IDC Predicts Another Solid Year of Growth for the Southeast Asia IT Services Market

Kuala Lumpur, Malaysia, February 13, 2012 – Against the backdrop of global market volatility and economic uncertainty, there continue to be questions on how Asia will step up, respond and perform. While local nuances in each country create varying dynamics that impact the growth potential of the IT services market, IDC expects another year of solid growth for the industry in Southeast Asia.

"2011 was a colorful year for the IT Services market in Southeast Asia; from Economic Transformation Programs in Malaysia to the inflation battle in Vietnam, from cloud advancements in Singapore to the PALAPA ring in Indonesia, from a transitioning government in Philippines to the flood waters in Thailand. These country-level activities, which are continuing into 2012, lead IDC to see key opportunities that will drive IT services growth across Southeast Asia," says Roger Ling, Research Manager for ASEAN Services Research Group, IDC Asia/Pacific.

Drawing from the latest IDC research and internal brainstorming sessions amongst IDC's regional and country analysts, the following are the top 10 key IT Services predictions in 2012 for the Southeast Asia market. This year, the predictions are split into three key segments. The big picture, which looks at how the region is expected to perform, key country level factors in 2011 that will impact 2012, and game changers that will continue to shape the IT services scene in 2012 and beyond.


The Big Picture

1. The Southeast Asia IT Services Market will continue its Double-Digit Growth Streak in 2012
As predicted last year, 2011 did see the loosening of purse strings as organizations looked at making investments when clear business outcomes can be demonstrated. This is exhibited by the 19% year-on-year (YoY) growth by end of 2011. The Southeast Asia IT services market is forecasted* to close at US$8.1 billion in 2011, and is expected to grow 12% to reach US$9.1 billion in 2012.

Country Level Predictions – Drivers in 2011 that are Shaping 2012

2. Malaysia: The Economic Transformation Plan will Fuel IT Services Growth but is Not Yet a Silver Bullet for Growth
As the transformation program celebrates its one year anniversary, it continues to draw mixed sentiments from different quarters. On one hand, advocates see it as a clear catalyst for growth, and on the other, opponents feel that there are missing links that need to be addressed before it can function as a catalyst. A number of initiatives are currently underway. For example, Get Malaysian Businesses Online (GMBO), Datacentre build-up and others. IDC predicts that in 2012, the different entry point projects (EPPs) will draw up more concrete growth plans to address the loopholes needed to achieve the nation's target. IDC also acknowledges that the Digital Malaysia plan is important in driving growth in IT services.

3. Thailand: The Blue Whales did More Than just Find their Way Back to Sea
In 2011, amidst the panic, confusion and chaos during the flood crisis in Thailand, it was difficult for the people to get clear and reliable information about the disaster. As a result, people ended up turning to other sources of information — especially a quirky animated video series that used blue whales to explain Thailand’s hydrological troubles. Considering the impact of the flood, IDC is predicting that one of the key 2012 IT services trend will be a keen focus on business continuity and disaster recovery (BC/DR). The demand for this combination of services has been increasing since 2011 and will continue to grow over time. Factors driving its growth include uncertain situations such as demonstrations and natural disasters like floods.

4. Indonesia: National ICT Flagship Initiatives -- A Possible Inflection Point for the Country
Indonesia has long been touted as a sleeping giant with untapped potential. While the National ICT Flagship initiatives are not new, recent progress gives us reason to revisit and reconsider its implications in 2012. IDC is of the opinion that in 2012, key strategies under the National ICT flagship initiative as well as projects such as the PALAPA ring and the Single Identity Number Flagship will serve as an inflection point for the adoption and permeation of ICT. In 2012, the use cases and ubiquity of IT will become prevalent to the mass population and, the disparity between the technology laggards and the early adopters will likely be reduced.

5. Singapore: As the Cloud Matures, Data Sovereignty will be an Issue to Tackle
Over the past 12 months, IDC notes that many international and local service providers and vendors have been gearing up for their cloud services offering and building their datacenter infrastructures in Singapore. This emphasizes the increasing strategic importance of the cloud services market to the country going beyond Salesforce.com (in 2009) and Amazon Web Services (in 2010). There is a concerted effort by the government to attract major IT players to develop their infrastructure here and establish Singapore as a cloud computing hub for the region. While the country has an overarching 2015 focus to ride the Sentient Wave, IDC is of the opinion that in the near term, the focus on securing the cloud value chain will take precedence. IDC predicts that cloud services will mature rapidly in the next 12 months aided by ecosystem partnerships, which combine the best elements of infrastructure, hardware, software, and process to form secure and repeatable applications. In addition, cloud service providers will be resetting customer perceptions on what is required for secure service delivery -- from enterprise-specific technical requirements to pragmatic selection of mass-market services based on business requirements.

