Malaysian ICT sector to grow amid caution

Led by high-speed broadband and mobile, country's tech market expected to grow 8 percent but firms still want tangible returns and lower operational costs.
Written by Edwin Yapp, Contributor on

KUALA LUMPUR--The local infocomm technology (ICT) industry is expected to experience moderate growth in the aftermath of the global financial crisis, and will likely be led exclusively by projects that bring tangible improvements and lower operational costs, say industry watchers.

National ICT association Pikom, has forecast the market to grow by 8 percent this year coming off the back of several sectors that curtailed spending.

Pikom President C.J. Ang said this was not surprising as hardware is a major purchase decision, with consumers and businesses typically holding off investment in upgrades or new equipment "until better times".

"The outlook for this sector, however, looks bright and Pikom expects it to rebound into positive growth for 2010," Ang said in a statement. "Naturally we do not expect a full return to double-digit growth experienced in the pre-recession period, but we feel that current underlining economic conditions--both locally and globally--are improving and will generate a higher demand for ICT products and services."

He noted that government action, specifically incentives and tax breaks, may accelerate growth. Programs such as loans to civil servants to purchase PCs every three years instead of the previous five, as well as the tax reduction of 1 percent on broadband subscriptions will help, he added.

"There is also an expected growth in online and mobile applications and I believe the rollout of high-speed broadband (HSBB) and related services, would rally the industry," said Ang.

IDC noted that while budgets are still tight and buying patterns may have changed irrevocably from what the ICT industry has been accustomed to, there remains an air of cautious optimism in the market with some pockets of surprising growth.

The net result of the economic slowdown has been an overarching change in how and why companies make new technology investments, the research firm added in a statement.

"The key areas of focus going forward will be in customer care, client retention and 'wallet-share' growth enabling technologies," said Simon Piff, head of IDC Asia-Pacific predictions committee.

Johnson Khoo, managing director of Hitachi Data System (HDS), however, believes demand in the IT sector will be "sluggish" this year. "We have not seen a major impetus in stimulating the overall economy toward recovery and this is a cause for concern," Khoo said at a media briefing last month.

In a survey of CIOs across the Asia-Pacific conducted by HDS, he noted that about half of the enterprise information chiefs indicated that they were still concerned about reducing operational expenditure. "Businesses will continue to focus on lowering costs and maximizing existing investments in IT, rather than investing in new technology," he said.

With customers that had already prioritized storage infrastructure purchases expected to reduce IT spending, Khoo said companies would likely focus on technologies such as virtualization, that can meet the challenge of dramatic data growth while also improving efficiency.

Keeping 2009 score
Despite the cautious optimism, analysts believe there are some bright spots in Malaysia's ICT landscape.

Topping this list is telecommunications, where the market is led by mobile operators that have adapted their strategies to fit a maturing market with a focus on cost management and segmentation. Nathan Burley, analysts with Ovum Asia-Pacific, explained: "The key recent growth drivers have included 3G mobile and enterprise services."

Burley told ZDNet Asia that mobile population penetration in Malaysia passed 100 percent in March 2009, though an estimation of real penetration is closer to 75 percent due to multiple SIM ownership.

"The Malaysian mobile market is reaching maturity and operators are positioning accordingly," he said. "The key emphases in operators' strategies include subscriber loyalty and retention, segmentation and micro-segmentation, leveraging customer data, and expansion into non-traditional areas, especially broadband."

Research firm Frost & Sullivan added that several other areas that gained traction last year included mobile broadband, HSBB and the shared services and outsourcing (SSO) sector.

"The entry of new WiMax players did see significant traction in the mobile broadband sphere," Delesh Kumar, director of Frost & Sullivan, said in an interview. "Also, the HSBB deployment is finally seeing some investment and light of day, and the MDeC is still attracting investments in the SSO segment."

Looking forward into 2010
In the coming year, IDC's Piff believes several technological trends will emerge, noting that the use of business analytics for better business management, the maturing of cloud computing and inevitable adoption of social media in enterprises will lead the way."Business analytics will emerge as a key technology area to help CIOs manage cost, comply with regulations and most importantly, grow the business as information is treated as a strategic asset within the organization," he said.

Concurring with this view, Frost & Sullivan's Kumar added that cost optimization will drive companies to consider technologies such as virtualization, managed services and cloud computing.

"Also, the general growth in consumers adopting Web 2.0 solutions especially Facebook, blogs and Twitter, suggests companies are adopting these technologies as part of their customer outreach programs," he added.

He also said the further adoption of e-government initiatives such as Inland Revenue Department e-filing and government services portal My-EG as well as green IT, will gain traction in 2010.

Edwin Yapp is a freelance IT writer based in Malaysia.

Editorial standards