Tune in to shift in market focus, analyst says

Businesses are shifting their focus away from cost reduction, presenting new market opportunities for traditional technology and telephony players, analyst says.
Written by Aaron Tan, Contributor

SINGAPORE--As global chief executives today focus on growth rather than cost-cutting, technology priorities like information access and protection are topping the business agenda, according to an industry analyst.

Manoj Menon, partner and Southeast Asia managing director at analyst firm Frost & Sullivan, said during a briefing that the number one priority among CEOs has changed over the last 12 months.

"They have moved away from the days of managing costs and focusing on productivity and efficiency. While all of those are still important, companies today are focusing on how they can grow their businesses faster and capitalize on new market spaces," he said during a media presentation.

Against this backdrop, telephony players should start looking at ways to further differentiate their offerings. Menon explained that several large companies have traditional products and services in markets that have become mature, such as fixed-line telephony. "They need to transform themselves either by playing in the services space more aggressively, or participate in new growth opportunities through acquisitions or expansions into other geographies," he noted.

Menon pointed out that Asia has been the engine of growth for the global technology industry, spearheaded by the rapid economic development of China and India. "The Asian market, by far, is the fastest growing region in the world," he said.

For example, he noted that the Asia-Pacific enterprise IT market registered a compound annual growth rate (CAGR) of 13.2 percent from 2002 to 2005. Much of the growth so far has been led by IP telephony, whose market grew by more than 35 percent during the same period.

Over the next seven years, growth of between 20 percent and 25 percent is also expected in the security area, including VPN (virtual private network), firewalls and secure content management, he said.

However, the Asia-Pacific telecoms market has been growing at a slower pace in the last few years, Menon said. From 2002 to 2004, the industry only grew by 5.7 percent, because fixed-line businesses have been decreasing as more consumers and enterprises opt for IP telephony and mobile phone lines, he noted.

Menon added: "Mobile lines are fast replacing the fixed lines at homes, and it's also beginning to replace the fixed lines in the office. That is driving an accelerated decline in the fixed line communications market."

However, he remains optimistic that the growth of the telecoms market will improve and grow at about 7.5 percent over the next three years, thanks to higher broadband adoption in India, Thailand, Malaysia and China, he said.

Telcos and vendors hoping to capitalize on these opportunities should aim for first-mover advantage in the face of stiff competition, and also differentiate their products because competitors can catch up in six months, he noted.

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