IDC Predicts Malaysian Businesses Will Invest Wisely In ICT To Survive The Economic Downturn In 2009

Kuala Lumpur, February 06, 2009 – IDC, in its 2009 Top 10 Predictions of the Malaysian information and communications technology (ICT) industry, believes that opportunities still exist within the industry despite the global economic slowdown. Malaysian businesses are expected to revamp their strategies and invest prudently in ICT to remain competitive and sustain profits. Companies with lean business operations will also be in a stronger position to maximize profits as the economy recovers.

"The global economic meltdown will have a direct effect on the Malaysian ICT sector through 2009. During this period, businesses will look to quickly alter strategic business directions and invest wisely in IT. IDC believes that Malaysian companies will be in search of emerging technologies such as Green IT, Managed Services, Web 2.0 and Virtualization, to help reduce operational cost and maximize profitability; hence, creating pockets of opportunities for ICT companies operating in Malaysia," says Jaygan Fu Ponnudurai, Associate Analyst for Personal Systems at IDC Malaysia.

The following are the top 10 key predictions that IDC believes will shape the Malaysian ICT industry in 2009:

1. IT Spending Will See Light at the End of the Tunnel

Malaysia IT spending is expected to grow between 4% to 5% in 2009, surpassing the US$6 billion mark. This probable scenario is based on the current GDP growth forecast of 3.5% for 2009 by the Malaysia Institute of Economic Research, which led IDC to adjust the 2009 IT spending downwards from its previous 7.6%. Despite the global financial meltdown, IDC still sees growth in the commercial space particularly with the Financial Services Industry investing in new technology to compete globally. IDC foresees the small and medium enterprises (SMEs) segment to be more innovative in business operations, leveraging mobile technology, outsourcing of certain business functions and mail servers, to reduce operating cost.

On the other hand, consumers will need a stronger push to purchase IT-related products in 2009. The drop in consumer confidence, with ongoing news of downsizing and retrenchments, has led consumers to cut back on non-necessity items like IT products. IDC expects ICT vendors to focus on key range of products supported with heavy promotions rather than engaging in further price wars.

2. Mini-Notebooks To Revolutionize Traditional Go-To-Market Strategy

IDC predicts new selling strategies for mini-notebooks to materialize in 2009. Vendors will collaborate with wireless service providers (WSPs) and aggressively promote mini-notebooks to end users, moving beyond the hardware price war. The bundling strategy is particularly important in cities outside the metro areas where WSPs are currently expanding their subscriber base. As a result, vendors will need to strengthen their customer services and support or work closely with channel partners to provide these services. Channels are also required to embrace telecommunications services like broadband skill sets as consumers are likely to perceive them as a one stop center.

3. SaaS Will Gain Momentum In 2009

The concept of offering alternative delivery and deployment methods for software has a long-standing history. IDC predicts that Software as a Service (SaaS) in Malaysia will make greater strides in 2009 due to the changing market dynamics. Trying times such as this will be a push factor for organizations to adopt the SaaS model because of its low upfront cost compared with traditional licensing. IDC believes that the SaaS model will address how long an organization is tied down to a vendor as well as the time it takes to deploy the solution. The pull factor for SaaS revolves around the offerings that can be provided by vendors within a SaaS model. Vendors are not only taking notice of the SaaS model but also coming up with solutions that can be deployed. IDC believes the push and pull factors will generate the necessary synergy to start a revolution for an alternative deployment in 2009.

4. Green IT To Walk The Talk In 2009

The past couple of years has seen the term “Green IT” being actively promoted across Malaysia to generate awareness of the concept and the benefits that it can bring. IDC believes that 2009 will finally be the year where companies convert this awareness into execution. The economic situation will be the catalyst of such initiatives and accelerate the adoption of Green IT, driven by companies desperate to save costs, rather than a push by the government. IDC also feels that IT companies will start small in their investment on Green IT, for example, investing in lower cost and energy efficient PCs rather than costlier options like blade servers in the short run. According to IDC’s Asia/Pacific Green Poll 2008, more than 40% of respondents indicated they are willing to make Green IT investment on energy efficient PCs and servers within the next 12 months.

