To put it mildly, the Year of the Ox 2009 has been ‘disruptive and unsettling’ for Asia’s IT and communications industries. Everybody has high hopes for a major improvement in the Year of the Tiger 2010. Hong Kong’s enterprise IT industry was perhaps hit the hardest by the recession, along with Singapore, due to their relatively large exposure to financial institutions, and the disrupted plans to set up technology centres; Malaysia fared better.
Indonesia managed to technically stay out of recession, and analysis firm Business Monitor International (BMI) expects the Indonesian IT market to grow at a compound annual growth rate of around 13 per cent up to 2013, one of the best regional IT growth prospects for the next five years.
Earlier this year, the Indonesian government issued a ministerial decree to local government offices across the country, requiring them to adopt open source software by 2011.
The Philippines is also seen by some as outperforming other Asian countries in the year to come, because its business process outsourcing (BPO) industry, which accounts for about 30 per cent of IT spending, continues to grow.
BMI, which researches country risk, industry and company intelligence, expects Singapore’s domestic IT market to increase from a projected US$5 billion in 2009 to around US$6.1 billion in 2013. BMI says “significant government information and communication technology (ICT) spending (will) help to compensate for deferred consumer and enterprise IT spending. The Lion City’s IT market is projected to remain in positive territory this year.”
BMI’s fourth quarter 2009 research indicates that the Hong Kong IT market will grow from around US$4.5 billion in 2009 to US$5.9 billion in 2013. “The market was boosted in the second quarter of 2009 by a revival in consumer spending, while long-term drivers include investment by key IT verticals such as financial services and logistics,” BMI says. “The Hong Kong government should also continue to spend on key modernisation and informatisation initiatives as part of its ‘Digital 21’ programme.” For Malaysia, BMI forecasts that Malaysian IT spending will grow to around U$4.5 billion in 2010, from US$4.3 billion in 2009. “Despite a difficult economic and political situation, the market has strong growth fundamentals, including low PC penetration, rising incomes and a high tech-focused national development plan,” according to BMI researchers.
Yes, some Asian countries and tech companies, particularly those focused on security, business process optimisation, virtualisation and cutting costs, have fared quite well in the past torrid 12 months, but they are few in number.
Most Asia enterprises are thanking their lucky stars 2009 has passed, and are hoping the cautious air of optimism in the world markets is justified during this Year of the Tiger 2010.
Asia leading the way
This optimism is supported by research house Gartner, which believes that the timing and strength of the recovery will still vary across regions, with Asia leading the way, the US following and Europe lagging behind.
In its recent report ‘Gartner Perspective: IT Spending 2010’, the professional forecaster states that “recovery will also vary across industries, with consumer markets reviving first, followed by the housing and business equipment sectors”.
In 2010, worldwide IT services spending is forecast by Gartner to reach US$816 billion, a 4.5 per cent increase from 2009.
Global hardware spending will be flat totalling US$317 billion. Software spending is projected to return to growth in 2010, with revenue reaching US$231 billion, a 4.8 per cent increase from 2009.
Gartner says movement toward SaaS and cloud computing, shared services, and more selective outsourcing will take firmer shape as near-term priorities to address constrained IT budgets.
Hardware projects continue to be stalled for PCs, servers and storage, says Gartner, further pushing down the new sales of infrastructure software that are dragged by hardware sales. Also, new sales of enterprise application software in the manufacturing and financial sectors have completely stalled as these vertical sectors sort out their long-term viability.
Overall spending in the enterprise network equipment market will be driven by changes in gross domestic product (GDP) and employment through 2011, particularly in mature markets, the leading research house maintains.
“Spending on areas that promise cost savings, such as WAN [wide area network] optimisation and secure sockets layer [SSL] virtual private networks [VPNs], will be less influenced by changes in GDP and employment levels.”
Gartner concludes that the carrier network infrastructure market is suffering a late cyclical impact from the financial crisis, with negative growth in 2009 and 2010. However, the researchers believe “the long-term fundamentals are intact and will drive a moderate rebound of the market from 2011 to 2013”.
