COVID-19’s impact on ICT budgets in APAC

The global pandemic is still impacting ICT budgets in Asia Pacific region. According to analyst firm GlobalData Asia Pacific countries are seeing a decline of seven per cent to five per cent in ICT spending. However senior IT decision makers are investing in certain types of technologies to help steer their organisation through COVID-19

China

China’s ICT spending for 2020 is expected to register a decline of 7.6 per cent, against the estimated positive growth rate of 7.2 per cent before the COVID-19 outbreak.

According to GlobalData while China’s domestic ICT spending had grown by 8.0 per cent in 2019, the COVID-19 outbreak will lead to a decrease in ICT spending from last year across almost all segments of the market.

An analysis of GlobalData’s Market Opportunity Forecasts model reveals that spending on hardware is estimated to register a negative growth rate of 8.5 per cent in 2020  as against the positive growth rate of 8.9 per cent in 2019 and the projected growth of 6.8 per cent before the COVID-19 outbreak, said Anshuma Singh technology analyst at GlobalData.

“A heavy fall in the sales of hardware devices across the country and decreased capital expenditure on hardware devices by enterprises will negatively impact the growth of infrastructure hardware segment this year,” he said.

The demand for software is also set to fall due to the impact of the COVID-19 pandemic, with enterprises delaying the roll-out of new applications and renewal of software licenses in 2020.

Indonesia

At a time when Indonesia’s ICT spending for 2020 is expected to decline by 7.1 per cent as opposed to the 7.5 per cent growth expected before the COVID-19 outbreak, mobility and cloud technologies are set to present opportunities for vendors.

According to analysis of GlobalData’s Market Opportunity Forecasts Model reveals that the COVID-19 outbreak will lead to a decrease in ICT spending from last year across almost all segments of the market.

Spending on hardware is expected to fall by 7.7 per cent as against the growth of 9.9 per cent in 2019 and the projected growth of 8.3 per cent before the COVID-19 outbreak.

Kaipa Sai Shashank senior technology analyst at GlobalData said enterprises in Indonesia have been deferring hardware purchases as an initial response to the economic uncertainty owing to the pandemic.

“With the enterprises now having moved onto the remote working phase, all capital expenditures are being re-evaluated, leading to decreased hardware spending in the domestic market in Indonesia,” he said.

The demand for software will also decrease in 2020 with enterprises delaying the roll-out of applications this year. The market for enterprise social networking and collaboration platforms, however, is set to increase by 31.3 per cent for 2020 owing to the demand for collaboration due to remote working.

The market for ICT services too is set to fall in Indonesia, with organisations pausing their project-oriented services until business visibility improves. In addition, spending on managed and support services is set to decline with enterprises holding these off amidst the financial uncertainty.

Malaysia

The mobile services revenue in Malaysia is poised to grow at a sluggish compound annual growth rate (CAGR) of 0.1 per cent during 2019-2024, from US$5.1bn in 2019 to US$5.4bn in 2024, after registering a major drop in the market revenues in 2020 due to the COVID-19 outbreak, according to GlobalDataGlobalData’s Malaysia Telecom Operators Country Intelligence Report showed the COVID-19 pandemic will have a significant impact on mobile service revenues in 2020.

Aggregate mobile services revenues will witness a decline of 6.5 per cent year-on-year in 2020, in line with decline in the mobile average revenue per user (ARPU), with operators offering discounts and free mobile data services to support users during the crisis.

Deepa Dhingra telecom analyst at GlobalData said, the mobile data segment will see its revenues increase at a CAGR of 2.9 per cent over the 2019-2024 period, driven by the steady growth in adoption of higher ARPU postpaid plans.

“On the other hand, revenues from mobile voice and mobile messaging segments will continue to decline at CAGR of 4.5 per cent and 7.9 per cent, respectively, over 2019-2024,” he said. “4G will remain the leading mobile technology through the forecast period 2019-2024, driven by continued investments on 4G network enhancements by operators such as Celcom, Digi Telecommunications and Maxis. With all the major mobile service providers preparing for 5G network, GlobalData expects 5G to be commercially launched in 2021.”

