Asia to lead ICT growth: Australia must be ready says report

Stan Beer
Thursday, 03 March 2005 02:00

IT Industry - Development

Asia Pacific ICT markets remain decidedly growth-oriented according to a new KPMG report.

Titled Convergence gathers pace: Emerging trends in Asia Pacific ICT markets, the report highlights the major short and medium-term trends at work in the region's information and communications technology markets.

According to the report, ICT markets in Asia Pacific are expanding strongly with growth in IT expenditure and outsourcing, increasing numbers of broadband and mobile subscribers and measured investment in communications networks.

The region will have spent US$650 billion in 2004 on software, hardware, IT solutions and communications services, and it is projected that this figure will grow to some US$800 billion by 2007, says KPMG's director for information, communications & entertainment, Malcolm Alder.

'With the world's densest broadband markets, close to 10 million new mobile phone subscribers registering every month and nine out of every 10 of the world's 3G subscribers, Asia is also setting the standards of what next-generation services will become globally.'

Alder says that this has important implications for Australia's ICT industry. 

'Australia must position itself to be a leading player in this market or we will fail to capitalise on the enormous business opportunities on offer,' he says.

Asian telecoms carrier spending on network infrastructure remains the one questionable area in an otherwise resurgent ICT marketplace. 

'Although there is continued shareholder pressure to keep costs down, equipment vendors are seeing carriers in Asia finally wake up to the benefits of IP, with some growth in capex likely as carriers take the next-generation plunge,' said Mr Alder.

However, the sustained and rapid growth in Asian ICT markets is not without some very significant challenges, such as the possible commoditisation of next-generation services. While new mobile and broadband subscriptions are multiplying, operators have yet to find the formula to earn substantial revenue beyond basic access and messaging.

'Australian carriers need to be careful not to position 3G services with subscribers too low in the value chain. This could set unrealistic customer expectations that threaten revenue flows needed to cover operators' investments in next generation networks,' Mr Alder said.

Another trend highlighted by KPMG is the re-positioning of Asian companies from low cost manufacturers to global technology brands.

'The proposed acquisition by China's Lenovo of IBM's personal computer business will not only help it achieve global scale but also enable it to reach higher end markets,' Alder says.

KPMG also predicts ongoing outsourcing growth in Asia but not just in traditional locations such as India and China. Low-cost capacity is expanding in such countries as the Philippines and Vietnam and IT services firms, predominantly Indian, have begun to regionalise their operations to take advantage of comparative skills advantages elsewhere in Asia.

'Australian companies that have outsourced their operations can expect their service providers to be increasingly multi-site, multi-national and multi-process.' says Alder.

KPMG also identified an important trend that could see more enterprises manage their outsourcing risk by taking the services back on board in captive, off-shore operations. 

'A major source of competition to Asia's emerging IT outsourcing giants may be their clients themselves,' noted Alder.