Trends and opportunities

The market
Mexico’s IT market is currently growing at a rate above the regional average an appears to ridding a wave of optimism, with the economy minister recently predicting that Mexico would become the largest IT market in Latin America. While Brazil remains in regional pole position for the moment, Mexico has a special significance due to its proximity to North American markets, and status as the country in the region where many foreign vendors first launch brands. A steady expansion of credit schemes and other initiatives to encourage computer ownership have resulted in faster-than expected growth in PC sales.
Since the liberalization of the early 1990s, which was given further stimulus throughout Mexico’s North American Free Trade Agreement (NAFTA), the information sectors have benefited from lower prices, increase investment and more competition for protected domestic industries.
Projections
The value of the Mexican IT market will increase from around US$12.5 billion in 2008 to around US$20 billion in 2013. Mexico certainly has plenty of room for potential progress on a range of ICT indicators, including a computer penetration level of about 15 per cent and under-developed e-services.

IT spending as a percentage of GDP at around 1.3 per cent remains well below OECD levels.
However in the current global economic climate, Mexico’s close economic ties to the US present a significant downside risk, with consumer sentiment at an all time low, and consumer spending falling.
Meanwhile various central and regional government plans to increase IT investment and improve the ICT penetration will have an impact. In August 2007 the government outlined an overall policy framework for economic development, which included themes such as more and better government e-services, and support for the SMEs.

The government has also announced a US$445 million 2008 budget for a project to introduce ICT into the education sector, where in 2008 the government unveiled a US$445 million plan to introduce ICT into the education sector.
In the enterprise segment government support should encourage IT adoption to spread steadily from large companies to their smaller partner and customers. However, the vendors push to penetrate the SME segment will mean lower prices. In the corporate and industrial sector as a whole, the slump in technology investments has left a series of relatively obsolete equipment that needs replacing, creating a sustainable demand. Despite this, IT services will show the fastest growth over the forecast period, especially outsourcing driven by demand from US companies.
In the retail segment, more creative financing plans and better access to credit will gradually help bring computer ownership within the reach of millions more lower income Mexicans.

Low PC penetration of around 15 per cent represents a growth opportunity, as Mexico lags in comparison with regional rivals, such as Chile and Brazil. Mexico has also struggled to make much headway in e-government, but local governments are now increasingly launching their own initiatives and looking to private funding to make up for deficiencies in federal programs. Combined with rising consumer confidence, the market should continue to grow in 2009, despite a slowing economy.
The share of hardware market is predicted to grow from US$5.9 billion in 2009 in 2013, with computer sales rising from US$4.7 billion to US$7.6 billion. Software spending should rise from US$839 million to US$1.3 billion and services from US$4.2 billion to US$7.3 billion. Broadband subscribers will increase over the forecast period to more than 12 million in 2013.
Government
Around one-third of government spending is accounted by state and municipality-level governments. A 2008 austerity decree identified IT as a core area for potential savings. Although the public sector market is relatively small, at just 15 per cent of spending in 2005, the Mexican government has launched several programs to stimulate IT use throughout the economy.

Special focus: financial sector
Mexican banks and financial services companies are among some of the country’s most significant IT spenders, with consolidation, competition, and compliance with new international guidelines fuelling the trend. In recent years, several foreign-owned banks have been operating aggressively in the market, spurring local competitors to ramp up spending on IT as they compete for customers. With a wave of hardware and infrastructure installations in the past few years, the focus is now shifting to software and services, as companies look to enhance productivity and improve offerings to customers. Compliance and risk management applications are among the top sellers, with the need to manage compliance with Base II capital guidelines, and legislation tightening up corporate governance standards. Another trend is for banks of all sizes to outsource the hosting, management and maintenance of software and hardware.

Enterprises

Enterprise computer penetration is uneven, with over 90 per cent of firms in the agro-industry and construction sectors having computers, with the figure being considerably lower elsewhere. For software, the financial sector is the largest overall end-user, followed by the manufacturing and retail stores. Other fast-growing sub-sectors include construction, transportation and hotels and restaurants.
Opportunities
Hardware
Mexico computer and accessories market will have a growth around 10 per cent over the 2008-2013 periods. In 2008 computer sales were put at US$4.7 billion, and they should increase towards US$7.6 billion in 2013. The growing popularity of Internet and broadband is driving PC sales, along with laptops, which account for close to 50 per cent of all computer sales.
Demand for PCs and related hardware is growing in all sectors, particularly SMEs and home users.