New Zealand

ICT spending in New Zealand is estimated to register a 6.3 per cent year-on-year decline to reach US$9.5bn in 2020, against the initial estimated growth of 9.6 per cent before the COVID-19 outbreak, according to GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Market Opportunity Forecasts Model reveals that ICT spending across all infrastructure segments, which includes hardware, services and software will decline as enterprises defer their purchase decisions.

Gopi Srikanth senior technology analyst at GlobalData said even for the few enterprises that are looking to maintain their pre-outbreak upgrade timelines, the COVID-19 outbreak has caused supply chain constraints that will affect the availability of hardware.

“The market for ICT services in New Zealand too will decline in 2020, as enterprises revisit their buying decisions owing to an increased focus on profitability amidst the uncertainty,” he said.

Looking at the sector-wise implications of the COVID-19 pandemic, spending across consumer goods, food service, transport and logistics, and travel and leisure will bear the maximum brunt in 2020. The consumer goods sector, which accounted for 9.2 per cent of the overall ICT spend in 2019, will also witness a 13.2 per cent decline in ICT spend in 2020.

Singapore

An analysis of GlobalData’s Market Opportunity Forecasts model reveals that the COVID-19 outbreak will lead to a decrease in ICT spending from last year across almost all segments of the Singapore market.

Spending on hardware is expected to fall by 6.3 per cent as against the growth of 10.7 per cent in 2019 and the projected growth of 8.4 per cent before the COVID-19 outbreak.

Manish Chaurasiya senior technology analyst at GlobalData said enterprises in Singapore are restricting their infrastructure upgrade plans to minimise their capital expenditures to retain profitability during the on-going COVID-19 pandemic.

“The demand for software is also set to fall, with enterprises delaying the roll-out of applications in 2020,” he said. “The market for enterprise collaboration platforms, however, is expected to increase by 25.8 per cent, driven by the increasing demand for collaboration due to remote working.”

The ICT services market in Singapore is also anticipated to fall, with enterprises looking to curb upcoming projects and non-critical ICT spending and delay their long-term digital transformation initiatives until at least next year to mitigate the risk of financial instability in business operations.

Australia

Australia’s ICT spending is expected to decline by 5.9 per cent in 2020 as opposed to the 9.4 per cent growth forecasted before the COVID-19 outbreak, says GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Market Opportunity Forecasts Model reveals that spending on hardware is expected to fall by 6.8 per cent in 2020 as against the growth of 11.5 per cent in 2019 and the projected growth of 8.6 per cent before the COVID-19 outbreak.

On the other hand, the public cloud market, which includes SaaS, PaaS and SaaS, is expected to grow by 3.1 per cent over 2019. Likewise, the market for enterprise social networking and collaboration platforms is set to increase by 29.4 per cent for 2020, owing to the need for increased collaboration for the remote workforce amidst the pandemic.

Kaipa Sai Shashank senior technology analyst at GlobalData said enterprises are refraining from non-critical hardware purchases, and these longer device refresh cycles will strongly impact spending on hardware in the future.

“Also, the current trend of remote working is shifting organisations’ internal ICT infrastructure towards cloud-based applications and storage options that offer strong business continuity from an operational perspective,” he said.

The software segment will remain significantly affected due to the business impact across several verticals – notably travel and leisure, and the transportation and logistics sectors.

Shashank said the uncertain economic environment has adversely affected the enterprise software spending on licenses and the roll-out of new applications in 2020 across all verticals.

“Looking at the sector-wise impact of the COVID-19 pandemic, the travel and leisure sector will be the most impacted, with ICT spending in the sector projected to fall by 19.4 per cent in 2020 when compared to 2019,” he said. “Similarly, ICT spending in the transport and logistics, consumer goods and manufacturing sectors will also witness significant declines.”

South Korea

With the COVID-19 pandemic having engulfed almost the entire globe, South Korea too is estimated to witness a 5.4 per cent decline in the overall ICT spending in 2020, according to GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Market Opportunity Forecasts Model reveals that ICT spending in South Korea is estimated to register a 5.4 per cent year-on-year decline to reach US$59bn in 2020, against the initial estimated growth of 8.9 per cent before the COVID-19 outbreak.

Anshuma Singh technology analyst at GlobalData said “ICT spending across all infrastructure segments – software, hardware and services – is estimated to fall in South Korea in 2020. However, cloud computing will be among the few technologies which witness strong growth due to the growing demand for the public cloud services among enterprises.

