M-payment, microblogging to drive China IT in 2010

China's IT spend this year to rise 11.6 percent over 2009, with key trends such as mobile payment and microblogging shaping market, predicts new report.
Written by Vivian Yeo, Contributor

Mobile payment and microblogging will be some of the top trends shaping China's growing enterprise IT market in 2010, according to new predictions from Springboard Research.

In its "China Key IT Trends 2010" report released Thursday, Springboard said it expects the country's IT spending this year to increase 11.6 percent over 2009 as the market continues to rebound.

Last year, market revenues grew 11.3 percent year-on-year despite the global economic downturn, the research analyst added. At a more macro level, China's GDP (gross domestic product) rose 8.7 percent, spurred by the government's economic stimulus package, government-directed investment and a loose monetary policy.

According to Springboard, China's enterprise IT market in the Chinese Year of the Tiger will be shaped by various market trends. At the same time, there are general market assessments in the IT sector, such as the growing maturity of IT buyers and China's shift from a global manufacturing base to an IT service center.

Among the key influencers is the rise of cashless payment technologies, said Springboard. Citing the country's Ministry of Industry and Information Technology, the analyst noted that China had about 15 million 3G users at the end of 2009, which accounted for a vast user base that can be tapped for value-added services such as mobile payment (m-payment).

Banks and mobile providers, it noted, have also begun to collaborate in this space. China Unicom and China Telecom, for instance, recently partnered with UnionPay, the largest credit card issuer in China, to bundle mobile phones and bank cards to consumers. Similarly, China Mobile launched its "All-in-One Cell Phone" program in Guangdong as well as plans to invest 300 million RMB (US$43.9 million) over the next two years.

On the other hand, authorities have also stepped in to ensure smooth development of the technology--the People's Bank of China introduced new regulations in January and is reportedly considering tightening supervision of e-payment companies by issuing relevant licenses.

M-payment, which Springboard recognizes as the star of cashless payment, is expected to gain traction in tier one cities such as Beijing, Shanghai and Guangzhou in 2010, and gradually expand to other cities, the report added.

Microblogging mega boom
Microblogging, said Springboard, has become the new social networking buzz word in China and its explosive growth is set to continue this year.

One of the drivers for microblogging is China's enormous population of mobile Internet users--estimates from the China Network Internet Information Center indicate the number of mobile Web surfers in the country reached 233 million by end-2009.

"Chinese mobile users' love for short messages can easily shift to 140 words Twitter-like microblogs," Springboard said in its report. "The on-the-go mobile network will also maximize the user experience by providing real-time feeds for microblogs."

Despite the promise of microblogging and social networking, some uncertainty looms in the form of tight regulatory controls on Internet information, noted the analyst. "The viral adoption of microblogging will draw efforts to supervise the dissemination of information, with the potential to halt market growth."

In addition, as social networking sites in China mostly gain popularity through embedded games, enterprises are wary about adopting social networking within the corporate environment and still maintain a "take-it-slow" attitude toward the technology.

Other key trends Springboard predicts will impact China's IT market in 2010:

Moderate rebound in corporate IT spend, fueled by new and refreshed project investment
A survey of 100 companies by Springboard found that 75 percent expect their IT budgets to increase in 2010. Particularly strong recovery is anticipated in sectors including banking and financial services, healthcare, telecom and professional services.

Cost-cutting and efficiency will remain the top IT challenges for enterprises
Companies are faced with rising costs of doing business, especially in the areas of manpower and materials, the research firm noted, adding that CIOs are expected to continue to scrutinize maintenance costs and more aggressively bargain with IT vendors on pricing issues.

Importance of information security gains traction in corporate IT environment
Some 34 percent of those surveyed by Springboard indicated they plan to implement security technologies, with IT security traction strongest in the banking and financial services, government, and telecom or ISP (Internet service provider) sectors.

Virtualization to continue gaining momentum, and play a more critical role in the enterprise
According to Springboard, 41 percent of survey respondents rated "data center integration and virtualization" as the top emerging technology to impact their business--higher than any other technology. Desktop virtualization is also expected to pick up, with small and midsize businesses leading the way.

Cloud computing momentum to increase dramatically
In 2010, IT vendors are expected to launch more cloud products and services in China, while the government will likely play an active role to further public cloud or SaaS (software-as-a-service) initiatives. Large enterprises will also pilot private cloud projects. All these will take cloud computing in the country to the next level.

China's ERP market will undergo accelerated consolidation
Consolidation is expected to take place in the enterprise resource planning (ERP) market this year, as major vendors pursue acquisitions to accelerate growth and expand capabilities. Business intelligence will be a key investment target for businesses, leading to acquisitions in this space as well.

Government efforts to converge three-way networks (broadcasting, telecom and Internet) offer potential for IPTV and other innovative applications
Following the government's pledge of support for convergence and detailing of plans, network convergence and adoption of relevant innovative applications such as IPTV (Internet Protocol television) will start to accelerate this year, said Springboard. However, network convergence is a slow journey hampered by technology and competitive issues.

Software outsourcing will recover after a slowdown in 2009
Springboard expects the annual growth rate for software outsourcing to hit over 25 percent, up from 14 percent in 2009. Tighter cost controls globally have led companies to outsource to lower-cost markets such as India and China, but China could be impacted from Japan's slow economic recovery.

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