The strongest growth, even among business users, will continue to be in the generic computer sector. PC sales are driven especially by higher consumer purchasing power, lower prices and more credit availability. Other factors include the renewal of equipment by large corporations, the adoption of technology by medium and large corporations, and government spending.
Software
The software market for 2008 was estimated at US$839 million, with imported software accounting for at least 80 per cent of the total. The figure for 2009 is projected to dip to US$836 million. However software growth for 2008-2013 is put at around 11 per cent outpacing general IT market growth, as the government turns its attention to overcoming Mexico’s longstanding under-investment in this area. Mexico has the second largest software market in Latin America.
The software sector current high single-digit growth is being driven partly by increasingly strong demand for ERP solutions from SMEs. A lack of IT infrastructure is thought to contribute to the high failure rate among SMEs in many parts of the country. Popular applications include integral administration and accounting suites, enterprise resource planning (ERP), inventory control, hotel administration packages, point of sales applications, e-business solutions and computer-aided manufacturing applications.
Business intelligence software is another strong performer, with sales of databases growing demand or more sophisticated security solutions.
In terms of verticals, public and financial sectors, healthcare, the chemical industry, utilities and SMEs are seen as the ones with the most growth potential.

Spending has been rising in the financial sector as banks, insurance companies and other firms look to enhance productivity and improve customer experience. The industrial and services sectors have also seen high growth such as construction, transportation, and the hotel and restaurant sector.
IT services
The IT services is estimated to have grown around 14per cent in 2008 to a value of around US$4.2 billion, and the IT services sector has been increasing steadily for the last 10 years. The IT services market is becoming one of the most dynamic drivers of IT-sector spending in Mexico and the Latin America region.

Local companies are trying to use computing resources more effectively and integrate investments made in hardware and software. Growth opportunities reside even within the SME sector, where companies are trying to use computing resources more effectively and integrate investments made in hardware and software.
Other areas of opportunity
Latin America is still in the adopting stage of eco-friendly IT implementations. Cost reduction is achieved by a series of new capabilities that uses less energy and have greater operational capabilities and are therefore, far more efficient. In Mexico, though these methods are in a nascent stage, the most popular ones:
• Server virtualization and consolidation
• Thin provisioning
• Power management
• Print management
• User mobility
Austrade will be integrating opportunities related to Mexico as an innovative area

Source: http://www.austrade.gov.au/ICT-to-Mexico/default.aspx

From 1992 to 2002, U.S. ICT firms increased exports to Canada by77% and increased exports to Mexico by 239%.
In 2002, U.S. firms captured 51% of Mexico’s ICT import market and 48% of Canada’s ICT import market.

Export Highlights
U.S. companies exported more than $138.1 billion in information and communication technology (ICT) products in 2002, including $21.4 billion to Mexico and $18.5 billion to Canada. Together, our NAFTA partners account for 29% of
total U.S. ICT exports.
Industry Facts
Mexico and Canada are the first and second largest export markets for U.S. ICT firms.
Closer trade and investment ties due to NAFTA allow U.S.

ICT firms easier access to Canada’s and Mexico’s growing computer markets, which have more than doubled in size since 1992 to $12.7 billion combined.
The packaged software market alone in Canada and Mexico was worth $4.5 billion in 2002, triple the pre-NAFTA market size.
The ICT industry has benefited from NAFTA’s investment provisions that lifted most restrictions on foreign investment. NAFTA eliminated the 49% cap on foreign participation in enhanced telecommunications services. It also provided greater protection for investors in telecommunications services sectors.

NAFTA investors are able to hold 100% of the ownership interest of new enterprises engaged in the production of telecommunications equipment without government approval.
The United States continues to be the world’s largest consumer, producer, and provider of computer equipment and software and related goods and services.
U.S. industry plays a major role as a manufacturer and technology developer.
NAFTA 10 YEARS LATER
Industry Facts
NAFTA partners have realized benefits of the agreement as well. Mexico’s ICT exports to the United States increased 230% over the 1992–2002 period, to $21.5 billion.