“Enterprises in South Korea are adopting remote working to ensure business continuity with minimal disruption and as a control measure to prevent the virus spread. Owing to this, South Korea is witnessing a rise in demand for the teleconferencing technology and components, server chips and network peripherals, as organizations rush to build virtual offices.”

The market for enterprise social networking and collaboration platforms is, however, estimated to increase by 30.1 per cent in 2020, owing to the increased demand for audio and video conferencing tools among enterprises for team collaboration.

The demand for software is set to fall by 4.8 per cent in 2020. Almost all ICT products/solutions’ revenue is anticipated to witness reduced demand in 2020, as compared to the high growth projections before the outbreak. This is primarily due to the substantial fall in spending on software licenses and on tech consulting and systems integration services.

COVID-19 pandemic has adversely affected the growth of various verticals. ICT spend across manufacturing and BFSI, the two largest verticals in terms of ICT spend (together accounting for nearly 31 per cent in 2019), is also expected to decline by 12.1 per cent and 3.8 per cent, respectively, in 2020. Apart from these, ICT spend is estimated to decline across the travel and leisure and transport and logistics verticals in 2020.

Japan

An analysis of GlobalData’s Market Opportunity Forecasts Model reveals that ICT spending in Japan is estimated to fall to US$ 271bn in 2020, witnessing a 5.3 per cent year-on-year decline in 2020, as against the initial estimated growth of 8.6 per cent before the COVID-19 outbreak.

Kaipa Sai Shashank senior technology analyst at GlobalData said ICT spending across all infrastructure segments – hardware, services, and software – is projected to fall in Japan in 2020.

“The demand for software is set to fall, with enterprises delaying investments in new technologies amidst the COVID-19 pandemic,” he said. “Almost all of the software categories are expected to witness reduced demand in 2020, as compared to the high growth projections before the outbreak.”

Looking at the sector-wise implications of the COVID-19 pandemic, the ICT spend from the BFSI vertical, which accounted for the largest share (11.1 per cent) of the overall ICT spend in 2019, will witness a decline of 3.6 per cent in 2020. Additionally, ICT spending from travel and leisure, transport and logistics, and the manufacturing sectors will bear the maximum brunt of the COVID-19 impact in 2020.

Technologies APAC companies are investing in

While ICT budgets may shrink for traditional hardware and software, COVID-19 has fast-tracked the transition to digital payments across the Asia-Pacific (APAC) region as consumers opt for the comfort and safety of digital channels rather than expose themselves to disease vectors such as cash, according to GlobalData, a leading data and analytics company.

Consumers globally and in Asia are increasingly going digital and are embracing electronic payments at a fast pace. According to GlobalData revised forecasts, the total card payments in APAC market is expected to grow by 6.5 per cent to reach US$20.3 trillion in 2020. This is expected to rise further to US$27.4 trillion by 2023.

Even cash-intensive countries in the region such as India, Japan, Taiwan, the Philippines, Malaysia, Indonesia, Vietnam, and Cambodia are witnessing similar trend, with rise in card payments.

Kartik Challa banking and payments analyst at GlobalData said while most Asian markets are traditionally cash-dominated, there has been gradual rise in digital payments in past few years due to constant push by the governments, banks, and payments companies.

“The current COVID-19 pandemic has further accentuated the importance of digital payments among the consumers,” he said.

Governments were also pushing efforts to maintain the economy in several APAC countries. In Japan, the Government turned to healthcare infrastructure to combat the COVID-19 pandemic — with the Government and healthcare verticals leading the ICT spending in Japan.

In Australia and Malaysia fixed communications services were likely to increase due to the fixed broadband segment.

The total fixed communications services revenue in Australia is expected to increase at a compounded annual growth rate (CAGR) of 1.3 per cent from US$9.5bn in 2019 to US$10.1bn in 2024, driven by the growth in revenues from the fixed broadband segment. In Malaysia following a marginal decrease in 2020 mainly as a knee-jerk reaction to the COVID-19 crisis, the total fixed communications services revenue in Malaysia is forecast to grow at a compounded annual growth rate (CAGR) of 3.9 per cent from US$2.2bn in 2019 to US$2.6bn in 2024.

