to rise 5%, according to Abinee.

Weak purchasing power, on the other hand, is also boosting the sales of simpler models, called feature phones. This segment is expected to increase by 23%, reaching 3.18mn units sold this year.

For 2020, revenue from the overall telecom sector in Brazil is seen growing by 9%.

Abinee expects the local electric-electronics industry to invest 11% more next year, compared to 2019, surpassing 3bn reais (nearly 2% of the sector revenues).

IDC's Villate expects Brazil to invest US$48bn in IT and US$41bn in telecom services in 2020.

WORKFORCE

One of the main hindrances for the regional IT industry is skills shortage. 

Next year, the deficit of ICT professionals (graduates versus market demand) is expected to be 570,000 professionals, declining slightly from 2018 according to IDC.

Nonetheless, IDC estimates that by 2025 the region will have 1.5 times more developers and nearly 50% of companies in Latin America will be software producers.