“Meeting the challenges of 2010 will require CIOs to make harder decisions that impact more than just the IT organisation,” the Gartner report states. “They will need to lead these resources to create results that go beyond their own productive capacity.”
Richard Gordon, vice president, Gartner Research, says the global economic downturn has continued to weigh on the ability and desire of businesses and consumers to make IT purchases.
“While initial growth in IT spending in 2010 and 2011 may come as the result, directly or indirectly, of the various government stimulus packages announced around the world in recent months, there will be a return to more sustained growth in IT spending in 2012 and 2013 as the economic recovery unfolds,” Gordon states in the report.
“IT budget cuts may have slowed market growth in the short term but, even in the toughest of business environments, enterprises must preserve short-term spending on critical business operations and long-term technology investments.”
For the bigger picture, Gartner forecasts that worldwide IT spending “is expected to return to growth in 2010 as revenue is projected to reach US$3.3 billion, a 3.3 per cent increase from 2009”.
A cohesive view
In its report, Gartner says: “Leading the IT organisation in 2010 requires a clear vision for melding technology, business process and financial management into a cohesive view of IT investments and priorities.”
Gartner Executive Programs group vice president and head of research, Mark McDonald, says that leading in 2009 was “relatively simple as economic conditions headed in one direction”.
“Now CIOs face an array of business, operational, technical and strategic challenges in 2010 as conditions may or may not improve,” McDonald says. “Some 88 per cent of enterprises reported reducing the IT budget during 2009. “Even with strong increased revenue in 2010, CIOs will face the future with essentially the same resource levels they had in 2006 or 2007.”
He says CIOs report that unlike past recessions, they are being pulled in two directions at once. The business needs cost savings to protect financial results—yet it also needs new solutions to retain current and attract new customers.
Cost reduction challenges reflect the enterprise’s overall need to better match resources to revenues. Declining revenues, in some cases by more than 30 per cent, require adjusting every resource in the company—including IT,” McDonald says. Gartner is also predicting robust growth in another technology device direction—e-book readers.
Allen Weiner, research vice president at Gartner, expects 2010 to be the year when e-book readers really become popular consumer electronic devices, culminating in e-reader “mania” for the 2010 holiday season.
“With the entry of new players, such as Barnes and Noble, into the e-reader market and an increase in models from Amazon and Sony, consumers began to have choices in single-purpose e-reading devices in 2009,” says Weiner. “Among the product differentiation points are support for E Ink’s electronic paper technology, support for further book formats, and the ability of some devices to allow consumers to purchase content wirelessly and to synchronise content across devices.”
Gartner believes it is too early in the evolution of the e-reading market to know whether smart phones will become powerful standalone devices for reading books or whether they will complement other devices, such as fixed readers.
“Book applications for smart phones have the potential to become a bridge to other devices such as tablet readers and netbooks,” says Weiner. “Apple, for example, could migrate the more than 500 book applications in the iTunes store to a tablet device and Google, which recently announced a browser-based e-reader, could offer applications for Android-based devices of various form factors.”
Longer-term, Weiner believes the future is bright for e-readers and advised publishers to be bullish in the digital distribution of e-books, newspapers and magazines. “It’s the perfect time for a trial and to establish relationships with others in the value-chain—that is, service providers and digital warehouses—that can be positioned to assist in a rapid deployment if the market takes off earlier than anticipated,” he says.
Asian I.T. growth
IT market intelligence firm IDC, forecasts that information, communications and technology spending and growth in the Asia Pacific excluding Japan (APEJ) will reach US$184 billion in 2010 with a 7.7 per cent growth over 2009.
IDC expects the lion’s share to come from India and China, although all countries are expected to experience varying degrees of growth on the back of a dismal 2009.
