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Malaysia Information Technology Report Q1 2010
Business Monitor International, Jan 2010, Pages: 57
The Malaysia Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Malaysia's information technology industry.
Market Overview
Malaysian IT spending is expected to grow to around U$4.5bn in 2010, from US$4.2bn in 2009 as demand recovers from 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. Key sectors will include government, telecoms and finance, including Islamic banking. The Malaysian IT market is now projected by BMI to grow at a compound annual growth rate (CAGR) of 12% over 2010-2014. BMI expected a market upturn in H209 after the market was affected by the global economic slowdown. Recovery may be boosted by faster distribution of stimulus money and ITfriendly 2010 budget measures, but much will depend on the speed of economic recovery.
There will be increasingly attractive opportunities in the IT services area as the government implements measures to grow Malaysia as a regional services hub. There are several potential PC market growth areas, including netbooks and entry-level servers for small businesses. The government has a number of long-term initiatives with favourable implications for demand for IT products and services, including investment in broadband infrastructure.
Industry Developments
In November 2009, the Malaysian government called for government ministries and agencies to give preference to local software and solutions. The prime minister said that a circular would be sent out, informing all government institutions to use local ICT solutions wherever possible, provided that local products were cost competitive and of high quality.
In the run-up to the 2010 Malaysian budget, Malaysia’s IT industry bodies lobbied the government for the inclusion of various measures to boost the IT industry. The Association of the Computer and Multimedia Industry in Malaysia (Pikom) called on the government to acknowledge that ICT accounts for more than 10% of national GDP and to implement measures to stimulate demand and support local IT companies. Despite the economic crisis, the government has continued to make progress in some elements of its egovernment plan. In 2009, around 1.5mn e-tax returns were filed online ahead of the April 30 2009 deadline, up from around 189,000 in the first year that the services were available. The total cost of the system over the past three years was around MYR34.7mn, with all of the e-forms being developed inhouse.
Competitive Landscape
Despite the economic crisis, many computer vendors remained positive about their prospects in the Malaysian market. Lenovo said in September 2009 that it saw significant potential in Malaysia, which it has targeted as a priority emerging market on account of projected growth in PC penetration. In 2009, Lenovo launched a new strategy that places more emphasis on working with local distributors in emerging regions, and the company said that the number of its Malaysian distributors had increased to four. Microsoft said that it was employing a local network of 5,000 partners to promote its new Windows 7, Windows Server 2008 and Microsoft Exchange Server 2010 products. Windows 7 was available in six different versions on the Malaysian market, including Windows Starter Edition. Microsoft anticipated that the release of Windows 7 would help to drive Malaysia’s broadband penetration to 50% in 2010. Industry-specific applications are a 2009 vendor focus. In August 2009, SAS signed a deal with Bank Islam Malaysia to implement a risk-management system as part of the bank’s five-year MYR100mn plan to overhaul its IT systems. Meanwhile, IBM’s first software development lab in Malaysia will focus on solutions for communications service providers and was expected to employ around 150 staff by end- 2008.
Computer Sales
BMI forecasts that the addressable Malaysia computer hardware market, including notebooks and peripherals, will have a value of US$2.4bn in 2010, up from US$2.3bn in 2009. Trading conditions were challenging in 2009, despite some growth areas, but BMI expected conditions to improve towards the end of the year. Stimulus spending and a potentially IT-friendly 2010 budget were forecast to create the conditions for an upturn in Q409, which, with economic recovery, should grow stronger in 2010. PC sales will be supported by the government’s push for greater broadband penetration, for which an optimistic target of 50% by 2010 has been sent. Other factors include ICT in education programmes and a number of e-government initiatives. The government is determined to tackle the digital gap beyond the Klang Valley area and is rolling out an extensive network of community PC centres. One of the targets of the plan is middle-income potential computer owners who have the ability to afford a PC. Such programmes, together with falling prices, are opening up the market to lower income tiers.
Software
Malaysia’s addressable software market market is expected to grow to US$760mn in 2010, following a deceleration in 2009 due to the global economic headwinds. BMI expected a mild pick-up in sales in H209, but with longer sales cycles as businesses remained cautious and focused on return on investments (RoI). By 2014 we see software spending rising healthily to US$1.2bn with a software CAGR for 2010- 2014 in the region of 13%.
E-business applications such as enterprise resource planning (ERP) and finance are finding increasing popularity with the business market as enterprises look to enhance productivity through automating accounting and other functions. Customer relationship management (CRM) is expected to be a doubledigit growth opportunity despite the economic downturn. Software as a service (SaaS) has achieved double-digit regional growth in Malaysia in the past couple of years, but is still an early stage market.
IT Services
IT services spending, excluding telecommunications-related spending, is forecast to reach a value of around US$1.4bn in 2010, with high single-digit growth compared with 2009. The financial crisis and government retrenchment had an impact last year with a number of projects being scaled back or postponed. However, IT services are still expected to be a relative bright spot for the IT market this year, remaining in positive growth territory.
Over 2010-2014, the most potential for large projects is likely to be in key sectors such as financial services, oil and gas, telecoms and agriculture. The government has accounted for around 15% of IT spending in recent years. The upgrade of core banking systems will drive bank spending on application services. Meanwhile, the government continues to try and create a more competitive environment in the telecoms sector, pushing newly licensed WiMAX operators to roll out services.
E-Readiness
Malaysia is developing at a steady rate on most ‘e-society’ indicators. The government is pursuing programmes to reduce the digital divide between urban and rural areas. The Ministry of Rural and Regional Development is co-operating with the Ministry of Science, Technology and Innovation and Malaysia’s IT industry association on plans to establish more community PC centres in the country this year. Nearly 2,000 such centres are already managed by the Economic Planning Unit (EPU). The programme recognises that many of those who do not own a PC at present are capable of ownership and are hoping to use the programme to draw them in.
The growing popularity of broadband after a slow start is set to be an important drive of PC penetration over the next few years. To encourage faster penetration, the government has awarded WiMAX licences to a number of service providers, including ISP Jaring. Recently, Telekom Malaysia was awarded a MYR11.31bn contract to roll out a high-speed broadband network. The government will invest MYR2.4bn, and Telekom will foot the rest of the bill. This money is only for the first phase, and the project will be implemented over 10 years.
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