Driving digital in Malaysia and Philippines

Digital infrastructure will be key for APAC advantage.

Malaysia’s accelerated digital economy coupled with increased digital behaviours during the crisis has brought the adoption of cashless payment methods to an inflection point – IDC estimates the volume of cashless transactions to double in 2020 as compared to the preceding year.

The reality of the crisis meant that spending behaviours shifted to digital means during movement restriction orders. The aversion to high-contact physical payments like those involving cash and signatures created changes on both sides of the transaction. This holds particularly true for micro, small and medium businesses who are starting to see the benefits of accepting digital payments.

Malaysian ICT spending is expected to contract by 3.2 per cent as enterprises halt spending to re-assess their business priorities and transition to targeted digital spending instead. Not surprising, IDC anticipates Malaysian SME ICT spending to take a dip during the same period, and the 2020 forecast anticipates a -4.4 per cent dip in spending as they examine the options in front of them.

However, many businesses have acknowledged the need to continue throughout the respective lockdown or semi-lockdown periods, and IDC has noted SMEs are now exploring new digital platforms that can help their business push ahead and create stability in 2021.

SME adoption of cashless payment methods were initially nascent, with few small and medium businesses willing to pay the Merchant Discount Rates (MDR) required with card machines. As of 2019, only 40 per cent of Malaysia’s transaction volume were cashless. To this sense, the rise in popularity of QR-code based payments were championed by the three major e-wallet players as the most viable and cost-effective way of accepting digital payments. As consumers grow familiar towards using QR codes for contact tracing, it also builds a natural bridge to their adoption of QR payments.

Spurred by the ePenjana initiative that ended on the 30th September 2020, SMEs saw greater collaboration with e-wallet platforms. Aside from encouraging consumer spending through cashbacks, discounts, and rewards, the initiative also provided much needed exposure to these businesses, said Darshiniy Selvaratnam, senior market analyst at IDC Financial Insights.

“It is clear that cashless payment behaviours will likely persist post-pandemic. This increased awareness will come with a silver lining for SMEs who have embraced digital payments by providing transaction trails for businesses who have traditionally been cash-based. These could aid in applying for micro-loans and providing potential creditors more visibility into the business” she said.

If trends observed in the last six months continue the same trajectory, Malaysia may well be on its way to achieving BNM’s aim of 200 e-payment transactions per capita by the end of 2020 (BNM’s Financial Sector Blueprint 2011-2020).

As the lockdowns restrict business operations and limit the movement of people, internet connectivity has never been more urgent to enable digital transformation as the country adopts to new landscapes brought about by the pandemic, said Angela Jenny Medez, Client Devices Market Analyst at IDC Philippines.

“In times of crisis such as this, the telecom industry plays an important role in ensuring business continuity and household sustainability as dependency for a reliable broadband connectivity becomes more critical”, she said. “Internet connectivity will serve as one of the main foundations in supporting the overall digital infrastructure development in the Philippines.”

Telecom providers ensured consumers of sufficient network capacity after a surge in mobile data traffic has been observed as more people work at home and learning moves online. Smart Telecom carried out a national LTE rollout by upgrading its’ 2G based stations to 4G across the country increasing their LTE based stations by 10 per cent for the first half of 2020 whereas Globe Telecom appropriated 1.2 billion US dollars to further improve network services by building additional 900 cell sites through partnership with tower companies as part of their expansion plans for the rest of the year.

IDC’s data has shown that more than 55 per cent of Philippine enterprises have opted to extend Work from Home policies through to June 2021. The mindset behind the extension has helped organisations to plan for the future, and therefore, IDC anticipates a surge in demand in not just telecommunications and cloud based services, but also devices and laptops/PCs that will help facilitate employees to function productively from home.

A surge in demand for devices especially in the education segment has been observed as early as Q22020 due to large procurements from the Department of Education and several other LGUs in preparation for distance learning by providing tablets and laptops that includes a complimentary monthly data allocation to public school students and teachers, said Jessica Joyce Caspillan, PCD associate market analyst at IDC Philippines.

“It should be emphasised that along with hardware devices, a well-integrated learning system is crucial in producing a more accelerating rate of learning in the online education space”, she said.

With the rising demand of remote working and online learning brought about by uncertainties and prolonged lockdowns, IDC predicts that the device market in the Philippines will continue to show a strong growth in the succeeding quarters.

According to IDC the ability to transform and modernise IT infrastructure to a cloud-enabled digital infrastructure – one that runs in an autonomous fashion and deliver ubiquitous experience across different locations – will be a key strategic imperative for businesses to succeed in the Next Normal. Revenue growth and business expansion can be accelerated by tightly aligning the key tenets of digital infrastructure (technology adoption and IT governance) using cloud-centric hardware and software building blocks.

IDC’s CEO Agenda research in early 2020 showed that by 2025, businesses in Asia/Pacific* expect to generate 38 per cent of their revenues from digitally enabled products, services, and customer experiences – up from 21 per cent this year.

To achieve business transformation goals, building a digital IT infrastructure that supports resilient operations and pervasive experiences will be the #1 priority by 27.6 per cent of CIOs. Flexibility, agility, resilience, cost-optimization, and highly scalable infrastructure will be a key underpinning for businesses to power next-generation data-driven workloads to deliver new and exciting business outcomes for enterprises’ sustainability.

The CxO view from this early 2020 research also revealed some remarkably interesting and exciting insights to support the rapid evolution and adoption of Digital Infrastructure:

47.1 per cent mentioned developing a sustainable, cost effective digital infrastructure as the #1 Digital Infrastructure priority that will help them deliver reliable digital services and experiences.

42.6 per cent believe that delivering a digital infrastructure resiliency plan is critical to ensure that they can successfully deliver the digital business agenda.

39.7 per cent felt that the ability to successfully build hybrid / multi-cloud capabilities is a challenge that needs to be addressed in 2020.

“Digital infrastructure will be the underpinning engine, which will power AI/ML enabled data-driven workloads and microservices, to win in the digital economy. CIOs who take the leap of faith by accelerating the digital infrastructure adoption will define and architect their organization’s success and leadership in the respective vertical industry,” said Rajnish Arora, vice president for enterprise computing research at IDC Asia/Pacific.

Businesses across vertical industries are rapidly expanding their digital infrastructure, which is expanding beyond traditional enterprise data centres, and private and public clouds to include edge infrastructure such as multi-access edge computing nodes (MAECs), campuses, buildings, and metro colocation facilities.

IDC believes that digital infrastructure will include resources that facilitate rapid adaptation of applications and code to enhance customer experiences, embed intelligence and automation into business operations, and support ongoing industry innovation at edge locations.

Digital infrastructure will be defined by software-enabled intelligence, which will be able to abstract, provision and orchestrate compute, storage and network resources using underpinning hardware, to address myriad workload requirements and business KPIs. Business resiliency and flexibility will be a key hallmark of digital infrastructure which will enable businesses to constantly realign to changing market and competitive landscape.

The emerging digital infrastructure ecosystem will increasingly be built on cloud-centric technologies, ubiquitous deployment options, and automated IT operations.

IDC expects by the end of 2021, 80 per cent of enterprises will put a mechanism in place to shift to cloud-centric digital infrastructure twice as fast as before the pandemic.

The current crisis has simply accelerated the adoption of digital infrastructure which will further widen the chasm between digital innovators and digitally determined enterprises Vs digitally distraught organisations.


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