6. Vietnam: IT Services Maturity leads to Opportunities for MNCs but Growth will be Tampered by Inflation
Compared to the developing IT markets, Vietnam still has room to mature and grow. The nation’s underlying infrastructure is growing and while information demands are increasing, it is still at a nascent stage. In more recent years, Vietnam's emerging market status created an ideal marketplace for IT vendors to provide IT consulting services to assist end users in adopting new technologies and IT products. Going forward, IT demand will be further intensified by infrastructure projects and the increasing privatization of state-owned enterprises. The main inhibitor of IDC's IT services growth forecasts is inflation, which the government has made a priority to address in 2012. As the demand side for IT services matures, IDC believes that the supplier landscape will continue to see increased differentiation between local service providers and multinational companies.

7. Philippines: Transition Paving Way for Transformation
With the transition of government in mid 2010, 2011 marked the year in which the new government introduced the Philippine Development Plan 2011-2016. The plan was put in place in response to the slow and below par socioeconomic development of the country in comparison with its Asian counterparts. Looking into 2012, the government is expected to drive further transformation in the Philippines as committed in the development plan. In particular, IDC believes that efforts will be stepped-up to transform the existing IT-BPO industry for the country. While the country is generally regarded as among the most cost competitive destinations for IT-BPO services, it is also clear that there are bottlenecks around safety and labor pool sustainability. Factors that are threatening the nation’s IT-BPO industry include more competitive environment for voice and non­voice services coming from India and other emerging destinations; the stigma about being only known as a voicecentric hub; and, lack of distinguishing branding against India and near­shore geographies. To compete successfully in this industry, the Philippines will need to step up their efforts to transform and grow.

Game Changers and the Overall Impact on the Southeast Asia IT Services Market

8. Cloud: The Parts are Ready, it's Time to Transform
IDC predicts that the cloud will continue to see increased traction across the different countries in Southeast Asia in 2012. The idea behind this prediction is straight forward but what the "parts are ready, it's time to transform" means varies from country to country as the dynamics in each country are different. IDC predicts that in 2012, cloud offerings will not be merely driven through a one-to-many channel but from many-to-many channels as well. This will be a result of the strengthening of the cloud value chain as vendors collaborate to meet the demands of its various users. IDC believes that the cloud will only proliferate if the government steps in. In countries like Singapore, proactive measures are taken by the government to introduce new policies to support cloud developments. In 2012, selected governments across Southeast Asia will endorse the cloud and take proactive measures to close the loop and complete the value chain.

9. Analytics: Different demands but with a singular purpose
The need to cope with the exponential growth of data -- particularly as we move into the semi-structured and unstructured realm -- continues to be a driving force behind the need for analytics. With the proliferation of devices and form factors, the need to contend with the increased variety of data sources is not only introducing a number of challenges for organizations but also significant opportunities. In 2012, system integrators across Southeast Asia will be more prepared to address the demands of analytics and the demand will come mainly from the telecom and banking sectors. While the evolution depicts overall technological changes and functional requirements, it is obvious that from country-to-country, organization-to-organization the information demand needs and maturity will be different. As system integrators prepare for the next wave of change, it becomes pivotal to be able to address different demands but with a singular purpose to address the broad demands of analytics.

10. Enterprise Mobility: The New Workspace Service
In 2012, enterprise mobility will become more prevalent because of a number of factors: the development of new smartphones; lower handset prices; and, the need for various departments in an enterprise to drive improved service delivery, operational efficiency and communication with employees in the field. With the fundamentals of technology in place (and growing) and the fact that more people in the workforce are using smartphones, the future of enterprise mobility is very positive. According to reports from the Economist Intelligent Unit (EIU), in late 2010, Gen Y & Gen Z made up 50% of the population in selected countries in Southeast Asia including Malaysia, Indonesia, Vietnam and Philippines. For Singapore and Thailand, Gen Y & Gen Z fell within 31%-50% of the total population. These aged-based demographic groups are characterized by their need to be constantly connected, which will drive new demands in terms of how organizations interact with them as clients as well as manage them as employees.

For more information about the research or to purchase this report, please contact Juliana Lai at +603-2177-9255 or julianalai@idc.com.