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End-user perception studies:
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Study by geographic demand, end-user demand, buying behavior, vertical industry penetration
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In 2009 the global economic slowdown had a marked impact across Asian IT markets, with spending growth declining sharply in states like Malaysia, but holding up relatively well in others like Australia. Australia’s top ranking is in part due to government ICT programmes, such as the government National Broadband Network project. The ambitious broadband plans will drive development of Australia’s digita economy and feed demand for PCs. Government tenders will also generate opportunities in years to come in areas such as education, e-government, transport and healthcare.
The two smaller, but mature, IT markets of Singapore and Hong Kong take second and third spots in the rankings table respectively, due primarily to their high country structure scores. Hong Kong continues to offer investors in the IT field opportunities associated with its growing links to the vast Chinese market. Singapore benefits from high broadband penetration and initiatives such as the government’s ambitious ‘Intelligent Nation 2015’ plan and the standard operating environment.
On the downside, the continued restructuring of both economies to a more service-oriented economic model may limit long-term growth prospects, although this also brings opportunities in sectors such as financial services and banking. Businesses will probably remain cautious and value focused in the near term. By Q110, surveys showed significantly better business sentiment, and vendors reported a boos from projects delayed from 2009.
South Korea, in fourth place in our table, was hit by the global economic downturn, but we forecast that Korean per capita IT spend will rise from US$750 in 2010 to US$921 in 2014. Consumers seem willing to upgrade their PCs, and there is also a trend for households to own more than one PC. There will be a number of key growth areas such as industry-specific software applications, and IT outsourcing, which is expected to show a strong demand trajectory.
In China, factors such as the vast potential rural market, government spending and demand from key verticals such as telecoms should drive growth. Key sectors currently include telecoms, government, energy, social security, education and transport. However, there are still risks associated with IP rights protection and piracy and a lack of business environment transparency. Pressure on hardware prices is also a risk in the current environment.
Malaysian IT spending growth will be driven by a rise in the current PC penetration level of around 35%, rising incomes and a high-tech-focused national development plan. The subsidised roll-out of a highspeed broadband network will address a relative lack of information and communication technology (ICT) infrastructure outside the Klang Valley. There are also increasingly attractive opportunities in the IT services area as the government implements measures to make Malaysia a growing regional services and outsourcing hub.
In the Philippines, the IT market will be driven by further growth in the local IT and business process outsourcing (BPO) sector. The Philippines has a lower PC penetration than many other Asian countries, and the IT market offers correspondingly high growth potential over the forecast period. However, there are challenges such as labour shortages and rising wages.
In 2009, the Indian authorities announced a series of measures to stimulate the domestic IT market as well as assist domestic IT companies. The potential is plain, with less than 2% of the population owning a computer, about one-fifth the level in China. Realisation of this long-term growth potential depends on fundamental drivers such as raising India’s low computer penetration, rising incomes, falling computer prices and the government’s ambitions to connect the vast rural areas to the outside world.
Three South East Asian markets occupy the final three positions in our table, with low rankings due primarily to business environment factors, despite considerable growth potential. In Thailand, once an upturn starts, IT spending could spurt forward again as customers make good on pent-up demand. The fundamentals of growing affordability and low PC penetration should keep the market in positive territory during the forecast period. A number of factors should also support momentum, including a Government PC for Education programme, and 3G mobile and WiMAX broadband service roll-outs.
Similarly, with ICT penetration of only around 20% and development restricted to richer areas such as Java, the Indonesian IT market has much latent growth potential. BMI expects the Indonesian market to bounce back strongly from the deceleration last year and become one of the best regional IT market growth prospects over BMI’s five-year forecast period. The SME sector will drive demand for basic hardware and applications as enterprises look to enhance productivity
Sri Lanka’s IT market has felt the effects over the years of the country’s and political economic instability, from disruption of distribution channels, and a flourishing grey market, to underdeveloped telecoms infrastructure. However, the market will feature on IT vendor’s radar as among the best potential growth prospects in South Asia. Computerisation has only just got started in the government service, and major public and private sector organisations remain largely underpenetrated in terms of
basic enterprise software.
Across Asia, government information and communication technology (ICT) initiatives and growing affordability will drive increases in PC penetration during ourforecast period. While some cities and regions stand out, there is an unbalanced pattern of regional development, with PC penetration in countries like Singapore being above 50%, while in other countries, such as Indonesia, it is less than 2%.
The two Asian giants, China and India, embody the region’s growth potential, as in both countries computer ownership remains the preserve of a minority. In China, PC penetration was only around 16% in 2007 - although it was far higher in cities like Shanghai and Beijing - and projected to pass 25% overall by 2013. In India, less than 2% of people own a computer. However, some 45% of the population is under 25, which provides a promising demographic context for increased PC ownership. The government’s ultimate target of 1bn internet-connected computers in India is equivalent to the total estimated number of
PCs in the world today.
Around the region, affordable computer programmes are finding favour with governments. In early 2009, China announced a new subsidised PC programme aimed at rural residents. In the Philippines, where penetration is currently around 5%, the government launched its PC4All programme in 2007. In Indonesia, penetration of around 2% could double within the forecast period if government initiatives are followed through. The Indonesian government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio of PCs to students in public schools to 1:20.
A similarly broad range is found with respect to internet penetration. India and Indonesia are now above 17% penetration, despite a lack of fixed-line infrastructure in those countries. Both have deployed fixedwireless technologies as one alternative solution and overall penetration should pass 30% in both by 2012. The fastest growth is projected for India, in which penetration is projected to increase from 17.7% to 44% by 2013, while Indonesia suffers from high tariffs.
Some 46% of Malaysians had internet access in 2008. Across the region, government programmes are an important driver of ICT penetration. The Chinese government has a five-year plan to make the internet available in every administrative village in central and eastern China and every township in the west.
Dial-up technology is still the dominant access method. However, even in developing markets, the number of broadband subscribers continues to gain ground steadily. In China, broadband penetration is on course to reach 31% by 2014. In India, where the government designated 2007 as ‘the Year of...