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Singapore Information Technology Report Q4 2010
Business Monitor International, Oct 2010, Pages: 57
Singapore 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 Singapore's information technology industry.
Market Overview
Singapore's IT market is projected to grow faster in 2010, building on momentum from a pick-up in consumer spending in the second half of 2009. The total size of the domestic IT market is expected by BMI to increase from a projected US$5.3bn in 2010 to around US$7.1bn in 2014 boosted by strong PC market growth, significant government ICT investment and a pick-up in key IT spending sectors such as telecoms and real estate.
In 2010, consumer PC spending, which was robust in 2009, is expected to be reinforced by a revival in business IT hardware spending. PC sales grew strongly in the first half of 2010, with a surge prior to the end of many companies' financial years in March which continued into the second quarter.
The IT market will benefit from the announcement of S$1.1bn in new infocomm tenders in 2010, as well as ongoing initiatives such as the government's Standard ICT Operating Environment (SOE) project. With the Intelligent Nation 2015 (iN2015) plan placing IT at the heart of the government's strategy to improve competitiveness, complex government tenders will drive considerable spending in years to come in areas such as education, e-government, transport and healthcare.
Industry Developments
In May 2010, the Singapore government announced that it planned to invest a further S$1.1bn in new infocomm tenders in 2010. This figure does not include the substantial sums already committed to major ongoing projects such as the Next Generation National Broadband Network, and the Standard Operating Environment (SOE) projects. The 2010 budget is in line with actual spending levels in 2009, when government procurements were about S$1.12bn, although planned spending had been higher. The Singaporean government had announced plans to invest around SGD1.73bn in ICT projects in the financial year through to March 2010. Three hundred ninety-two new projects were to be put out to tender, with 40% of the planned projects expected to be worth more than SGD500,000. Key projects include the SOE programme for schools (being supervised by the Ministry of Education), a content and management system by the Defence Science and Technology Agency (DSTA) and the Ministry of Home Affair's BorderWatch System.
The 2009 Singapore budget pledged an additional US$4bn for healthcare, including US$200mn specifically earmarked to develop a better electronic health record system. The first phase of the electronic health record system implementation was due to start in November 2010. The system, part of the government's iN2015 ICT masterplan, will cover hospitals and doctors in both the public and private sectors.
Company News
Multinational vendors dominate sales of PCs in Singapore, with the top two vendors accounting for more than 50% of sales. Taiwanese PC vendor Acer took top spot in the Singaporean PC market in 2009, ahead of US company HP. In a stronger-than-expected PC market in 2009, both Acer and HP claimed to have achieved double-digit shipments growth compared with 2008 levels. Acer's strength in the consumer segment gave it a slight edge over HP in a year when business demand was sluggish.
Cloud computing is on the rise in Singapore, boosted by the city state's excellent telecoms infrastructure. Incumbent SingTel has reported that it already has thousands of customers using its cloud services. The company has launched a wholly owned cloud computing business unit, Alatum, which offers grid computing services such as data storage and computing power. Meanwhile SingTel also offers Softwareas-a-Service (SaaS) to local business clients, including SMBs.
Significant opportunities for IT vendors exist in sectors such as telecoms, electronics and health. IBM Singapore is implementing a major contract from SingHealth, the nation's largest public healthcare group, in order to standardise hardware and software platforms across its various institutions. IBM was commissioned to consolidate the varied IT infrastructure into a single platform to create a better flow for patient care delivery.
Computer Sales
Singaporean spending on IT hardware is projected at around US$2.5bn in 2010 from around US$2.2bn in 2009. Singapore's PC market was estimated at more than 1.1mn units in 2009, which marked a strong recovery from a market slowdown in 2008. In 2010, another strong PC market performance is forecast, with robust consumer spending is expected to be reinforced by a revival in business IT hardware spending. This started in H110, and is forecast to grow stronger as the year goes on.
According to the latest report from the IDA, 74% of Singaporean households now have a PC, and, following demand growth of close to 20% over 2001-2005, this level of saturation would be expected to act as a constraint. However, consumers have appeared willing to spend on upgrading their notebook computers, and there is a trend for households to own more than one unit. Given an expected 300% growth in broadband penetration by 2013, the increasing number of products and services available on the internet will be a major driver of demand for computer hardware.
Software
Spending on software is projected at around US$779mn in 2010 from around US$688mn in 2009. Software accounted for about 15% of the domestic IT market in 2009. Software accounted for about 16% of the domestic IT market that year. As the market focal point evolves from hardware to services and solutions, the share of IT spending accounted for by software should rise to nearly 18% by 2014, with enterprises seeking greater leverage from their investments.
Over the forecast period, enterprise resource planning (ERP), customer relationship management (CRM) and other e-business applications will find increasing popularity with the small and medium-sized enterprise (SME) market as enterprises look to enhance productivity through the automation of essential functions. Given the current focus on many businesses of controlling costs, the pay-on-demand SaaS model has grown in popularity and spread beyond the initial core application area of CRM.
IT Services
In 2010, the IT services sector is projected to be worth around US$2.0bn. IT services CAGR is expected to be 9% over 2010-2014. IT services accounted for around 40% of the domestic IT market in 2009 with spending of US$2.8bn forecast for 2014. In 2010, a brightening business climate should mean more opportunities in key IT-spending verticals like Financial Services, Telecoms, Government, Healthcare and Logistics.
Regulatory compliance will continue to require spending by banks and investment by foreign banks is spurring new technology investments by local players. Competition in the telecoms field is a driver for that key IT spending segment, where deregulation has led to new entrants. Meanwhile, expanding technology adoption in the logistics industry and public transport will be a source of IT services projects.
E-Readiness
The National Broadband Network (NBN) is at the core of the government's iN2015 initiative. The contract for the first phase of the project, which will link businesses, schools, hospitals and homes, involves 45% of the network being rolled out within three years and the entire network by 2012. The IDA recently said that, within two years, 60% of homes and offices should have access to the network. The second phase of the project will place emphasis on pervasiveness and the provision of wireless access at affordable rates. The project is expected to lead to 68% broadband penetration by 2012. The NBN will be capable of offering high speeds of 1Gbps or more and aims to provide affordable broadband for 95% of all homes and businesses by 2012.
Reviewing one year of the landmark iN2015 plan in 2007, Minister for Information, Communications and
the Arts Lee Boon Yang said that much progress had been made but much remained to be done.
Key Issues For Investors
- Further government-enforced reductions in labour costs and mandatory corporate contributions to pensions;
- Cuts to corporate and income taxes if the government sticks to its budgetary commitment to lower business costs;
- Competitiveness is at risk of being eroded by cheap labour in China.
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