Canada’s ICT exports to the United States in the same period increased 69%, to $9 billion.
Trade Barrier Elimination
NAFTA immediately eliminated 10% to 20% tariffs in Mexico on 70% of U.S. exports of computers, peripheral equipment, and software and phased out remaining duties for these products over a five-year period. Canadian tariffs were mostly eliminated from the 1989 U.S.-
Canada FTA. Today U.S. firms receive duty-free access to Mexico’s market while other competing producers such as South Korea, Japan, and Taiwan face tariffs up to 23% on radio and television communications and broadcasting equipment and telecommunication switches. Without NAFTA, U.S. ICT firms would be at a disadvantage with such European competitors as France and the United Kingdom, whose ICT products enter duty-free due to their FTA with Mexico.
Nontariff barrier elimination was also important for the ICT industry, which realized NAFTA benefits through more transparent commercial dealings, removal of investment barriers, and the opening of Mexico’s lucrative government procurement market for U.S. suppliers.

This sector also benefits from stronger intellectual property rights protection following NAFTA, including increased protection of integrated circuit layout designs and trade secrets.
Key Exporting States
Arizona, California, Colorado, Florida, Georgia, Illinois, Indiana, Massachusetts, Michigan, New York, North Carolina, Ohio, Tennessee, Texas, Vermont
JUNE 2004
INFORMATION & COMMUNICATION TECHNOLOGIES
Success Stories
NAFTA has allowed Kodak products to enter Mexico duty free. As a result, the company has been able to transfer a high-cost sensitizing operation from Mexico to Rochester, New York, increasing efficiency, lowering costs, and improving quality.
NAFTA has also had a positive effect on U.S. employment at Kodak. Kodak, a digital and traditional imaging company, has increased exports to Mexico by $400 million since NAFTA was implemented. Over the last five years, Kodak’s U.S. exports to Mexico have grown four times faster than Kodak exports globally.
“Each year we continue to find innovative ways to
use NAFTA as a means to serve our customers and
remain price-competitive,” says Kitty Krishnamurthy, vice president of the Panasonic facility in Troy, Ohio, where employment has grown. NAFTA is crucial to the competitiveness of Panasonic’s color television cathode-ray-tube production in Troy. It provides Panasonic’s customers a source of duty-free materials, ease of logistics planning among border factories, and lower operating costs along the border trading zone.

Employment Opportunities
The ICT industry employs 2.5 million people nationwide. Employment in the ICT industry grew 11% during 1992–1998 and 2.6% during 1992–2002. The more modest recent growth in the telecommunications industry reflects the global economic downturn in the wake of the ICT boom in the late 1990s and early 2000s. ICT industry wages increased 35% during this ten-year period.
The Sector
This sector covers computer and telecommunications equipment, software, and semiconductors and other electronic components.
Prepared by the U.S. Department of Commerce, International Trade Administration, Office of Industry Trade Policy.
For more information, please contact the Office of Trade and Economic Analysis/Industry\ Trade Policy at 202.482.3703.
Source:

http://www.trade.gov/td/industry/otea/nafta/ICT.pdf

As part of the initiative called Park Transfer Articulation and Educational Technology, part of the Technological City project, the Technological Institute of Sonora signed a pair of agreements with the University of Sonora.

The MSc. Gonzalo Rodriguez Villanueva, President of ITSON, came to the city of Hermosillo, to formalize an alliance that should boost educational development with the use of digital technologies, to implement specifically in older adults.

He further explained that the prototype is also transferred theoretical method for diagnosis in micro technology adoption with the intention of applying them in the city of Hermosillo.

“This initiative of the Park and Educational Technology Transfer, which fits into the Digital City project is a labor of years, where the main aim is to create infrastructure to give tools to citizens, schools, students and teachers” he said.

“We want to make the use of technology to improve their communication skills and the use of the media for their decision making” abounded, “Currently, universities must be active in improving the quality of the population’s live, and in this perspective is the importance of using technology and telecommunications”.

The two Presidents agreed to work together in the projects with the aim of encouraging higher education in the state.

The formalization of both contracts was held in the facilities of the University of Sonora, where he attended the MSc. Gonzalo Rodriguez Villanueva, President of ITSON and Dr. Heriberto Grijalva Monteverde, President of UNISON.

For his part, Dr. Heriberto Grijalva considered important the progress of models applying various colleges for the development of Sonora and education in this context, specifically to work in this project in the technological literacy that has been transferred to the University .