“While budgets are still tight, and the buying patterns may have changed irrevocably from what the ICT industry has been accustomed to, the fact remains that there is cautious optimism in the market with some interesting pockets of surprising growth,” says Simon Piff, IDC’s head of the Asia Pacific predictions committee for 2010.
“The net result of the economic slow down has been an overarching change in how and why companies make new technology investments,” Piff says. “Most notably, the key areas of focus going forward will be in customer care, client retention and wallet-share growth enabling technologies. Additionally, IDC foresees projects that generate immediate ROI and tangible improvements in managerial and operational efficiencies will continue to be the projects that garner quick corporate ‘buy-in’.”
Research house Frost & Sullivan recently analysed the 2009—2010 mobile and wireless market and found that wireless subscribers actually increased during the recession.
Its principal analyst, Gerry Purdy, believes mobile and wireless will be one of the leading industries to fuel recovery in 2010 and that smart phones and Windows 7 notebooks will lead the way.
Hong Kong’s MTR head of IT, Daniel Lai, says key lessons from 2009 are that “lean IT is good for organisations and IT can enhance productivity” and that “steady growth is better than erratic growth and retractions”.
“The focus for 2009 will be on delivering greater business value, creating new business models with IT, applying innovative and practical IT solutions to streamline processes or enhance productivity,” Lai says. “Key technology trends will be cloud computing, Web 2.0, and unified communications and collaboration.”
He says senior IT executives will approach their work in 2010 differently, developing more rigorous business cases to justify IT investments, using services instead of high capital spending, and more outsourcing. They will also become more customer-focused.
IT budgets up
Ovum is a firm providing advice on the commercial impact of technology and market changes in telecoms, software and IT services. Ovum’s senior analyst—industries, Adam Jura, says he expects “a slight loosening of the constraints on IT budgets (in 2010) as the wider business focuses on “taking advantage of the upswing”.
“Projects will continue to veer on the side of caution with tactical projects still more in favour,” Jura says. “IT projects that deal with the fallout of business model restructuring will continue to be a priority as companies look to streamline altered processes with the support of IT. Enterprises will start to invest in growth foundations for future projects, both IT and line of business.”
He says a greater focus will be put on the service delivery options available to businesses, including cloud and outsourcing engagements, as a shift to a more OPEX-centric model continues.
“In-house versus out-house will continue to be a question for CIOs,” Jura says.
On social networking for enterprises, Jura says there still exists significant scepticism in the minds of CIOs.
“However, the high usage of such technology by employees in their personal lives suggests that communication may be enhanced in a corporate environment,” he says.
As one of Asia’s most experienced technology leaders, and a longstanding member of MIS Asia magazine’s editorial advisory board, Lai believes customer services and loyalty plus business-led IT will be enterprise IT strategies likely to dominate in 2010. He expects to see better alignment and alliance with business functions, IT, and business vendors to meet common goals. Hong Kong Computer Society president, Sunny Lee, the executive director, information technology, for the Hong Kong Jockey Club, is also a member of the MIS Asia editorial advisory board.
He says in the coming year, more enterprises will see IT as a strategic weapon for their business, and will realise that IT will be critical to their long-term sustainability and success.
“We will see more and more CIOs reporting to the CEO and joining the company’s top level management board,” Lee says. “CIOs will be called upon to help formulate business strategies for their enterprises, and to turn IT into a catalyst for business innovation.
“One thing for certain is that 2010 will be a year filled with uncertainties. To create and lead an agile IT organisation, IT executives must stay close to their business, clients and competitors, more than ever before, to the point that they have the ability to anticipate the next surprise and prepare ahead of time.
“To cope with what lies ahead, IT executives must make their IT organisations a truly agile organisation,” Lee says.
David Wong Nan Fay is chairman of Outsourcing Malaysia and the immediate past chairman of PIKOM,
Malaysia’s national IT association.
He says the emergence of next generation ICT solutions such as Web 2.0, dotnet, SaaS, cloud computing, open source solutions and e-commerce have dominated the IT landscape in 2009.
