How the digital transformation is shaping Indonesia's business opportunities for global ICT players

• Indonesia's digital economic growth benefits from its demographic bonus and the contribution of MSMEs, with rapid technological adoption serving as the primary driving force
• Opportunities arise from large yet suboptimally served market potential in Indonesia. Big chunk of the market is still underserved, underdeveloped and unconnected
• Indonesia’s unique conditions created massive opportunities for ICT players to grow their business in Indonesia
• There are five domains of ICT platform with great potential for ICT players to focus on

JAKARTA, 6 October 2022. Indonesia's national digital transformation is no longer just an aspect of economic development; it is now the primary driver of economic growth. The development of a country's digital industry is strongly intertwined with its economic foundation and can be viewed as a development cycle that constantly circulates and builds on top of one another.

To help investors better understand information, communications and technology (ICT) and digital transformation landscape, and the potential of Indonesia market, EY-Parthenon leaders, Anugrah Pratama, EY-Parthenon Partner, Strategy and Transactions, PT Ernst & Young Indonesia, and Hery Atmadja, EY ASEAN Digital & Emerging Technology Lead, Consulting Partner, PT Ernst & Young Indonesia, share their insights on macroeconomic, growth prospects, landscape, and challenges to enable Australian based ICT players better navigate in capturing opportunities in Indonesia. Both shared their perspectives, at the Global Tech Webinar Indonesia, organized by The Australian Trade and Investment Commission (Austrade) on Tuesday, 4 October 2022.

Anugrah Pratama, EY-Parthenon Partner, Strategy and Transactions, PT Ernst & Young Indonesia, says:

“We are fortunate to join the session and hopeful to witness future ties that boost the economic growth of both countries, as it is expected to drive the growth of technology advancement from both countries and maximize available opportunities in the market. EY has been trusted partners of various companies looking in investing and penetrating Indonesia”

Hery Atmadja, EY ASEAN Digital & Emerging Technology Lead, Consulting Partner, PT Ernst & Young Indonesia, adds:

“The importance of technology adoption has become more significant nowadays, to enable Indonesian enterprises to strive in the business and create a more tailored customer experience. This is one of many areas where Indonesia and Australia can collaborate.

As Indonesia provides unique opportunities and a unique market landscape, it requires the right, fit-for-purpose model to serve. Having local partners in the market most of the time help foreign company and investor to accelerate and better understand the market.”

Indonesia’s unique conditions created a massive opportunity for ICT players to grow their business in Indonesia

Indonesia’s economy has performed well over the past decades and is on a trajectory to become the 8th largest economy by 2040. Supported by demographic and MSMEs contributions, as well as rapid technological adoption, the country has become the fastest growing digital economy in Southeast Asia and is forecast to gain $173 billion from the communication and telecommunication industry by 2040.

However, Indonesia's digital ecosystem, both from a demand and market perspective, is still in its infancy stage and requires support to grow further. There are undeserved, under-developed, and unconnected markets waiting to be tapped in, which represent the gap between regions; nascent solutions for SMEs; low but growing digital and financial literacy; limited access to funding, knowledge and products; among many others.

From the perspective of industry players, challenges such as inefficiencies in serving customers - logistics and speed; high cost of operations and disturbed IT supply chain; and limited market intelligence, remain to persist. These open the arena for digital and ICT solutions to play in order to solve and bridge the inefficiencies in the market. Pick any industry and we can easily identify potentials on how ICT and technology can bridge the gap and solve the problems.

Anugrah Pratama says:

“We see these unique conditions have created the right environment and big chunk of opportunities for ICT players in various sectors, to blossom. Given there is a massive opportunity for ICT business in Indonesia, with the emergence of 9 new unicorns (2 decacorns). It really shows how technology can be used to improve the quality and activities in various sectors”

There are other reasons that make Indonesia a perfect market. First is our large customer base – Indonesia has a large and growing population with increasing purchasing power, which allows ICT players to build a solid customer base in Indonesia. They are digitally savvy and willing to try new things powered by technological innovation.

Second is innovation - The characteristics of most of the Indonesian population force ICT players to deal with various customer preferences, triggering creativity and innovation in developing the go-to-market strategy and product development.

Third is diversification - The broad range of needs and problems faced by customers in the market provides potential for ICT Players to expand horizontally and diversify their product offering to bring additional value to the user. All sectors have provided room for ICT to serve tech start and grow. Indonesia is also a perfect “training ground” for any ICT and tech startups for them to nurture and become regional champions. Experiences in capturing the Indonesian market and its complexities have been used to strengthen players’ capability and innovation and prep them to become regional champions. Case in point, GoTo which is now considered the most valuable super-app in the region – started its journey by conquering and learning from Indonesian market.

Hery Atmadja further concludes:

“These unique conditions – large customer base, innovation and diversification – may result in stronger ICT market opportunity. Therefore, the collaboration between Australia’s IT Company and Indonesia’s ICT Company will allow both parties to grow and further develop both their technology sector to another level.”

The five domains of ICT platform with great potential for ICT players to focus on
EY with its long-standing experience has categorized 5 domains of ICT platforms in Indonesia that ICT players should focus their activities on, which are covering Cybersecurity; Infrastructure; Data and Analytics; Enterprise Resource Planning (ERP) & Back-End Operation; and Front-end Interface & Product or Service Development.

Going ahead, the question lies in how to drive Indonesia’s unique opportunities into a winning strategy. The ample strategic collaboration between Australia’s ICT Company and Indonesia’s ICT players is driven by opportunities and geographical proximity. A potential form of collaboration may cover market expansion, whereas Australia’s ICT players could partner with Indonesia’s ICT players to distribute and integrate their products to rapidly tap the Indonesian market, and vice versa. Also, Australia’s and Indonesia’s ICT players could tap into the best talents in both countries to develop strong R&D teams in Indonesia. Last but not least, Australia’s ICT players could set up production plants in Indonesia while introducing the latest ICT development to the Indonesian market. This is to tackle the local content requirement as well in Indonesia.

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Notes to Editors

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