Remote working and digital transformation were helping to drive growth in tech areas like Cloud. In Japan public cloud will be one of the few segments to show growth, with the market expected to grow over 2019. Public cloud (comprising of SaaS, PaaS, and SaaS) will continue to grow as enterprises in New Zealand leverage public cloud to effectively manage their processes such as the recovery of data and safe backup systems.

Similarly, the market for enterprise social networking and collaboration platforms is set to increase by 22.5 per cent in 2020, owing to the demand for collaboration due to remote working requirements.

Public cloud will also lead the Cloud space in Singapore, with the market projected to grow by 3.7 per cent over 2019.

Enterprises in Singapore are likely to continue to invest in public cloud, owning to high infrastructure cost, data privacy and security, and operational performance.

Looking at the sector-wise impact of the COVID-19 pandemic, the travel and leisure sector in Singapore will be the most affected, with ICT spending in the sector projected to fall by 18.6 per cent in 2020 when compared to 2019. Similarly, ICT spending in consumer goods and the foodservice sectors is also expected to fall sharply, said Chaurasiya.

“As enterprises work remotely amidst the COVID-19 pandemic, remote accessibility and collaboration are critical for enterprises to achieve business continuity,” he said. “As a result, the adoption of cloud-based solutions has increased across enterprises in the country.”

In Indonesia public Cloud market comprising of SaaS, PaaS and SaaS will occupy a significant share of the cloud computing market in Indonesia in 2020, with the market expected to grow by 3.3 per cent over 2019.

Shashank said enterprises in Indonesia are leveraging public cloud services to effectively manage their processes such as data-recovery and a safe backup system.

“In terms of sector impact of the COVID-19 pandemic, the government sector in Indonesia will be the least impacted, with ICT spending in the sector projected to decrease by 0.8 per cent in 2020,” he said. Similarly, ICT spending in the healthcare and communications sectors are expected to decline marginally by 1.0 per cent and 1.4 per cent.

“To ensure business continuity and minimise losses, organisations in Indonesia have adopted a Cloud-first strategy by shifting their ICT infrastructure to the cloud, which has increased their focus on adopting cloud-based solutions,” Shashank said. “The new workplace models adopted due to the COVID-19 outbreak have also increased demand for collaboration tools in the country.”

In China public Cloud will witness high demand in this pandemic situation, with the market expected to grow by 3.2 per cent over 2019. Small and medium enterprises are migrating to cloud-based solutions from traditional application software to operate efficiently in this pandemic situation.

However, in China the market for enterprise social networking and collaboration platforms is set to increase by 23.7 per cent for 2020 due to the growing demand for audio and video collaboration tools to provide remote working facilities.

Meanwhile in enterprises in Korea leveraged its extensive digital expertise in mobile devices, AI and high-performance computing for the development of COVID-19 diagnostic kit and information analysis of COVID-19 sample collection to flatten the COVID-19 curve.

“Being one of the most digitally connected countries globally, South Korea still continues to make strong strides towards technology enhancements,” said Singh. “Increased investments in the areas of cloud computing along with data centres, artificial intelligence, 5G technology, big data and the Internet of Things, will facilitate the country’s technology sector to remain on growth trajectory during the forecast period.”

In Japan enterprise social networking and collaboration platforms will be one of the exceptions, with the market set to grow by 30.8 per cent for 2020 owing to the increased demand for collaboration due to remote working, as enterprises focus on ensuring business continuity.

Taiwan saw growth in export orders increase 2.3 percent year-on-year to US$38.53 billion amid robust demand for ICT products and electronics, said the Ministry of Economic Affairs.

“Due to COVID-19 lockdowns, market demand for laptops and tablets, as well as servers and other electronic devices, remained strong… Stronger than our previous predictions,” Department of Statistics Director Huang Yu-ling (黃于玲) told a news conference in Taipei.

“Orders from the US, our biggest [overall] customer last month, totaled US$10.95 billion [in all categories combined], a record high,” Huang said, adding that orders from Europe also hit a record high of US$8.25 billion.

“Demand for foundry services, ICs and passive components increased thanks to the accelerating deployment of 5G technologies and high-performance computing,” Huang said, adding that China and Hong Kong were the main contributors, placing up to 39.5 percent of total electronics orders.