BCG Market report: Indonesia among APAC’s fastest growing IT market

A report released by Boston Consulting Group last week revealed that Indonesia is one of the fastest growing IT markets in Asia-Pacific. With a projected compound annual growth rate (CAGR) of 25% in the next five years, the public cloud market is expected to grow from $0.2 billion in 2018 to $0.8 billion in 2023.

Many of the world’s major cloud providers are considering setting up their servers in the region. Indonesia becomes the next lucrative market thanks to the rapid growth of its native businesses. There are now four unicorns in the country and each of them relies heavily on public cloud services. One of the examples in the report is the ever-expanding Gojek.

Gojek relies on data analytics tools to discover new opportunities and expand its business. Providing the best customer service has always been its main focus, hence why it needs to automate key processes in its services to make sure that everything runs smoothly. To this date, Gojek has managed to cater for its increasingly active users by utilising available public clouds. 

The next case study is BRI, one of the country’s largest banks. By taking advantage of public cloud services, BRI can now provide fintech services as far as the Internet reaches via its digital banking application. The bank expands this banking model by recruiting agents throughout the country to carry out banking services for customers. This model allows people in rural areas to access banking services.

Another case study in the report is Alfamart, one of the most popular local minimarket chains. According to the report, the minimarket chain discovered that public cloud services allow it to boost efficiency and productivity while reducing costs by 10%-15%.

Alfamart used public cloud services to collaborate and improve communication on priorities, automate workflows and achieve continuous improvement by measuring targets. Alfamart International Business and Technology Director Bambang Setyawan D. said that public cloud helps the chain of 13,000 stores operate like a start-up company.

However, the report also highlights the challenges in developing the public cloud sector. First is gaps in organisational capabilities, as demand for cloud-native talents will outweigh supply. Second, the lack of clear understanding of data privacy. This remains a concern as many digital users in the country have different levels of digital literacy and clear understanding of how important their data are.

The last challenge is the lack of robust network infrastructure. Despite the government’s development plans, Indonesia’s communication infrastructure is not sturdy enough to support the increasing demand for public cloud and provide stable services.

The report estimated that if Indonesia’s public cloud growth moves at the current pace, the overall cumulative economic impact between 2019 to 2023 is expected to reach $36 billion, equivalent to 0.5% of the annual GDP. Public cloud growth will also create 70,000 direct jobs, equivalent to 0.6% of new jobs created in the previous five years. 

The report also suggested two scenarios of how public cloud could go. The first scenario is The Big Bang Scenario, in which all stakeholders join forces to accelerate growth. This scenario includes but is not limited to the government adopting international digital policies, cloud service providers stepping up their investments, large companies training tech-savvy talents and entrepreneurs building native digital businesses. If this were to happen, the projected economic impact would be $53 billion.

The second scenario is The Sluggish Growth Scenario, which will happen if the challenges become more adverse. BCG stated that this scenario will stall Indonesia’s growth and put the country behind other markets. This will also mean failure to create more jobs in the field.