Wong has a reasonably optimistic outlook about the future of IT outsourcing. He says 2009 showed that “outsourcing should be seen as a new avenue for enterprises to consider in improving their productivity and operational efficiency, especially in the space of business process outsourcing (BPO) and information technology outsourcing (ITO)”.
He says that, despite concerns of unemployment, corporations in the US and Europe are expected to continue to offshore their non-core activities, for the benefit of countries such as Malaysia and new outsourcing cities in India, Philippines and China.
“They (US and Europe) continue to face cost pressures and need to focus on their own core activities to operate effectively to ensure reasonable shareholders’ returns,” he says. “Nearshoring from Australia, Singapore, and to some extent Japan, to countries such as Malaysia, is also expected to continue. Therefore Malaysia stands to gain from this trend.
“However, to remain relevant and continue to grow,” Wong says, “Malaysian providers need to find their niche in high-value outsourcing services.”
Tan Seng Chee, CIO with, City Developments, a Singapore-based international property and hotel conglomerate involved in real estate, says the toughest tasks for senior IT executives in the Year of the Ox were deciding and agreeing on the projects to push back or cut.
He says one key lesson from 2009 is that senior IT executives need to be “better prepared for the rapid changes in the business environment”.
Tan says the past year also demonstrated that CIOs need to “ensure all projects are prioritised with users and senior management so quick decisions can be made concerning projects to be cut or delayed when required”.
He cites virtualisation, business intelligence (BI), green IT, cloud computing and planning for migration to Windows 7 as some of the key IT technology trends and focus areas for 2010.
Key 2010 strategies
“Enterprise strategies likely to dominate in 2010 include cost containment—reduction strategies, alignment of green IT with corporate green strategies plus support for better and faster business decision-making through BI solutions,” Tan says.
“For the coming year, one word that best sums up my attitude is ‘circumspect’.
“Like most, I am hoping for a stable, sustained recovery in the economy in 2010. We all hope that the governments can co-ordinate their acts to bring this about.”
Hot 2010 business tech trends
- Business intelligence
- Cloud computing
- Green IT
- Mobile and wireless
- Planning for migration to Windows 7
- Software-as-a-service (SaaS)
- Unified communications and collaboration
- eb 2.0
IDC’s top 10 predictions for 2010
1. The maturing of the cloud: SLA implications on service providers will improve and emerge. IDC believes the combiniation of five nines guarantees (‘5 nines’ refers to a service availability of 99.999 per cent), plus robust business continuity and disaster recovery (BCDR) capabilities will be the new ‘killer application’ in cloud services. In 2010, large organisations that are ready to make that leap to cloud services will do so demanding the same SLAs with BCDR capabilities.
2. Business analytics for better business. In 2010, IDC expects business analytics to emerge as a key technology area to help CIOs manage cost, comply with regulations and, most importantly, grow the business as information is treated as a strategic asset within the organisation.
More advanced and sophisticated forms of analytics solutions are actively being implemented by Asia Pacific organisations.
3. The tipping point: The inevitable adoption of social media in enterprises. The Year of the Tiger 2010 will be the year social media hits ‘critical mass’ in acceptance and adoption. IDC believes this convergence of economic necessity, mature enabling technology such as business analytics tools, and increasing market awareness, will mean 2010 will be the year where social media truly gains traction and establishes itself as a natural and accepted tool for Asia companies, CIOs, and CMOs.
4. Converged fabric and the evolving data centre. IDC believes converged fabric solutions significantly address some of the IT sprawl and the resulting large amount of expenditure on maintenance. Prevailing economic conditions have fuelled the hunger to pare cost in data centre management, and maintenance will be one of the most powerful motivators for the demand of converged fabric.