5. Managed Services, as Replacements of Products, Will Boom

Managed services is expected to boom in 2009 and beyond and become a significant alternative to product purchasing in Malaysia. With the current economic conditions, organizations are more likely to opt for the Operating Expenditure (OPEX) model instead of a Capital Expenditure (Capex) model especially in areas such as managed unified communications and managed security services. Managed unified communications adoption is expected to accelerate as vendors develop stronger partnerships with SPs such as Telekom Malaysia and Heitech Padu. Flexible services offered includes site- and network- based services, which enables end users to choose combined functionalities such as unified messaging and video conferencing without large capital outlay.

Despite the low adoption of managed security in Malaysia in 2008, the number of Managed Security Service Providers (MSSP) has increased ranging from IT system integrators, security/networking vendors to telcos. IDC believes the trend to adopt managed services will continue not only by traditional SME customers but also by enterprises in 2009. Managed Security will be realized in 2009 through hybrid approaches by MSSPs which combines the email hygiene benefits of a hosted service with the granular policy enforcement and data loss prevention benefits of a managed environment.

6. Competition Between Wired and Wireless Broadband Service Providers

As emerging Internet SPs embark on a more aggressive roll out of broadband services, 2009 will see the broadband industry engaging in a two-way power struggle between traditional ADSL and new wireless transmissions. Since a variety of wireless technologies including fixed wireless access, hotspots, 3G HSDPA, I-burst and WIMAX, exist in Malaysia, the incumbent SP, Telekom Malaysia (TM), cannot afford to be slow in counter responding to what the wireless SPs have to offer. In fact, TM has recently invested heavily in expanding their hotspot coverage. IDC therefore foresees an all-out war on broadband services, as SPs compete fiercely to gain market share. In order to gain a competitive edge, SPs will intensify their strategic moves which includes service differentiation in terms of service coverage, mobility and innovation of customer premises equipments (CPEs) in sizes and colors. In addition, partnerships will also arise between SPs and hardware vendors through bundling programs.

7. Every Cloud Has A Silver Lining

The current economic situation is pushing companies to look at ways to leverage existing IT-based systems to compete more efficiently and effectively in the business environment. As one of the new, alternative computing models, cloud computing allows existing IT capabilities to be extended or new capabilities added with no or a low upfront fee as it minimizes investments in new infrastructure, training new personnel or licensing of new software. Cloud computing is a usage based model where the customer only pays for what they actually use. In today's economic environment, this makes a lot of sense for the budget-constrained companies. There are opportunities for cloud computing in the government, healthcare and manufacturing industries as these organizations invest heavily in IT systems and infrastructure while at the same time searching for cost savings. The nature of cloud computing also makes it suitable for the budget and resource constrained SMEs, where not requiring in-house teams to deploy and manage the solutions is a huge advantage to this sector. IT vendors will also benefit from cloud computing as it allows them to combine their vertical industry knowledge, IT products and service and support offerings into highly relevant customer solutions and expands their sales portfolio IT systems capabilities, hence resulting in more business opportunities.

8. Mobile Operators To Continue With Strategic 3G Network Expansion In Year 2009

In 2009, mobile operators in Malaysia will continue to invest in 3G-network expansion and infrastructure upgrade projects. DiGi is expected to launch its 3G services in 2009, while other 3G players are already planning their launch strategies. IDC believes 3G mobile operators will take this opportunity to invest in more 3G base stations, despite a weakened economic environment, and benefit from this investment once the economy recovers. Since the second half of 2007,subscribers have been moving from 2G to 3G services. Hence, it is important for 3G mobile operators to provide coverage in green field areas in order to increase their 3G subscriber base. This is also an opportunity for mobile operators to put pressure on vendors to provide cheaper network equipments given the economic situation. Falling prices of 3G mobile phones will also encourage the adoption by potential subscribers.

