IT Spending: Malaysia's Public Listed Companies to Invest More on new Strategic Applications in 2004

12 January, 2004

Kuala Lumpur, January 12, 2004 – According to IDC's recently published research of a survey conducted on the top public listed companies in Malaysia, IDC expects the market to continue in investing more on new strategic applications in 2004. Based on the survey conducted in late September 2003, 48% of the respondents expect that developing new strategic applications would be their most important focus. This means that more local public listed companies would be looking at new applications that can help them in expanding their business locally or overseas.

The survey was conducted to understand the top-level trends in IT spending by vertical markets and company revenue. This IT spending metric also provides insight into end-user sentiments, outlook, decision drivers, and spending behaviors. Some of the key findings from the survey are:

* Among the top public listed companies that have responded to the survey, companies in the highest deciles (by company revenue) actually took up 70% of the IT spending accounted by these 75 public-listed companies. Based on the survey, IDC has used the Lorenz Curve to illustrate the relationship between the distribution of the IT budgets among the 75 companies and their size (as measured by their revenue). One key finding based on the Lorenz Curve that represent the market very well today is the bigger the company in terms of revenue, the larger is its share of the total IT budget projected for the group. IDC believes that IT spending in the private sector is very much based on their overall business health. Thus, majority of the IT spending today are contributed by companies that As the economy strengthened and companies looking to expand globally, IDC believes that the distribution gap will be narrower where companies with lower revenue will increase their spending.

* IT today has been seen as a steady contributor to ongoing operational capabilities, although IDC also believes that for the next few years, there is likely to be more adoption of new solutions that can really improve companies’ competitive advantages. This is where the software and services market will grow in Malaysia, as more and more companies are realizing different models that can mix well between IT adoption and the business strategies of the companies. The companies that start to have a mixed record regarding their IT investments fall within the financial, manufacturing, construction and services sectors, where we have mentioned earlier that these companies are now facing different challenges in their own verticals. The companies in these verticals are sometimes forced to move forward with the industry leaders in technologies before they are left behind the competition, but the companies must see the true benefits of how IT can benefit them.

* We also look at the investment in IT solutions. The solution that has the highest adoption is, of course, enterprise resource management (ERM), where 41.3% of the companies have already implemented it and 9.3% of the companies are currently implementing it. This makes up more than 50% of the respondents. ERM is probably the most common solution where most large companies would need to ensure that their business operations are running well. The challenge today is to create more cost-effective ERM solutions for the small and medium companies. It is surprising that although solutions such as CRM or ecommerce have been the hot topics in the market for several years now, new technologies such as wireless have actually been more popular where 13% of the companies have either implemented it or are currently doing so. Compared to solutions like CRM or ecommerce, wireless technologies are simpler solutions and involve a lower cost. The most important thing that most companies are now looking at is easy accessibility whenever and wherever they are, even in their own offices. Thus, wireless has gained significant demand during the last 12 months. In addition, solutions such as CRM require long-term implementation and the cost involved would require companies to have a longer cycle in making the decision than for wireless.

The year 2004 is likely to be an uncertain year for most IT vendors and service providers, with major elections coming up in neighboring countries as well as Malaysia’s major trading partners such as the United States. The economy has not recovered fully; in particular, the commercial market has been slowing down spending since the late 1990s. Therefore, winning IT contracts in the next 12 months will continue to be a function of vendors’ understanding of clients’ real needs in terms of IT and how IT is perceived in these companies, before making strategic offerings to the clients.

"Beside investing in new strategic applications as mentioned, controlling costs and improving ROI justification of IT is getting more attention, as companies today need to monitor their costs more carefully in light of the external changes in the next 12 months, such as major elections in neighboring countries as well as the United States", said Maggie Tan, Research Manager of IDC Malaysia. Companies that are looking at expanding overseas or looking at how globalization would affect them would need to control their spending as well.

For more information about purchasing this research, please contact Hazmi Yusof at +603-2169-7526 or hyusof@idc.com. For press enquiries, please contact Stephen Chong at +603-2169-7521 or ckchong@idc.com.

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Chee-Kian Chong
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Tel: +603-2169-7521
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