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Hong Kong Information Technology Report Q4 2011
Business Monitor International, Oct 2011, Pages: 64
Business Monitor International's 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.
Market Overview:
The Hong Kong IT market is forecast by BMI to grow from around US$5.2bn in 2011 to US$6.5bn in 2015. Economic expansion is expected to underpin stronger demand for IT in 2011, with vendors reporting strong demand for enterprise resource planning (ERP) solutions and cloud services, although a potential cooling of the Chinese economy in H211 as a result of monetary tightening would quickly spread to Hong Kong.
IT market growth is forecast at 11% in 2011 but much will depend on continued business and consumer confidence. The Hong Kong government should continue to spend on key modernisation and informatisation initiatives as part of its Digital 21 programme. The government's new IT plan includes an emphasis on cloud computing for 2011, and Hong Kong hopes to emerge as a regional cloud computing hub.
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 and the rollout of 3G mobile networks and popular converged services such as internet protocol television (IPTV) are also drivers.
Industry Developments:
In July 2011, the Hong Kong government announced a plan to incrementally expand its cloud computing environment over the next few years. The strategy is being guided by government agency the Office of the Government Chief Information Officer (OGCIO), which was set up in 2004. The proposed government cloud will include three environments: a private cloud operated by the government, dedicated outsourced private clouds, housed in secure datacentres, and public clouds.
Competitive Landscape:
In April 2011, retailers reported strong advance interest in Apple's iPad2, despite prices of around US$2,000 for the top-end 64-gigabyte model. In Q211, Apple's Greater China market revenues, including Hong Kong, were estimated to have exceeded those of Lenovo for the first time.
Meanwhile, in 2011, new cloud computing offerings and increased competition in this segment should fuel further demand from end-users. In July 2011, local telecoms leader Hutchinson Global Communications (HGC) signed an MoU with Dimension Data Asia Pacific on selling cloud computing services. HGC will market Dimension Data's 'onecloud' services using its datacentres and fibre backbone in Hong Kong.
Computer Sales
BMI forecasts the Hong Kong computer hardware market at US$2.3bn in 2011, with 6% growth from 2010. In H111 the market benefited as consumer spending remained strong.
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 small and medium-sized enterprise (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$1.3bn in 2011 and are expected to reach around US$1.6bn 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 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.
IT Services
In 2011, the IT services sector is forecast at around US$1.6bn, 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.
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.
Cyberport
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 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 e-government 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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