Singapore's IT market is projected to record single-digit growth in 2011, benefiting from economic growth that will consolidate a bounce back in IT spending from 2010. BMI expects the total size of the domestic IT market to increase to nearly US$7.9bn in 2015, with drivers including a new government ICT master plan, and cloud computing deployments fuelled by Singapore's Next Generation Nationwide Broadband Network rollout.
In 2011, strong economic growth is expected to sustain IT spending. PC sales stagnated in annualised terms in the first quarter of 2011 due to price-cutting, but BMI expects the market to pick-up later in the year as vendors release new models. While the sustainability of the global economic recovery is less certain over the next two years, we are upbeat about Singapore's economy over the longer term. 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
Healthcare IT is a major focus for IT vendors in the Singaporean market. Singapore's Ministry of Health is overseeing the creation of a National Health Electronic Register (NHER), which aims to have all healthcare institutions, public and private, linked to the same information system. The NHER is a key component of the government's healthcare plan. An initial launch for the new system was expected in April 2011, after the first phase of the project was launched in November 2010.
In June 2010, the Singaporean government launched an eGovernment Masterplan, which had an emphasis on participation, through utilisation of social networking tools, and greater sharing of data. The greater use of data analytics is likely to be one aspect of this programme. The government also plans to design a new ICT infrastructure for government, which uses cloud computing and energy-efficient technologies. In May 2010, the Singaporean 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 SOE projects. The 2010 budget was in line with actual spending levels in 2009, when government procurements were about SGD1.12bn, although planned spending was higher.
Company News
Cloud computing is on the rise in Singapore, boosted by the city-state's excellent telecoms infrastructure. In 2011, SingTel is expected to roll out a wider range of cloud computing products aimed at small and medium-sized enterprises (SMEs), including solutions for human resources and logistics management. In May 2011, SingTel in partnership with Canon launched a cloud-based printing service.
H111 saw major players British Telecom Global Services (BTGS) and Tata Communications both launch cloud services in the city. British Telecom's Next Generation Contact Centre (NGCC) is a portfolio of cloud-based services for call centres. Meanwhile Indian giant Tata Communications has made Singapore a regional hub for its cloud services, InstaCompute.
In August 2010, the Singapore Ministry of Health awarded a major tender to Accenture for creation of an National Health Electronic Register, a key component of the government's healthcare IT plan. Under the plan, key healthcare information will be available and exchangeable among healthcare providers. Meanwhile IBM Singapore is implementing a major contract from SingHealth, the nation's largest public healthcare group.
Computer Sales
Singaporean spending on IT hardware is projected at around US$2.7bn in 2011 with mid-single-digit growth continuing from 2010. In H111, spending growth was flat y-o-y due to price cutting and a delay in some public sector procurements, but demand was forecast to improve later in the year. In 2010, another strong PC market performance was reported, with robust consumer spending reinforced by a revival in business IT hardware spending.
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.
Software
Spending on software is projected at US$884mn in 2011, up from US$771mn 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 2015, 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 SME market as companies look to enhance productivity through the automation of essential functions. Given the focus of many businesses on controlling costs, the pay-on-demand software-as-a-service (SaaS) model has grown in popularity and spread beyond the initial core application area of CRM.
IT Services
In 2011, the IT services sector is forecast to be worth almost US$2.3bn. 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 to utilise efficiencies from cloud computing, with evidence that demand for cloud computing was not restricted to large organisations but has spread to the Singaporean SME sector. In 2011, a brightening business climate should mean more opportunities in key IT-spending verticals such as 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. 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 said that within two years 60% of homes and offices should have access to the network. The second phase of the project will have an 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.
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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