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Hong Kong Information Technology Report Q1 2011
Business Monitor International, Feb 2011, Pages: 62
The Hong Kong 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 Hong Kong's information technology industry.
The Hong Kong IT market is forecast by BMI to grow from around US$4.9bn in 2011 to US$6.1bn in 2015. Computer sales were strong in 2010, with robust retail sales leading the way as the economy recorded positive growth. The government sector was expected to be a key driver, thanks to a new IT plan, and there should also be growing interest from Hong Kong companies in cloud computing solutions. IT market growth is forecast at 4% in 2011, but much will depend on continued business and consumer confidence in the economic recovery. In 2010, consumer spending remained strong, as evidenced by strong demand for Apple’s iPad. Loan advances continued to grow strongly into May, while imports also increased.
The IT market will be supported by initiatives encouraging the integration of Hong Kong’s economy with mainland China and the abolition of taxes on cross-border trade. Recent integration of PCs with wireless networking technologies, as well as the rollout of 3G mobile networks and popular converged services such as internet protocol television (IPTV), are also drivers.
The Hong Kong government has announced that its new pan-government IT strategy has an emphasis on cloud computing in 2011. There is no specified time for rollout as officials continue to consider data privacy and security issues. In the initial phase, the emphasis is likely to be on creating some kind of private cloud to support internal communication and collaboration within the government. In February 2010, Hong Kong Financial Secretary John Tsang’s maiden budget was broadly positive for local IT market growth, as the government looked to strengthen the economic recovery. The HKD317.2bn (US$40.82bn) budget was composed of higher expenditure and one-off relief measures to support domestic demand and lower income households. Government fiscal stimulus, including tax relief, was aimed at boosting consumer confidence.
2010 saw growing enthusiasm in Hong Kong for tablet notebooks, spearheaded by Apple’s iPad, which became available from mobile telecoms service provider 3, as well as authorised Hong Kong resellers and the online Apple store. Meanwhile, in Q410 rival Samsung’s Galaxy Tab device was launched in Q410 with what was described as ‘four-digit’ pre-orders figures in the local market.
Government remains an important driver of IT market opportunities. In July 2010, HP Enterprise Services announced it had signed a 10-year contract with the HKSAR government to help Hong Kong public libraries implement and provide ongoing support for a new integrated library system (ILS). Meanwhile, in November 2010, IBM announced that it had partnered with government agency the Hong Kong Productivity Council (HKPC) to launch the first cloud computing application for the education sector.
One feature of the IT services competitive landscape is the increasingly aggressive move of telecoms service providers into the IT services space. In May 2010, PCCW Solutions launched its own cloud computing service. Local telecoms company PCCW has forecast the service will break even within one year, and the banking and retailing fields are seen as key areas of potential.
BMI forecasts the Hong Kong computer hardware market at US$2.2bn in 2011, with mid-single-digit growth from 2010. In H110 the market rebounded as consumer spending remained strong, building on an impressive recovery in H209.
Computer sales are expected to maintain an upward trajectory in 2011, with robust consumer demand support by demand for tablets and a revival in corporate and SME investment. The Closer Economic Partnership Agreement with mainland China is continuing to expand horizons for smaller enterprises and encourage IT investments.
Software Software sales are forecast at US$1.2bn in 2011 and are expected to reach around US$1.5bn by 2015. Hong Kong boasts one of the most advanced software markets in the region and software accounts for around 25% of IT revenues. Indeed, the territory has long been an important market for new launches of packaged software products.
Migrations to Microsoft’s Windows 7 operating system should continue to support the market. Beyond basic enterprise resource planning (ERP) applications, business segment growth opportunities include customer relationship management (CRM) and business intelligence. As vendors’ attention turns to smaller companies, the software-as-a-service (SaaS) model is enjoying increasing popularity in Hong Kong.
In 2011, the IT services sector is forecast at around US$1.5bn, up from US$1.4bn the previous year. IT services revenues are then projected to grow at a 2011-2015 CAGR of 6%. The market is expected to build on growing investment in cloud computing and a trend towards larger outsourcing projects evident in both the public and private sectors over the past couple of years.
The government’s Digital 21 initiative will continue to generate a number of projects, while one of the highest IT spending verticals should be the financial sector, where IT systems and processes still generally lag some way behind Hong Kong’s status as a leading global financial centre. The IT services industry benefits from Hong Kong’s excellent telecoms infrastructure, with Hong Kong being the first city to fully digitise its fixed-line telecoms networks.
The Cyberport was designed to provide the city with a major regional hub that would attract leading IT companies and professionals. The first phase of the HKD13bn project, developed by PCCW, was inaugurated in November 2001. After the science park opened in June 2003, it came under criticism for failing to attract enough tenants to fill the 38,000m2 of office space. This was mitigated slightly when the Dutch electronics firm Philips agreed to rent a floor and Microsoft announced it was moving its 250 Hong Kong-based employees there. However, high-tech blue chip companies seem to have lost interest, with commentators pointing to the lack of a mature venture capitalist community, favourable egovernment policy or even ‘entrepreneurial spirit’. As the Cyberport does enjoy some advantages, including a favourable location and proximity to the vast mainland market, there is increasing demand for the government to revive the project.
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