Towards the end of 2019, then communications and information minister Rudiantara stated that the country's spending on ICT accounted for 0.1% of Indonesia's Rp 15,833.9 trillion GDP for 2019, or roughly Rp 1,583.39 trillion. Despite the seemingly large figure, Rudiantara stated that there was still plenty more to be done, particularly on widening the internet infrastructure more universally across the archipelago. The government's latest internet fiber optics investment, Palapa Ring, is said to be able to only reach 514 cities and regencies.
PT Metrodata Electronics is one of Indonesia's largest IT distribution and solution companies. The company distributes IT hardware and software products through more than 4,000 channels and dealers located in over 150 cities across Indonesia. Furthermore, the company has branches in 20 cities that serve the needs of its clients. In total, there are over 100 IT brands that are included in Metrodata's distribution network. In 2019, the company reached its highest sales figure to date, booking Rp 15 trillion in revenue, up 18.5% (YoY) from 2018's revenue of Rp 12.71 trillion. The company was also able to grow its 2018's net profit by 23.9% to Rp 357.07 billion in 2019. Looking at the statement from Rudiantara, there is still undoubtedly a huge room for the company to grow.
Alas, the COVID-19 pandemic that entered Indonesia in March this year has stagnated Indonesia's economy and threatened many companies’ going concern. Despite the economic downturn, Metrodata was able to slightly surpass its 2019 first semester performance, booking Rp 6.2 trillion in revenue, up from last year's Rp 6.1 trillion. Metrodata CEO Susanto Djaja thinks that many corporations are investing in digital transformation projects to anticipate a future where employees will be working remotely under the "new normal" scenario.
"April and May were our toughest months so far this year with almost all IT stores physically closed and people's purchasing power reduced as some were laid off. Despite the uncertainty, with remote working becoming more of a trend, we project that many corporations will invest more in digital transformation during the second semester. This will positively impact Metrodata as there will be higher spending in the IT industry, particularly on IT solutions."
At the end of this year's first semester, Metrodata's IT solutions and consultancy sector has grown by 13% (YoY). Meanwhile, the company's distribution segment experienced a 3.5% decline. Due to the government's implementation of large-scale social distancing measures (PSBB), almost all IT shops in shopping malls and retail centers were forced to close. Sales relied mostly on ecommerce platforms, which resulted in an adverse impact on Metrodata's performance in its distribution sector. The company experienced a 2.5% revenue drop (YoY) in April and a 28% decline in May. However, it managed to bounce back with a 20% increase in June, when PSBB was relaxed and transitioned into "new normal."
"In June, with IT stores allowed to reopen, many of our dealers started increasing their hardware and software orders to us. Some of them ran out of computers, laptops, and other IT accessories to sell to these retail stores. Fortunately, due to the bounce back in June, Metrodata ended up equaling the revenue we had in the first semester last year," Susanto says.
The increase in Metrodata's IT solutions and consultancy was driven by growing purchases from several industry sectors like telecommunication and financial services. Sales from clients in the telecommunication sector experienced a 49% spike during the first semester. In addition, purchases from clients in the financial sector booked an 11% growth. Some of these clients include CIMB Niaga, Danamon, Maybank, Telkomsel, and XL Axiata. On the other hand, Metrodata's revenue stream from buyers in the manufacturing sector suffered a 30% decline during the period as many factories were forced to temporarily shut down as a safety protocol in response to the growing COVID-19 cases.
"We provide pillars of digital solutions which include cloud services, big data & analytics, business applications, hybrid IT infrastructure, IT security, Internet of Things (IoT), and artificial intelligence," says Susanto.
At the end of 2019, IT product distribution amounted to 78% of Metrodata's revenue, while IT solutions and consulting collectively contributed the balance. However, this year's first semester, IT solutions and consulting increased its contribution share to 28%. Going forward, Susanto says, the company aims to grow the IT solutions and consulting revenue contribution to above 30% as they bring a higher profit margin. The margin from Metrodata's IT solution and consulting services can reach as high as 16% Whilst in comparison, its product distribution lines earns a margin of 5-6%.
In terms of market share, Susanto estimates that Metrodata holds a 20-30% market share in the distribution sector for CPUs and laptops and roughly a 10% market share in the IT solution and consultancy segment. As of now, Metrodata operates only in Indonesia however, Susanto says that his company also caters to overseas companies that conduct businesses in the country.
When asked on Metrodata's competitive edge as opposed to competitors, Susanto highlights the company's massive distribution network which makes it attractive for both hardware and software dealers to transact with Metrodata. He also believes that the company's partnership with over 4,000 IT dealers to be one of the largest in Indonesia, with over 150 cities spread across the country. However, he says the competition has been reduced due to the nature of the industry.
"We've noticed that there have been fewer IT distribution companies in Indonesia over the last decade as many of them are forced to consolidate together. With the IT distribution sector having thin margins, many IT distributors joined together to stay competitive," he says.
At the beginning of the year, Metrodata allocated Rp 260 billion for its capital expenditures (capex) in 2020 and as of July, the company has spent over Rp 200 billion of this. Due to the growing demand for both the company's distribution and solution services, Metrodata has now adjusted its capex budget to Rp 450 billion. According to Susanto, the largest proportion of the capex was invested in purchasing IT equipment to be rented out to corporations, mostly in the oil & gas, banking, and fintech industries. Most of the rental agreements are recurring with periods of between 3 to 5 years. Some of the capex was also utilized to improve the company's internal systems to enable its sales staff and consultants to serve Metrodata's clients faster and more remotely. In addition, the company has also improved its recruitment and payroll systems.
The company currently has 1,500 employees and Susanto claims that there have not been any lay-offs since the pandemic entered Indonesia. However, the company has temporarily halted hiring new employees to cut costs during the economic downturn. Moving forward, Metrodata is staying realistic on its earnings projection for the remainder of this year.
"Our objective is to maintain our revenue and profit to equal the amount at the end of last year. For 2021, assuming the pandemic is over by then, we aim to grow our revenue by 5-10%," says Susanto.