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Singapore Information Technology Report Q1 2011
Business Monitor International, Feb 2011, Pages: 60
The 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.
Singapore’s IT market is projected to record single-digit growth in 2011, benefiting from economic growth which will consolidate a bounce-back in IT spending during 2010. BMI expects the total size of the domestic IT market to increase to around US$7.6bn in 2015, boosted by strong PC market growth, significant government ICT investment and a pick-up in key IT spending sectors such as financial services, telecoms and real estate.
In 2011, a strong economic recovery is expected to sustain IT 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. While the sustainability of the global economic recovery is less certain over the next two years, we are upbeat on Singapore’s economy over the longer term.
The IT market benefited from the announcement of SGD1.1bn 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.
In May 2010, the Singapore government announced that it planned to invest a further SGD1.1bn in new infocomm tenders in 2010. This figure did 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 was in line with actual spending levels in 2009, when government procurements were about SGD1.12bn, although planned spending had been higher.
The Singaporean government had already announced plans to invest around SGD1.73bn in ICT projects in the financial year through to March 2010. Some 392 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 Defence Science and Technology Agency (DSTA) content management system and the Ministry of Home Affair’s BorderWatch System.
In Q410, Samsung’s Galaxy Tab device was jointly launched in the Singapore market by Samsung and SingTel, opening a battle of distribution models with Apple’s iPad in the Singapore market. Whereas Samsung’s Galaxy Tab was to be sold at a subsidised rate through SingTel, the Apple iPad was available from Apple retail outlets.
Cloud computing is on the rise in Singapore, boosted by the city state’s excellent telecoms infrastructure. Incumbent SingTel has reported that thousands of customers already use its cloud services. Indian IT services giant Wipro announced in December 2010 that it planned to offer a range of cloud computing services to clients in South-East Asia, using Singapore as a hub 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.
Singaporean spending on IT hardware is projected at around US$2.5bn in 2011, with mid-single-digit growth from 2010. In 2010, another strong PC market performance was reported, with robust consumer spending reinforced by a revival in business IT hardware spending. This started in H110 and was forecast to grow stronger as the year went on.
According to data 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.
Spending on software is projected to reach around US$835mn in 2011 from US$1.2bn in 2010. Software accounted for about 15% of the domestic IT market in 2010. 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 companies look to enhance productivity through the automation of essential functions. Given the current focus of many businesses on controlling costs, the pay-on-demand SaaS model has grown in popularity and spread beyond the initial core application area of CRM.
In 2011, the IT services sector is projected to be worth around US$2.2bn. IT services’ compound annual growth rate (CAGR) is expected to be 9% over 2011-2015. One significant demand driver will be organisations looking for help with to utilise efficiencies from cloud computing, with evidence that demand for cloud computing was not restricted to large organisations but had spread to the Singapore SME sectors.
In 2011, a brightening business climate should mean more opportunities in key IT-spending verticals like 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. Meanwhile, expanding technology adoption in the logistics industry and public transport will be a source of IT services projects.
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 while much progress had been made, 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; and
- Competitiveness is at risk of being eroded by cheap labour in China.
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