IDC Predicts Renewed Attention To SMB and Channels That Will Drive Innovation and Growth in Asia/Pacific (excluding Japan) for 2007
14 March, 2007
Singapore and Hong Kong, March 14, 2007 – According to IDC’s latest report “ Asia/Pacific (Excluding Japan) Small and Medium-Sized Businesses and Channels 2007 Top 10 Predictions ” (Doc# AP676111P), the highly diverse and complex small and medium-sized business (SMB) market in this region makes the task of coordinating highly localized product, positioning, and channel strategies even more daunting for technology providers. IDC therefore believes that ICT vendors will devote more effort and resources in 2007 to look for strong channel partners and independent software vendor (ISV) solution providers to help them reach out to SMBs across the region.
"The smallest firms have the greatest technology needs, the lowest spending levels, and the lowest brand loyalty, giving rise to an SMB market that is colorful, multi-faceted and dynamic. This kaleidoscope with multiple dimensions, industry verticals, geographies, sub-segments, will drive innovation and feed on the growth momentum of China, India and emerging Asia countries (EACs). ICT vendors are exploiting this growth through strategic alliances and channels. An effective channels strategy is therefore key to successfully penetrate the vast SMB sector,” says Walter Lee, Vice President of Asia/Pacific Consulting and SMB/Partnering Research at IDC Asia/Pacific.
Given the enormous interest in EACs, such as Malaysia, Indonesia, the Philippines, Thailand, Vietnam, Pakistan, Sri Lanka, and Bangladesh, as well as the explosively growing mega markets, India and the People's Republic of China (PRC), IDC predicts the following for SMBs and channels in 2007:
1. Vendors will ramp up efforts to recruit channel partners in emerging Asia countries
The growth of EACs will be driven mainly by significant increase in infrastructure development and IT spending power in the region. It is, therefore, critical for vendors to identify suitable channel partners in EACs to pave the way for more success and increased penetration by leveraging their channels' local expertise and partner networks in these countries.
2. The People's Republic of China and India will remain a battlefield for channel partners that want to ride their growth
The PRC and India will continue to enjoy high growth in 2007. The sheer geographic size of these two markets, coupled with the diversity of the sub-regions, makes it necessary for vendors to have an effective route-to-market strategy in order to be successful.
3. Vendors will ramp up channel investments to reach out to the small and medium-sized business sector
Many vendors are shifting their attention to the APEJ SMB market for potential growth. SMB initiatives will continue to be a source of great opportunities for channels and vendors. In 2007, IDC expects the release of more customized and packaged products and services, and software as a service (SaaS) offering designed specifically to address SMBs' need for easy-to-install, well-supported, and less expensive applications. IDC predicts the APEJ SMB IT spending will grow at a healthy 10% from US$47.3 billion in 2006 to US$52.1 billion in 2007. APEJ's strong economic growth and numerous government initiatives to encourage IT adoption in the SMB segment are leading to greater IT penetration and higher IT expenditure as more business practices have been automated by the use of technology.
4. Alliances among channels will increase to improve market penetration
Partnership networks will increase in order to capture more business opportunities and maximize market reach. IDC predicts continued investments in managed services, and alliances between service providers (SPs) and Value-Added-Resellers (VARs) in 2007, as well as an increase in alliance formation amongst partnership networks.
5. Consolidations through mergers and acquisitions in the channel space will accelerate
Channels will increasingly consolidate, driven by the establishment of partner alliances and the usual economic forces. IDC believes that these alliances and acquisitions will continue in 2007 to attract larger partner companies to the fore, making it urgently necessary for smaller partner companies to enhance their partnership networks.
6. The need for vendor-channel collaboration for specific industry solutions will increase
In 2007, vendors will increasingly be on the look out for channel partners with specific industry solutions. Service partners will continue to build up their vertical expertise in order to expand into other product areas, such as infrastructure or security, which require more industry-specific skill sets.
7. Vendors will review and revamp their partner compensation plans – the evolution of channel programs
IDC expects vendors to shift to, or at least announce, new compensation strategies to reward and retain their most preferred channel partners by establishing mid- to long–term commitments and maintaining their partners' loyalty, Vendors will move to activity-based rather than sales-based compensation schemes and shift their partner management objectives and incentive focus from sales to partnership development. This will enable account managers to build partnerships for both the mid and long terms.
8. Software as a service will gain momentum in the small and medium-sized business market and impact channels
SaaS challenged traditional software firms to look for new revenue streams and pressured traditional service firms to use the most effective delivery model. Traditional firms will therefore have to focus more on creating new programs, deliverables, and channel and SMB strategies and offerings centered on SaaS. This can be accomplished through acquiring successful on-demand delivery SPs, as well as developing their own IP-based SOA strategies.
9. Channel investments to extend and enhance market reach to a broader base of lower-tier partners will increase
Vendors will be adding channel partners to expand coverage. The importance of indirect software sales channels in APEJ will continue to increase in terms of both vertical and geographic reach, as well as further penetration of the SMB segment. Vendors will invest in new channel partners to expand both the breadth and depth of their partner support services in order to increase their share of the SMB business and grow their vertical presence in APEJ.
10. More growth opportunities in the small and medium-sized business hardware market, due to technology buildup, will set the stage for increased software and service spending
In APEJ, the average SMB IT spending is significantly pulled down by the large number of very small firms (with <10 employees). Most of these firms do not even have basic technology (e.g., PCs), which naturally constrains the sales of other hardware, software, and services. On the plus side, however, this presents real opportunities for vendors who can provide affordable access to IT infrastructure building blocks.
This report is part of IDC's Asia/Pacific Channel, Alliance and Partnership (CAP), and the Small, Medium and Medium-Large Sized Business (SMB) syndicated research programs. It is based on key emerging and continual trends identified by IDC's expert analysts to be the top 10 leading predictions impacting the SMB market, ICT vendor business, and partnering models in the coming year. Vendors and channels partners alike will find these observations of the SMB and channels invaluable as they update their respective partnering and go-to-market strategies.
For more information about purchasing the research, please contact Elaine Chia at +65-6228-7758 or echia@idc.com. For press enquiries, please contact Holly Fung at +852-2905-4225 or hfung@idc.com.
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