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Malaysia Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 61
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 U$4.6bn in 2010 from US$4.1bn in 2009 as demand recovers from the impact of a difficult economic and political situation. The market has strong growth fundamentals, including low PC penetration, rising incomes and a hi-tech-focused national development plan.
There will be increasingly attractive opportunities in the IT services area as the government implements measures to make Malaysia 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 longterm initiatives with favourable implications for demand for IT products and services, including investment in broadband infrastructure.
BMI expects a return to growth in 2010, driven by a pickup in business spending on hardware and applications. The market has strong growth fundamentals and key sectors will include government, telecoms and finance, including Islamic banking.
Industry Developments
The MSC Malaysia has named cloud computing as the most important of its top 10 strategic technology priorities for 2010. The government hopes that adoption of cloud computing, building on the National Broadband Initiative, could accelerate Malaysia's development into an advanced economy. Elements of cloud computing are already being used to deliver some government services in Malaysia, such as MYEG, the public service payment and monitoring application.
In 2010, the Terengganu state government plans to expand a pilot e-books project that delivered about 25,000 laptops to Year 5 students at a cost of MYR25,000 in 2009. The state plans to deliver 50,000 notebooks in 2010 with a budget of MYR50,000. Other states, such as Sarawak and Malacca, have expressed interest in the project and a wider roll-out is likely.
The most recent national budget contained a number of initiatives related to developing ICT for schools, including a pledge to spend MYR45mn on providing internet services to rural schools. This builds on a government drive to increase the use of computers and ICT in schools through expansion of the Smart School programme. In 2009, despite the economic crisis, the government continued to make progress in e-tax and other elements of its e-government plan.
Competitive Landscape
Over the next three years, from 2010-2012, Acer has targeted double-digit growth as the economy recovers from recession. The company is also focused on improving its share in the professional segment, where it has only around a 10% share, compared with 18% worldwide. Acer's aim is to double its share of the Malaysian commercial PC market within the next one to two years.
Growing investment in data centres and ICT infrastructure have helped to drive interest in cloud computing business models, which are now being actively promoted by vendors in the Malaysia market. In July 2010, IBM said that it would build an 'animation cloud' for the government-based MDeC, which MDeC will host. The cloud will provide online computing resources for Malaysian designers and graphic artists.
One focus for Microsoft and other software vendors is to make products more affordable to the key small and medium-sized enterprises (SME) segment. In Q110 Microsoft said that it plans to accelerate cloud computing solutions for Malaysia SMEs as this model is regarded as having high potential for its partners. In the first quarter of its FY10/11, India-based Ramco Systems launched a campaign to sign deals with channel partners in Malaysia to offer enterprise resource planning (ERP) solutions to local companies.
Computer Sales
BMI forecasts that the addressable Malaysian computer hardware market, including notebooks and peripherals, will have a value of US$2.5bn in 2010, up from US$2.2bn in 2009. Economic recovery and a potentially IT-friendly budget in 2010 have created the conditions for an upturn in spending, which should grow stronger in H210.
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 set. 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 and is rolling out an extensive network of community PC centres. One of the target groups of the plan is middle-income potential computer owners who have the ability to afford a PC. Such initiatives, alongside falling prices, are opening up the market to lower income tiers.
Software
Malaysia's addressable software market is expected to growth to US$756mn 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 ROI. By 2014, we forecast software spending rising healthily to US$1.1bn, with a software CAGR for 2010-2014 in the region of 11%.
E-business applications such as ERP and finance are finding increasing popularity in the business market as enterprises look to enhance productivity through automating accounting and other functions. Customer relationship management (CRM) is expected to be a double-digit 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 US$1.4bn in 2010, with high single-digit growth compared with 2009. Spending on IT services is expected to be a relative bright spot for the IT market in 2010, 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 about 15% of IT spending in recent years. The upgrade of core banking systems will drive bank spending on application services. The government also continues to try and create a more competitive environment in the telecoms sector, encouraging newly licensed WiMAX operators to roll out services.
E-Readiness
Malaysia is developing most 'e-society' indicators at a steady rate. The government is pursuing programmes to reduce the digital divide between urban and rural areas, with the Ministry of Rural and Regional Development cooperating with the Ministry of Science, Technology and Innovation and the national IT industry association on plans to establish more community PC centres in the country this year. Nearly 2,000 centres are already managed by the Economic Planning Unit.
The growing popularity of broadband after a slow start is set to be an important driver of PC penetration over the next few years. To encourage faster penetration, the government awarded WiMAX licences to a number of service providers, including ISP Jaring. 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 covers the first phase of the project that will be implemented over 10 years.
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