Overall market to grow, but manufacturing to be hit | Bangkok Post: tech

Although economic conditions remain blue, Thailand's overall ICT market is expected to grow by 7.2 percent thus year.

Computer services will likely see potential growth consecutively, but local PC makers are finding it harder to survive.

The overall ICT market this year is forecast at 595 billion baht, of which communications take the largest proportion, followed by computer hardware, computer software and computer services, according to an ICT market joint-survey by the National Electronics and Computer Technology Centre (Nectec), Software Industry Promotion Agency (Sipa) and eight private sector associations.

In 2009, the total value of the ICT market was around 555 billion baht, an increase of 6 percent from 2008.

The total value of IT sector alone, which comprises computer hardware, software, services, and data communication equipment (wired and wireless), is expected to reach some 284 billion baht, an increase of 10.5 percent on last year.

Meanwhile, the hardware ratio is declining, said Jumrud Sawangsamud, Chairman of the Advisory Board of the Association of Thai ICT Industry (ATCI), who added that IT utilisation proved that computer hardware and software are likely to shrink continuously,albeit slowly.

Such phenomena coincide with global trends as services tend to play more important role in the economy.

Apparently, computer services continuously gained ratio in the overall IT market, from 11 percent to 18 percent and 20 percent in 2008-2010, respectively. "Such services as pay-per-use and Software as a Service (SaaS) will be more popular and recognised," Jumrud said.

In 2009, the services which become talk of the town were cloud computing and SaaS and it is estimated that online software spending this year will be around 2.8 billion baht and it will grow continually in the future.

Jumrud noted that outsourcing services and sub-contracting are likely to be more recognised from now on, which will boost the services market growth. However the bad news is that foreign companies will increasingly compete for this market.

In 2009, household and SOHO (small office, home office) was the largest spending user group in ICT services and products, at 52 percent, while ICT spending by the government and corporate sector altogether was 48 percent, of which their primary expense was in telecoms and computer software.

Hardware such as notebooks and netbooks became more popular in household and SOHO, although a great deal of value came from mobile handsets and communications services.

In the IT market only, government and corporate were the major spenders, at around 76 percent, compared with 24 percent from household and SOHO.

The 9 percent growth of hardware computer is an interesting figure, Jumrud said, pointing out that while the price per unit is decreasing, the market shows that economic confidence has recovered. The hot products in 2010 include notebooks, external hard disks, all-in-one printers, and projectors.

Netbooks bundled with 3G will also become a new market and, with high speed, this will encourage further adoption of cloud computing and SaaS.

However, the ratio of international to local brand PCs is estimated to be 75 to 25 by this year. Jumrud said this is worrying for local manufacturers.

Moreover, the distribution of desktops is likely to decline, compared to notebooks and netbooks. Local manufacturers cannot produce notebooks and netbooks because of their high-precision technology assembly manufacturing. "Thai manufacturers will eventually become extinct," claimed Jumrud.

Positive factors for the hardware market in 2010 include computer procurement by the Thai Khem Kaeng program, the change in platform to support new technology such as 3G, Windows 7 and new CPUs, the expected recovery of the global and local economy, high speed Internet, and e-documentation of organisations.

These should lead to a growth in demand for scanners, all-in-one printers and data storage devices.

However, price competition has led to a shrinking market in terms of value.

Jumrud stated that the 5.5 percent growth in computer software is worrying. In 2006, the growth of software was around 20 percent, but since then it has decreased year by year.

This year may be a little bit more promising than 2009, when software growth was at 2.3 percent, but the industry needs to make adjustments to reach double-digit growth again, said Jumrud.

He pointed out that global and local economic conditions are behind the decreasing growth.

Furthermore, public spending has not outstandingly supported IT utilisation, and the promotion of software utilisation, especially in the SMEs sector, has also not been enough.

In 2009, the sectors that saw high spending in software were finance and banking, and telecoms. Open source software is set to play a more important role due to the slowing economy.

This year should see IT utilisation in the government, finance, education, medical and healthcare sectors.

New applications running on broadband also require software program supporting, and these are the positive factors of software. However, government policy in human resource development and software industry development does not coincide with industry requirements.

Cloud computing, SaaSs, Web 2.0, broadband technology, applications and open source software are the technology trends for 2010.

Meanwhile, the trend for software service is growing, especially in the not-complicated application field, and this should make the proportion of software value transfer to computer services (Service and Application Hosting).

Corporate is the largest-spending software user group (45.1 percent), followed by government and state enterprise (43.5 percent) and household and SOHO (11.4 percent).

"The government should spend more on software through outsourcing software development," Jumrud said, adding that open source software will gain a higher profile due to the economic decline and thus will be one way for organisations to cut investment costs.

Computer services, by definition of the survey, cover system integration, network services, software maintenance services, hardware maintenance services, data centre and disaster recovery services, IT-related training and education, IT consulting and IT outsourcing.

Corporate was the largest spending group in computer services in 2009.

Of overall services last year, IT consulting saw the strongest growth, so the government and large enterprise has recognised the importance of IT consulting, especially in the banking and finance sector.

In 2010, software maintenance services is expected to see the highest growth, followed by network services and IT outsourcing. Positive factors to boost computer services in 2010 are complicated software applications and the trend of in-house software development, the change of software buying from licensed software to pay-per-use and SaaS, and better quality open source.

However, the unstable political and economic situation, insufficient IT human resources, and the cost of international circuits are negative factors.

Of the total 382 billion baht spent on communications in 2010, the major proportion was on communication services, with a value of 244.8 billion baht, and communication equipment at 137.4 billion baht.

Jumrud noted that the overall growth of communication was only 5.6 percent because of a lack of confidence in the economy delaying spending.

Communication equipment includes telephone handsets, PBX/PABX, wired and wireless equipment, while communication services cover fixed lines, mobiles, Internet access, VoIP and leased circuit services.

In 2010, positive factors for communications business are 3G licenses, which are expected to be issued by the second half of the year, the investment in next-generation network (NGN) and Fibre to the Home (FTTX), an expected recovery of the global and local economy, and greater numbers of applications supporting high-speed Internet and data communication.

Relate Search: ICT market, National Electronics and Computer Technology Centre, Software Industry Promotion Agency, Jumrud Sawangsamud, Advisory Board of the Association of Thai ICT Industry