Malaysia IT and telecommunications: IDC identifies top key trends to look out for in 2006

18 January, 2006

Kuala Lumpur, January 18, 2006 – In its annual look at the year ahead, IDC predicts that the country's information technology and telecommunications industry will maintain its bullish growth in 2006. Barring any unforeseen circumstances, 2006 will be a year whereby key milestones will be breached in the various ICT markets. IDC forecasts that the industry will see interesting developments in the consumer market, as well as fundamental paradigms shifting away from traditional models to newly evolved market models, including a face-off between the IT and telecommunications industry.

Below are highlights of IDC's key predictions for Malaysia's ICT industry in 2006:

Linking What Your Heart Desires: Powering Digital Home with Music, Video, and Gaming

IDC predicts that vendors will bring more entertainment technology simplification and affordability in 2006. PC vendors will take advantage of the growing opportunity to market the entertainment theme bundled with technology simplification, with plug-and-play peripherals increasingly becoming common. The barriers to maximizing the use of digital devices such as PC, handheld and DVD recorder will lessen as users become more educated and in control of the utilization of home entertainment.

Mobile Payment – Will It Be an Extension of the Malaysian wallet?

IDC sees mobile micro-payments to be the core of mCommerce, as consumers are more comfortable with low-value transactions over such non-traditional means. Common applications will include payment for transportation, parking, restaurants, convenience stores, retail outlets, e-tickets to name a few - typically for low-value items. Therefore, IDC expects to see the beginning of the extension of the Malaysia wallet to mobile payments.

VOIP: The Next Wave of Change

In 2006, IDC expects another round of price reductions, not only in developed countries, but also in high tariff destinations. International direct dial (IDD) price reduction offered by wireless operators, as well as markets in high destination countries gradually opening up will bring about another round of price reductions. Moreover, despite the dismal launch of Voice over Broadband (VoBB) services in 2005, IDC expects VoBB to receive strong acceptance in 2006, following the settlement of 015 prefix issues. However, IDC expects that these services will also face strong pressure from free "Skype Like services".

IT Delivery: A Paradigm Shift from Products to Services

This trend has been in process for quite a while, but IDC has observed that most IT product vendors have been slow to understand that this trend actually impacts them. IDC is witnessing the growing delivery of IT as a service by internal IT organizations for example, through the implementation of service oriented architecture (SOA) and by commercial providers like software as a service (SaaS). In 2006, IDC predicts that the most obvious evidence of this shift reaching a tipping point will be the announcement of next-generation versions of online application delivery (SaaS) from one or more of the market leaders – SAP, Oracle, Microsoft (Dynamics), and IBM.

Storage and Data Management Becomes a Necessity

IDC predicts that in 2006, storage and data management services market in Malaysia will have a strong uptake. This is greatly due to the increased demand for storage-related consulting and consolidation services, which are required to help organizations align their IT infrastructure with their businesses based on the changing value of information over time.

According to IDC, there are 3 key drivers for storage and data management services market:

• Security of data and systems
• Need to handle increasing amounts of data
• Regulatory compliance

Life Will Never Be the Same Again for Information Technology Service Providers (ITSPs)

According to IDC, while IT and telecommunications serve different functions historically, and are provided by different vendors and service providers, there will soon be a blurring of lines between telecommunications and IT delivery models and information technology service providers (ITSPs) will offer more telecommunication services while Telecommunication Services Providers (TSPs) will become more like ITSPs.

Moving forward, IDC believes that the converging situation within the enterprise in terms of its IT infrastructure reliance on the network and WAN connectivity would see competition between ITSPs and TSPs.

More Vendors Play Catch-up in the IAM Space

Identity and Access Management (IAM) is expected to be the fastest growing security software market until 2009, says IDC. IAM is central to many different aspects of IT, from regulatory compliance to resource provisioning and configuration. However, this market in Malaysia is still in infancy stage, as consumers are still very much focused on the fundamental security protection such as anti virus and firewall software.

IT Management Takes the Next Step: IT Service Management (ITSM) and Information Infrastructure Library (ITIL)

With corporate governance of IT taking center stage now that Financial Reporting Standards are being introduced in Malaysia in 2006, IDC believes that process maps in the form of IT Service Management (ITSM) and the use of Information Infrastructure Library (ITIL) will drive the "internationalization" of operational standards and 'best practices' for tomorrow's IT manager.

There She Blows: Key Market Milestones Breach

IDC expects a number of IT and telecommunication markets to breach key milestones in 2006.

Among the key milestones that IDC expects to see in 2006 are:

• LCD to overtake CRT sales - With LCD monitor pricing reaching a more stable level, price has stopped fluctuating and shipments have started to see a healthy growth. Total Malaysia PC monitor market is forecasted to post 6.1% CAGR through to 2009 despite the 11.8% decline in CRT form factor.
• Wireless subscribers to exceed 20 Million - Entering into 2006, IDC projects there will be over 20 million wireless subscribers in Malaysia, representing an estimated 78% of the population.
• Internet subscribers to exceed 4 million – IDC forecasts that the number of Internet subscribers will exceed 4 million as 2006 begins, with 21% or 871,897 of this Internet-subscriber population being broadband subscribers.

Malaysia IT Spending: Growth Will Remain Strong Though Moderating from 2005

In 2005, hardware spending in the commercial and consumer sector with 17% growth from 2004 drove the strong growth rate. Personal systems spending contributed 30% to the total IT spending in Malaysia and surpassed the US$1 billion mark. Smart handheld devices (SHDs) enjoyed the strongest growth rate of 58% to reach US$390 million in 2005 with an expected strong vendor push, where vendors significantly increased their product line-up. Furthermore, the SHD market remains a fast growing market, which has yet to show signs of reaching mature status. Meanwhile, IT services is expected to grow by 13% by the end of 2005, mainly contributed by the growth from outsourcing while packaged software is expected to reach US$470.6 million with 6.4% growth.

IT spending for Malaysia will continue to enjoy double-digit growth in 2006, after a strong growth in 2005 reaching approximately 12%. IDC expects the strong growth will continue to drive vendors and suppliers in strengthening their positions in the market with creative products and service offerings.

IDC Predictions 2006 for the ICT market draws upon latest IDC research and a worldwide brainstorming exercise among IDC's more than 700 analysts. This was followed by an extensive regional review to weigh in on key industry events, user trends, and vendor strategies that promise to uniquely define the ICT market in Malaysia in 2006.

For more information about purchasing this research, please contact Hazmi Yusof at +603-2169-7522 or hyusof@idc.com; or Stephen Chong at +603-2169-7521 or ckchong@idc.com

Contact

Chee-Kian Chong
Events & Marketing Executive
Tel: +603-2169-7521
Fax: +603-2163-5098
Email:ckchong@idc.com