5. Evolutions of SaaS to KaaS. The increasing maturity and acceptance of software-as-a-service (SaaS) offerings will combine with decreasing profit margins in the business process outsourcing (BPO) market and will add another layer to the cloud services stack. Knowledge-as-a-service (KaaS) extends the SaaS delivery model by its addition of intellectual property (IP) related to a particular horizontal process or industry to the standard SaaS offering. This new level of cloud services will enable SaaS and BPO vendors to form partnerships for the delivery of KaaS solutions with industry, and/or process-specific IP embedded within them.
6. Smart phones on the rise in emerging economies. India and China remain the twin engines of growth for the overall mobile segment.
IDC expects the two countries to collectively chalk up more than 295 million units in handset shipments in 2010. The key driver of smart phones in the emerging markets is the increasing sophistication of mobile users.
Shipments of converged devices in China are expected to grow from 7.5 per cent of all shipments in 2008 to 13.5 per cent in 2010. For the mobile industry, this represents an enormous and growing prospect.
7. The dawn of the enterprise appliance: 2009 saw a number of product launches that started to change the way vendors were thinking about hardware stacks and solution offerings. This trend looks set to continue in 2010 and it is only a matter of time before hardware vendors emulate this proposition for dedicated, preconfigured hardware and storage for specific applications and workloads—the dawn of the enterprise appliance.
8. Revisiting chargeback: Accountability across LOBs for IT.
The ability to effectively provide chargeback functionality already exists at many levels: desktop, storage, and certain applications. IDC believes the full implementation of Chargeback 3.0 is some years away, as there are still levels of technical complexity that need to be addressed within certain IT platforms. This is a highly politically charged area with ownership and accountability transitioning, through. However, once the full benefits of Chargeback 3.0 are understood by the business owners, these are likely to be minimised, and vendors and IT management should have a road map.
9. Intelligent X: Building a smarter and more measurable world. IDC believes that 2010 will be a year of multiple ‘intelligent’ initiatives and tenders in Asia, as major governments and cities try to beat each other to the goal of securing foreign investment and foreign technology participation in this region. In these ‘intelligent’ initiatives, a new business model is emerging as a ‘holy trinity’ of government, ICT vendors, and citizens; having all three working in sync is required to make inroads in emerging countries.
10. Machine-to-machine (M2M): The evolution of ‘device grids’ to offer new business and efficiency models: IDC believes that with more than 600 million fixed-line subscribers in APEJ and more than
1.6 billion mobile subscribers in APEJ, the addressable opportunity for machine-to-machine (M2M) will be roughly 10:1 or over 20 billion M2M devices connected to the public and operator networks in the region by 2020. The emergence of M2M will lead to new wholesale and retail business models that will focus specifically on providing the latency and quality of service needed for commercial M2M applications such as surveillance, smart electric grid, emergency services and environmental sensors.
Booming 2010 digital devices
- e-Book readers
- Smart phones
- Touch screen devices
Ovum’s 2010 predictions
> Analytics and information management across the extended-enterprise will also see a higher priority in 2010 as enterprises look to drive more effective decision-making in a more timely fashion.
> Cloud computing pricing models still have some way to mature before achieving true incremental costing. However, CIOs will need to ensure that easier resource provision doesn’t lead to cost blow-outs. Businesses will also need to evaluate the multi-tenancy ‘one size fits all’ of some cloud offerings against the specific requirements of their enterprise.
> Green IT as a concept and a practice will also see increased focus in 2010 as enterprises look to improve their sustainability performance.
IT will be looked to in two aspects: improving its contribution to the company’s overall environmental performance (reducing carbon emissions); and as the enabler of greener business processes (e.g. emissions trading, supply chain management).
> Social computing (networking) options will be examined by more companies seeking to enable better collaboration and drive productivity. Getting such projects across the line in terms of budgeting will be challenging for CIOs given the somewhat speculative nature of such technology in most Asia Pacific enterprises today.
> Windows 7 will emerge as an investment decision being faced by CIOs as support for XP lessens and hardware refresh cycles are initiated.
Such a transition will be a challenge for CIOs as they look to ensure legacy application support and assist in user education. MIS Asia
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