Vietnam information technology report q2 2011

Q2 2011
Published by Business Monitor International Ltd.
www.businessmonitor.com
INFORMATION TECHNOLOGY REPORT
ISSN 2044-9631
Published by Business Monitor International Ltd.
VIETNAM
INCLUDES BMI'S FORECASTS
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VIETNAM INFORMATION
TECHNOLOGY REPORT
Q2 2011
INCLUDES 5-YEAR FORECASTS TO 2015


Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline : April 2011

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CONTENTS
Executive Summary 5
SWOT Analysis 8
Vietnam IT Sector SWOT 8
Vietnam Telecoms SWOT 9
Vietnam Political SWOT 10
Vietnam Economic SWOT 11
Vietnam Business Environment SWOT 12
IT Business Environment Ratings 13
Asia 13
Table: Asia Pacific IT Business Environment Ratings 16
Asia IT Markets Overview 17
Vietnam Market Overview 23
Government Authority 23
Background 23
Hardware 24
Software 26
Services 29
Industry Developments 31
Industry Forecast Scenario 35
2011 Outlook 35
Drivers 36
Segments 37
Summary 38

Table: Vietnam IT Sector (US$mn unless otherwise stated), 2006-2015 38
Internet 39
Table: Telecoms Sector – Internet – Historical Data And Forecasts, 2008-2015 39
Macroeconomic Forecast 41
Table: Vietnam – Economic Activity, 2008-2015 43
Competitive Landscape 44
Hardware 44
Software 45
IT Services 49
Company Profiles 52
FPT Software 52
Country Snapshot: Vietnam Demographic Data 53
Section 1: Population 53
Table: Demographic Indicators, 2005-2030 53
Table: Rural/Urban Breakdown, 2005-2030 54
Section 2: Education And Healthcare 54
Table: Education, 2002-2005 54
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Table: Vital Statistics, 2005-2030 54
Section 3: Labour Market And Spending Power 55
Table: Employment Indicators, 1999-2004 55
Table: Consumer Expenditure, 2000-2012 (US$) 55
BMI Methodology 56
How We Generate Our Industry Forecasts 56
IT Industry 56

IT Ratings – Methodology 57
Table: IT Business Environment Indicators 58
Weighting 59
Table: Weighting Of Components 59
Sources 59

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Executive Summary
Market Overview
The Vietnamese IT market is estimated to grow at a CAGR of 16% over the 2011-2015 forecast
period. IT spending bounced back in 2010, following a sluggish start to the year. Factors such as growing
PC penetration, economic growth, a range of government ICT initiatives and a drive to develop
Vietnam’s IT industry will help to underpin one of the fastest IT market growth rates in the region.
An ambitious government IT plan for 2010-2020 should shape many segments of the Vietnamese IT
market, while Vietnam’s improving information and communication technology (ICT) infrastructure will
also drive growth. Vietnam’s gradual integration into global trade networks such as the Association of
Southeast Asian Nations (ASEAN) and the WTO has helped to bring down prices and increase
opportunities for importers.
The Vietnamese IT market is estimated to grow at a CAGR of 16% over the 2011-2015 period. The
addressable domestic market for IT products and services is projected by BMI to reach US$4.1bn by
2015. An increasing number of Vietnamese companies have shown an interest in cloud services.
Industry Developments
In November 2010, the government pledged to invest US$8.5bn in the ICT sector over the next ten years.
Meanwhile, the government’s campaign to attract more foreign IT companies to invest in Vietnam
received a boost with the announcement that Hewlett-Packard (HP) would set up a wholly-owned firm

in Vietnam in early 2011. The government hopes to attract US$5bn of foreign investment into the IT
industry by 2015.
The Vietnamese government has unveiled ambitious plans for developing the country’s IT industry. The
plans, which state a revenues target for the sector of between US$17bn and US$19bn in the next five
years, include major investments to develop production centres in software, services, hardware and
electronics. Revenues are projected at US$2bn from software sales, US$12.5bn from hardware, US$2bn
from digital content, and US$1.5bn from IT services.
In 2010 the Ministry of Education and Training continued to implement a national programme to supply
1mn affordable computers to Vietnamese schools by 2011. In January 2010, the Vietnam Post and
Telecoms Group (VNPT) in Ho Chi Minh City launched a local version of the Computers for Education
programme, which will provide teachers and students in the city with low-priced laptops and DSL
broadband connections.
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Competitive Landscape
In 2010, several Vietnamese enterprises announced plans to produce tablet PCs, and the first local
product, from Hanel, was launched in Vietnam in October 2010. However, local manufacturers are likely
to find it hard to compete with the iPad and rival products from other vendors, such as Samsung with its
Galaxy Tab.
Vietnam has around 10,000 firms currently licensed to provide IT services, but only one-third are actually
operating. The MOCI is currently developing a draft decree to map out policies to help the IT industry
grow. The decree will stipulate procedures and operational requirements for firms providing IT services.
In 2010, the Vietnamese FPT (Corporation of Financing and Promoting Technologies) and Microsoft
reached an agreement on cooperation to research opportunities for cloud computing in Vietnam. The
partners will also launch commercial pilots. Meanwhile, IBM is promoting cloud computing as a cost-
effective way for Vietnamese SMEs to realise efficiencies through IT utilisation.

