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Singapore Information Technology Report Q4 2009Product Type: Market Research ReportPublished by: Business Monitor International Published: October 2009 Product Code: R302-8430 Description Market OverviewSingapore's IT market is projected to continue to provide opportunities in H209 despite the difficulteconomic climate. The total size of the domestic IT market is expected by BMI to increase from aprojected US$5.0bn in 2009 to around US$6.1bn in 2013 as significant government information andcommunication technology (ICT) spending helps to compensate for deferred consumer and enterprise ITspending. The IT market is projected to remain in positive territory this year, although growth will bedown on last year. There were signs in H109 that spending on IT and office equipment hardware was surprisingly robustdespite the overall gloomy retail outlook, which saw private consumption dip by 5.1% year-on-year (y-oy)in Q109. Sales of computer hardware advanced by a low single-digit factor, according to industryestimates, driven principally by sales of low-cost notebooks. However, growth is still expectedto remain subdued even as the economy makes a mild recovery in H209. Despite challenging trading conditions in 2009, there are a number of factors that will to some extentimmunise against slowdown in demand. With the iN2015 plan placing IT at the heart of the government'sstrategy to improve competitiveness, complex government tenders will drive considerable spending inyears to come in areas such as education, e-government, transport and healthcare. Industry Developments In 2009, the government continued to roll out its ambitious cross-governmental Standard OperatingEnvironment (SOE) initiative, while also announcing boosts to IT spending in some key sectors,including healthcare and public sector construction. As of Q309, four agencies had begun actualimplementation of SOEasy, while between 30% and 50% of public officials were estimated to have begunto utilise the centralised services. Public sector spending on ICT remained a significant source of IT market opportunity in 2009. TheSingaporean government had previously revealed that it plans to invest around SGD1.73bn in ICTprojects in the current financial year through March 2010. To be put out to tender were 392 newprojects, with 40% of the planned projects expected to be worth more than SGD500,000. The 2009 budget pledged an additional US$4bn for healthcare, including US$200mn specificallyearmarked to develop a better electronic health record system. The first phase of the electronic healthrecord (EHR) system implementation was due to start in November 2010. The system, part of thegovernment's IN2015 ICT masterplan, will cover hospitals and doctors in both the public and privatesectors. Company News Against a backdrop of increased government ICT spending in 2009, IT vendors continued tocompete for major tenders. As of mid-2009, the winning consortium in last year's massive SOE1tender, One Meridian, led by HP unit EDS, had taken over the computer systems of 62 public sectoragencies, although only about four had reportedly started the transformation. By the end of 2010, all 75government agencies were scheduled to be connected to one common platform. Microsoft hopes that the launch of its Windows 7 operating system, scheduled for October 2009, willboost its local sales. However, the launch of Windows 7 was not in time for the roll-out of the latest phaseof the SOEasy government project, which will be based on Windows Vista. Agencies due to implementSOEasy next year could potentially move directly onto the platform, if authorities were satisfied as to itsstability. Significant opportunities for IT vendors exist in the healthcare sector. IBM Singapore is implementing amajor contract from SingHealth, the nation's largest public healthcare group, to standardise hardware andsoftware platforms. Meanwhile, New Zealand software company HSAGlobal, in co-operation withSingTel, was planning a multimillion dollar roll-out of its outpatient care solution across all SingHealthoutpatient and GP clinics. Computer Sales Singapore's spending on IT hardware is projected at around US$2.2bn in 2009 from around US$2.1bn in2008, with a deceleration evident as the global economic crisis impacts upon consumer and businessconfidence. In H109, spending remained in positive territory, even as spending on many other consumerproducts declined. Vendors cut prices, and there were signs in H109 that most demand in the notebooksegment was being driven by sales of models, which retailed at prices of below US$1,000. According to the latest report from the IDA, 74% of Singaporean households now have a PC, and,following demand growth of close to 20% over 2001-2005, this level of saturation would be expected toact as a constraint. However, consumers have appeared willing to spend on upgrading their notebookcomputers, and there is a trend for households to own more than one unit. Given an expected 300%growth in broadband penetration by 2013, the increasing number of products and services available on theinternet will be a major driver of demand for computer hardware. Software Spending on software is projected at around US$781mn in 2009 from around US$775mn in 2008.Software accounted for about 16% of the domestic IT market in 2008. The share of IT spendingaccounted for by software should rise to nearly 18% by 2013, with enterprises seeking greater leveragefrom their investments. Compliance with government and international regulations will also be a driver infinancial, manufacturing and other sectors, as will the continued expansion of Singapore's e-governmentsystems and e-commerce. Over the forecast period, enterprise resource planning (ERP), customer relationship management (CRM)and other e-business applications will find increasing popularity with the small and medium-sizedenterprise (SME) market as enterprises look to enhance productivity through the automation of essentialfunctions. Meanwhile, the launch of Microsoft's new Windows 7 operating system, scheduled for October2009, has the potential to have an impact, although much will depend on consumer and businessconfidence. IT Services In 2009, the IT services sector is projected to be worth around US$2.0bn, with growth down comparedwith the previous year. IT services compound annual growth rate (CAGR) is expected to be 6% over2009-2013. IT services accounted for around 40% of the domestic IT market in 2008 with spending ofUS$2.5bn forecast for 2013. Key IT spending sectors such as government, telecoms, healthcare andbanking have continued to supply demand for implementation, consulting and managed services. The economic situation, and credit tightening, has had an impact on projects in some market segments,but government ICT tenders were worth an estimated US$1bn in 2008, and other verticals such astelecoms, healthcare and banking should offer areas of opportunity. In 2009, government ICT projects,such as SOE2, will again provide significant opportunities. In the last few years, there have been growingbusiness process outsourcing (BPO)-related opportunities. E-Readiness The National Broadband Network (NBN) is at the core of the government's 'Intelligent Nation 2015'initiative. The contract for the first phase of the project, which will link businesses, schools, hospitals andhomes, involves 45% of the network being rolled out within three years and the entire network by 2012.The IDA recently said that, within two years, 60% of homes and offices should have access to thenetwork. The second phase of the project will place emphasis on pervasiveness and the provision of wireless accessat affordable rates. The project is expected to lead to 68% broadband penetration by 2012. The NBN willbe capable of offering high speeds of 1Gbps or more and aims to provide affordable broadband for 95%of all homes and businesses by 2012. Reviewing one year of the landmark Intelligent Nation 2015 (iN2015) plan in 2007, Minister forInformation, Communications and the Arts Dr Lee Boon Yang said that much progress had been madebut much remained to be done. Key Issues For Investors Further government-enforced reductions in labour costs and mandatory corporate contributionsto pensions; Cuts to corporate and income taxes if the government sticks to its budgetary commitment tolower business costs; and Competitiveness is at risk of being eroded by cheap labour in China. Table of Contents
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