The event was attended and witnessed by Jesus Gaxiola Melendrez, Coordinator of the Center for Business Intelligence; Dr. Sonia Mortis Lozoya, Head of the Department of Education and MSc. Cristina Castillo Ochoa, Secretary of Stewardship.

On behalf of UNISON, Dr. Emilia Castillo Ochoa, a member of Academic Teaching-Research Communication in Latin America, and academic Dora Barrientos Cecilia Lopez Oliveros and Lizeth Rodriguez Aracely.

Reference:

www.itson.mx

In May this year, Cisco acquired the steel division of Flip Video, which today is the first device that the company will market the common user in mind. Cisco is best known for its areas of enterprise networks and telepresence technology, but now also bet by consumer products, such as Flip. The creator of this gadget is considered one of the most influential people on the web, Jonathan Kaplan, vice president and general manager of Cisco’s Consumer Products. The device has had great success in the U.S., which has sold over two million since its inception and now Mexico becomes the first Latin American country where it is available. This is a handheld video camera with dimensions of only 4″ by 2″ by 0.6″ and weighing 93.6 g, has an anti-glare screen 1.5″ touch-sensitive buttons, rechargeable, lasting at least two hours, depending on the model and can record up to 60 minutes of video. Besides its size, the novelty of Flip is the ability to capture and share videos instantly through a USB-down when users are ready to download your video directly to your PC or Mac, without the need for any cable. Flip comes preloaded with software FlipShare to edit, organize, make films with music and then share the videos via email or upload to sites like YouTube, Facebook and MySpace. In Mexico are for sale two models MinoHD Flip Mino and Flip, the first at an average price of 2 thousand 500 pesos and high definition 3 thousand dollars, and both can get high definition pictures with image freeze tool. It expects users to record personal videos for fun and that the device will open new options for low cost advertising on sites like YouTube, which offers a framework through which advertisers create their business and only pay if a surfer clicks on your video.

What’s meant to be named one of the 25 most influential men in the world of internet in Time magazine?

At the time that Time wrote that it was for Flip, but I have experience as a magazine editor in New York and then had other businesses that were sold as Sega.

What are your goals within Cisco?

In our group we have several consumption outbreaks, the first is changing the way that the user consumes the video and then how they use the networks, we believe that combining the video with Internet creates a very powerful alliance, so my team is responsible for creating products that can truly change the way people live, work and learn.

What is the novelty of Flip?

Flip will help drive the video to a mass market, we created a device that is simple, you can record by pressing a button and is very easy to share the video on any computer with our special software, included with the product.

What is new is that I can take video and a second later taken into the computer, send it by mail in a very simple way, put it on MySpace and YouTube quickly, or freeze frame to find a good photograph, you make a film or postcard with the various issues that have preloaded, such as Christmas or holidays, fun and easy way: for that is designed Flip, unlike the camcorders of the past, involving time and use the cable.

Currently, Flip is available only in USA, Germany, France and Mexico, and the product is manufactured in China and their price is similar to the United States. We want to enter and worldwide.

What are your expectations in Mexico?

We think the combination of low cost and high quality will revolutionize the video, so we brought it and we are excited to be in Mexico, after our success in the U.S. now we want to carry that success to other countries around the world.

Mexico is one of the first four countries to bring Flip, because we believe it is a great opportunity. A product like Flip can reach the Mexican community because we all have wonderful memories, moreover, by the penetration of the Internet and Cisco has had experience in Mexico, we think it will be very successful.

Mexico represents 25% of the U.S. market, so I think we’ll have a great success, we’re fortunate to launch the product this season, and look forward to many happy customers this year and next.

What consumers want in this type of device?

The Mexicans, like other consumers in Latin America and elsewhere, the first thing they want is an experience like it, and believe that what makes Flip unlike many other consumer electronics companies that we aim create products that draw the attention of the user to make it really easy to relate the experience with the device, the Mexicans are very passionate in his life, like to record and share things, like taking pictures and Flip is the kind of product that helps to enjoy life even more because they can record their videos and share them with friends, family or partners, is a great tool for areas like education and for many sectors.

How has the response of consumers to the product in other parts of the world?

We do not know what great things can create consumers. For example, celebrities love the Flip because they have the opportunity to be the photographers and usually always take pictures with them and now they can turn it around and make videos, we found many people who love the concept of Flip, is a tool that can make things really interesting, and Mexico is a great country for this product. Flip camcorder, which has been ranked first among the fastest selling U.S. and has sold millions of units in the last two years.

