Technology for SMBs: The year ahead

Security, storage and VoIP will be buzz words in 2005, according to AMI-Partners senior analyst Jackie Chan.

It is plain to see that globalization has changed Asia's role in the world, and information technologies (IT) have been one of the key drivers of globalization and major advances in communications.

IT provides valuable tools for enhancing the ability of developing countries and those in transition to integrate into the global economy. Businesses today face greater uncertainties than ever in anticipating world events as well as rapid changes to markets and competition.

The biggest challenge for IT management is dealing with all this fluidity and becoming agile enough to cope with change. This is especially important for small and medium-size businesses (SMBs) as they face greater resource constraints and are more susceptible to change than large enterprises.

In 2004, SMBs in the Asia Pacific region (excluding Japan) invested more than US$98 billion in information technologies. This number is expected to grow almost 20 percent in 2005. As different countries within AP are in various stages of technology adoption, major types of IT investments in 2005 will also vary by country.

For instance, China and India are two of the most talked-about markets in AP due to their sheer sizes. Together, they are expected to account for approximately 30 percent of all SMB IT investments in the AP region. However, as SMBs in these countries are still in the early stages of IT adoption, much of the investments will be dedicated towards building the basic IT infrastructure by deploying PCs and connecting to the Internet.

On the other hand, newly industrialized markets such as Korea and Taiwan are well penetrated with PCs and Internet access. In 2005, SMBs in these markets should look to leverage and fully maximize their established infrastructure, thereby enhancing communications and resource sharing.

More mature markets like Singapore and Australia will increasingly shift to the next stage of IT adoption that is IP-centric. SMBs in these markets should leverage on the Web and extend beyond the enterprise by deploying "real-time" technologies that enable them to manage information more effectively and react more quickly to changing business conditions.


Three key trends
Indeed, the focus of the overall IT investments will vary country by country, as some invest more on infrastructure while others on IP services. However, certain consistent IT themes shape and lead the AP SMB markets in 2005.

One of the biggest tech challenges in business today is security, as worms, viruses and spam cost staggering amounts in lost productivity. Security-related spending by AP SMBs is expected to grow more than 50 percent in 2005, which includes investments in areas ranging from antivirus and antispam technology to intrusion detection solutions to managed security by third parties. Essentially, every computer that is connected to the Internet or any other network will require some form of security. And while SMBs express high awareness of the importance of security, they say many of their security needs have not been met. It does not take a rocket scientist to predict that security will continue to be a key IT trend in 2005.

With the opportunity that US markets typically represent, one expects voluntary compliance (of the Sarbanes-Oxley Act) to be increasingly commonplace in Asia Pacific.
Another hot growth area in 2005 will be IT storage solutions, for which AP SMB investments totaled more than US$400 million in 2004 and is expected to increase by over 45 percent in 2005. Currently, many SMBs do not save e-mail communication properly. They are typically concerned with being able to restore a failed system and don't pay any attention to retention. However, this could change next year due to US legislations. With the Sarbanes-Oxley Act of 2002, US companies could be at fault for knowingly replacing old backups and not saving them for possible future investigations. Such regulations have a direct impact on AP businesses due to the dominance of the US economy and the interdependency of the global economy today. With the opportunity that US markets typically represent, one expects voluntary compliance to be increasingly commonplace in Asia Pacific.

Other drivers also point to the staggering growth of IT storage solutions in 2005. As AP SMBs progress through the different stages of IT adoption, the amount of digital data increases significantly. Finding the right storage solution could potentially lead to significant cost savings, reduced risks, better asset utilization and faster time to market. More enterprises will be relying on such storage technology in 2005 to deal with data overload on their networks.

Aside from storage and security, AP SMBs are also expressing demand for applications beyond just plain voice . The growth in broadband deployment coupled with the surge in new applications ushered in by the Internet are driving demand for voice and data convergence over IP. Deregulation of the telecommunications market in many AP countries will also help fuel this growth. SMBs are increasingly recognizing that IP telephony can save them significant amounts of money on communications costs, as well as delivering new services using converged voice and data networks. The tariff advantage of VoIP over PSTN in international calling, which hits as high as 70 percent, is another market driver. The convergence of data and voice traffic has made IP-based voice telephony an enticing option for the increasing number of call centers in India and even for domestic calls in an extensive land mass like China.

AP SMB investment in IP telephony is therefore expected to increase by 40 percent in 2005. For AP countries like India and China where current telephone penetration is low, SMBs will likely skip the tradition telephone adoption and leapfrog the development curve.

Information technologies have opened up a huge potential for improving economic efficiency through e-commerce, the Internet and the instantaneous delivery of information anywhere in the world, at any time. They have also created a wider basis for a global knowledge-based economy. This is why information technologies and telecoms are revolutionizing business practices, both within corporations and in their relations with suppliers and customers. In the era of globalization, it is critical for SMBs to become a "sense and respond" organization in sensing and responding earlier to unpredicted changes in the environment.

Jackie Chan is senior analyst of AMI-Partners, a research firm with a strong focus on global SMBs. Based in New York, AMI-Partners provides an integrated go-to-market perspective across enterprise market sectors.

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