Malaysian IT spending is expected to grow to U$4.9bn in 2011, from US$4.5bn in 2010, when the market stabilised. IT spending should be boosted by ICT-friendly 2011 budget measures and growing interest in cloud computing, but much will depend on confidence in a sustainable economic recovery. There will be increasingly attractive opportunities in the IT services area as the government implements measures to make Malaysia a regional services hub. The government has a number of initiatives with favourable implications for demand for IT products and services, including computers for education programmes.
The IT market overall has strong growth fundamentals and key sectors will include government, telecoms and finance, including Islamic banking. The National Broadband Initiative has the potential to boost demand across all IT market segments.
Industry Developments
Malaysia's 2011 budget contained a number of measures to boost the IT industry and help stimulate ICT adoption in the country. Key measures included a two-year extension on import tax and sales tax exemption on broadband equipment, and the establishment of the MY Creative Content programme to encourage the development of local content. The tax exemption should stimulate the purchase of various types of connectivity devices, including notebook PCs.
In H111, the Malaysian government announced a new initiative to provide every adult in the country with a free Web-based email account. The ‘Malaysia Email’ initiative, which will enable the government to deliver tax returns, court documents and other official notices online, is expected to provide a major boost to e-government development. The government will spend US$16.6mn setting up the service. Malaysia 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.
Competitive Landscape
Over the period from 2010-2012, notebook market leader 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 datacentres and ICT infrastructure have helped to drive interest in cloud computing business models, which are now being actively promoted by vendors in the Malaysian 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 2010, Microsoft said that it planned 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$2.6bn in 2011, up from US$2.4bn in 2010. PC sales will be supported by the government's push for greater broadband penetration, for which an optimistic target of 75% by 2011 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 grow to US$805mn in 2011, consolidating a recovery in 2010, but businesses remain cautious and focused on return on investment (ROI). By 2015 we forecast software spending rising healthily to US$1.2bn, with a software CAGR for 2011-2015 in the region of 11%.
E-business applications such as enterprise resource planning (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 doubledigit 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$1.5bn in 2011, after services was a bright spot for the IT market in 2010, remaining in positive growth territory.
The government has accounted for about 15% of Malaysian 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 in 2011. 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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