What are future plans for the device?

The idea is to make it more fun and also make it cheaper, because although the price is 3 thousand dollars, we believe we can lower it further, because we would like each family in Mexico has one and that its availability is not a problem at all we want to be able to record longer video. In the United States already have one that is able to record two hours, we also hope to bring to Mexico. There also have different colors and designs that soon will bring, we will try to make larger screens so you can share the video without a TV or computer screen because today is very small, and the idea is that they can enjoy the video on that screen. Today it is only to review the video, but you can not show it to five people at that size, we believe that we will have many more features while retaining the simplicity of the product, its elegance, its low price.

On the difference between the models, one is high-definition format that has a 16 “, is a very high quality with stereo sound, is a bit more expensive. The other also has high quality, but is smaller. In the end the difference is the quality and cost, but has the same options and the same software.

Are you planning to include more applications in the software?

Yes, we will include some features, but we feel that the applications you have are all the consumer needs. We do not want to make very complicated functions, because that remains fun to the consumer. Other electronics companies believe they include many features in a product gives value, but Cisco wants to offer a friendly device, think about what applications will really benefit the consumer and I think we did a good job in that regard, although there are always things new to share videos, and add voice or to incorporate it into the telepresence application video call, because in the end the idea is to combine the video with the networks. Maybe Flip Wireless will be one day to take video and immediately taken into the computer without connecting.

Cisco How do you see the power of video?

I think the video will replace more photos, YouTube is an interesting case, because everybody can be famous, it’s a new way to distribute video and that’s very attractive, because many people have something to share, has a story to tell, something that is important to them and want to communicate with many people. YouTube is a great platform to do that, but you can also flip a video and share it only with your family, anyone can make a video because a product is not complicated and can be a famous director, upload the video and become the next Spielberg. For example, in schools is a great tool, some people have thousands of fans on YouTube.

How does the future of video?

The future is communication, the sharing, combining the video with the voice, ie pick up a telephone and that both have telepresence, is to create connections in the world that never existed before, will be somewhere between the same room and talk on the phone and see the expressions of people, perhaps in 10 years, the video will be the main form of user communication and are working very hard to make it reality.

What are your plans within Cisco?

I’m responsible for all consumer products, both video and networking. I have a very solid team that helps me create new products, but for now I invite people to try the product that is already available in stores such as Liverpool and Office Depot, also we have the Flip Web site in Spanish, designed exclusively for Mexico.

Reference: El Universal, México.

The plenary of the Senate discussed the reform initiative that seeks to extend up to 100% foreign capital injection in fixed telephony. Marko Cortes, senator for the National Action Party (PAN) and promoter of the initiative that seeks to remove restrictions on investment in fixed telephony, says it is very likely that this is approved unanimously. “We hope that ultimately the initiative is approved, have the unanimous vote of the senators will give strength to the initiative once it reaches the House of Representatives,” he says. Interviewed by the newspaper El Economista, the legislature states that once approved the Expenditure Budget of the Federation 2010, the initiative to reform the Law on Foreign Investment in the fixed line segment and will force Internet for analysis and approval. For his part, José Manuel Mercado, an analyst at Frost & Sullivan, says that “after the opening of the economy, of maintain public policies aimed at improve market efficiency, it is clear that the opening of the fixed foreign capital is part of this opening as necessary”. There are two initiatives that seek to open up to 100% foreign capital injection in fixed telephony, one is in the Senate and one in the House of Representatives. The latest returned to committee for further analysis, after lack of time and was not voted in full before completion of the LX Legislature. A study into the Committee on Economy, to last summer, estimated the amount of investment that could be generated in Mexico during the first year after the reform, would be around 3,000 million dollars. In this regard, Senator Mark Cortez argues that the passage of this bill will be a catalyst for increasing the competitiveness of the sector, generate investments and jobs that “it badly needs the country.”

Reciprocity, the bump

The main difference between the two initiatives is that in the Senate includes a reciprocity clause that deals with equal conditions for Mexican investors to the countries they come from the capital to fixed telephony. Adriana Rodríguez Vizcarra, who was chairman of the Committee of Economy of the Chamber of Deputies, said: “We had to lobby all together, we were in favor of this initiative, but unfortunately it happened and was stuck”

Reference: El Economista, Mexico