9. Web 2.0 Blitz Is Key To Customer Links

IDC predicts the enterprise sector in Malaysia to put additional efforts into reaching and understanding their customers better through the use of web 2.0 technology in 2009. Since the rise in Internet usage, effective Internet sites and online support has become a key determinant in deciding which products or services to buy. This trend is expected to grow even further in 2009, where Web 2.0 will play a major part in developing customer loyalty and securing the existing customer base. Networking tools such as Facebook, Linkedin and Friendster among others, will be leveraged to provide potential sales leads. Sales representative can prepare better presentations and provide additional value to clients based on the information available through the sites. Inputs and feedbacks acquired from online discussion forums, social network sites and blogging sites can be utilized to further improve products.

10. Virtualization Will Gain Momentum In The Enterprise Space

IDC’s annual Predictions for the ICT market in Malaysia draws upon latest IDC research and a worldwide brainstorming exercise among IDC’s 900+ analysts. This was followed by an extensive regional review to weigh in on key industry events, user trends, vendor strategies and economic measures, that promises to uniquely define the technology trends which would impact and drive the ICT market in Malaysia for 2009. Across the globe, following the release of IDC’s global top ten and IDC’s APEJ top ten, geographic and technology teams will be releasing their own specific predictions in the up coming months. Visit http://www.idc.com.sg/Predictions09/ often for updates.

-ENDS

For more information about this research, "IDC's Malaysia 2009 Top 10 Predictions : Opportunities Still Prevail Despite Economic Onslaught " (Doc# MY381101S), kindly contact Elizabeth Shunmugam at +603-2169-7536 or email: eshunmugam@idc.com.

Notes to Editor

To find out more about IDC's Malaysia Information and Communications Technology (ICT) 2009 Top 10 Predictions, please register at IDC’s Webcast Portal to listen to the Webcast presented by Jaygan Fu Ponnudurai, Associate Analyst, Personal Systems Research, ASEAN, which will be available from 11 Feb , 2008 till 15 Mar, 2009.

To view the webcast, please follow these steps:

1. Log on to IDC's Webcast Portal to register. By registering only once, you will be able to access the Webcast Portal for future webcasts without having to register again.

2. Once you have registered, you will be directed to a page which lists IDC’s complimentary webcasts and other webcasts available for purchase .

3. Click on the complimentary webcast and begin viewing.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. Over 1000 IDC analysts in 110+ countries provide global, regional, and local expertise on technology and industry opportunities and trends. For more than 43 years IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting http://www.idc.com/ .

About IDC's Asia/Pacific Green Poll conducted by IDC's ERS Group

This is an ongoing end-user survey focusing on awareness and adoption of Green IT in the region. Green IT is a growing, global phenomenon, with customers seeking out IT suppliers whose offerings are more energy efficient, more material efficient, less hazardous, designed for greater recyclability, and supported by end-of-life recycling programs. IDC's green IT research team — in Europe, the Americas, and Asia/Pacific — offers the only 360-degree perspective on green IT: analyzing the complete spectrum of offerings, services, and providers as well as customer adoption of green IT across all major regions and within energy, manufacturing, and other key industries.

IDC ran its Asia/Pacific Green Poll in January 2008 in order to get a better understanding on the current state of Green IT in Asia/Pacific. Countries involved in the Green Poll include Australia, Hong Kong, India, Japan, New Zealand, the PRC, Taiwan and Singapore. In total, there were 582 respondents.

About IDC’s "Continuum" End-User Survey

“Continuum” is an annual IDC end-user survey that is conducted across 14 key markets in the Asia/Pacific (including Japan) region since year 2000. This powerful study provides IT benchmarks in the area of IT spending, IT setup, IT planning environment, across a broad range of technology areas. The study harnessed 3500 feedback from CIOs, IT Directors, and/or IT Managers who are responsible for the IT decision-making process within end-user organizations.

About IDC's Asia/Pacific End-User Research and Statistics (ERS) Group

The aim of IDC's Asia/Pacific End-User Research and Statistics (ERS) Group is to design and collect research in a cost-effective, efficient and accurate manner with professional survey sampling, questionnaire design, and management experience. IDC is committed to deliver a comprehensive end-user research solution to help corporate/commercial, public and consumers sectors, as well as suppliers/channel partners, with their business and market strategies. Our research encompasses technology hardware, software, IT services, emerging technologies, peripherals and vertical businesses (manufacturing industries, government sectors, health industries, retail industries and financial sectors).

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