Computer Sales
BMI projects that sales in Vietnam’s computer hardware market will be worth around US$1.7bn in 2011,
up from an estimated US$1.5bn in 2010. BMI projects growth of around 13% in the Vietnam PC market
in 2011, after the market showed signs of a rebound in 2010.
PC penetration in Vietnam was estimated by BMI at around 15% in 2010. Notebooks are owned by an
estimated 7% of the Vietnamese population. This points to significant growth potential for the local PC
market, with the most potential being in rural areas. Currently Hanoi and Ho Chi Minh City are thought to
account for in the region of 85% of notebook sales.
Software
In 2011, Vietnam software sales are projected by BMI to grow to US$192mn, and software CAGR for
2011-2015 should be in the region of 15%. Software spending comprises around 10% of total Vietnamese
IT spending.
The market is expected to reach a value of around US$391mn by 2015, with steady growth in demand for
licensed software from government, enterprise and household segments. Vietnam’s software market is
developing, despite the problem of software piracy, which still accounts for around 85% of software,
compared with 76% in neighbour Thailand.
Services
Vietnamese IT services spending is forecast to reach around US$406mn in 2011, up from US$351mn in
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2010. Sectoral CAGR is projected at 12% over the forecast period, as the market approaches US$752mn
by 2015.
IT services now accounts for around 18% of total Vietnam IT spending. Over the past few years, the size
of IT services deals has increased in key IT spending verticals. Growing demand for digital infrastructure
projects in segments such as banking, telecoms, energy and government has attracted global IT services
providers to invest more in Vietnam.

E-Readiness
Vietnam’s fixed-line infrastructure is unreliable and offers poor coverage. However, Vietnam has an
exceptionally high penetration rate in the mobile market, reaching 126% at the end of 2009, and
registering around 110.8mn subscribers. This has been aided by mobile network operators reducing tariffs
to encourage growth of their respective subscriber bases, as well as increased investment in the expansion
of infrastructure to areas outside major towns and cities. Demand for mobile broadband has also been
accelerated by the changing lifestyles of consumers, who use the service for accessing the internet for
work and leisure.

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SWOT Analysis
Vietnam IT Sector SWOT

Strengths
 The domestic IT market is in a rapid growth phase, with trade liberalisation and
growing affordability driving projected double-digit growth of notebook computers.
 Expanding ICT infrastructure and internet penetration will continue to drive demand
for IT products and services.
 Vietnam’s gradual integration into the global trade network via its accession into
trade organisations such as ASEAN and WTO, as well as bilateral agreements with
Japan and China.

Weaknesses
 IT spend per capita much lower than in neighbouring Thailand, reflecting a much
lower GDP and GDP per capita.

 Low levels of access to credit and budgets restrain spending by SMEs.
 Highly cost-sensitive market, with 75% of software provided by lower-cost local
software vendors.
 High level of software piracy at 85%, although it has fallen in the last few years.
Opportunities
 High PC market growth potential particular in rural areas due to overall low PC
penetration rate of 15%.
 Vast and relatively under-penetrated rural market presents a significant growth
opportunity as the government rolls out measures to boost rural connectivity and
incomes.
 National IT Plan will drive spending on IT utilisation in areas like e-government, e-
taxation and education.
 SMEs have much potential to increase spending on basic solutions, including
customer relationship management and security.
 One Teacher-One Computer programme aims to deliver 1mn computers to schools
by 2011.
 The banking and finance sector is a promising area for database software and one
where foreign companies have done well.
 Banking and finance, oil and gas, aviation and telecoms are projected to be some of
the biggest opportunities for multinational vendors.
 Tax agencies at all levels of administration are looking to increase the efficiency of
tax collection.
 The government’s drive to create a significant IT services industry over the next 15-
20 years is expected to be a significant factor shaping the IT market.

Threats
 Continued depreciation of the dong against the US dollar would increase the
pressure on Vietnamese distributors of foreign IT goods.
 Falling prices may further undermine margins and profitability after steep discounting
in 2009.

 The implementation of the China-ASEAN free trade agreement means that
established multinationals will face a growing challenge from low-cost Chinese
vendors in the Vietnamese market.






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Vietnam Telecoms SWOT
Strengths
 Fixed-line penetration levels and internet user rates are high in major urban centres
such as Ho Chi Minh City, Hanoi, Danang and Haiphong.
 Competition exists in fixed-line and internet access markets; VNPT faces competition
from several other state-owned companies and two privately-owned operators.
 High levels of literacy and other demographic factors bode well for strong and
continued demand for wireline services over the next few years.

Weaknesses
 Vietnam’s fixed-line and internet access markets are both dominated by state-
controlled operators, VNPT and Viettel.
 Although alternative broadband infrastructures are currently being explored,
broadband growth continues to be dependent on DSL.
 Low fixed-line penetration rates in rural regions limit the scope for DSL broadband

growth.
 Internet user growth is slowing, despite the limited access to internet infrastructure in
much of rural Vietnam.
 Broadband tariffs remain high, creating a barrier for low-income subscribers to
access.

Opportunities
 The privatisation of VNPT could help to bring about increased investment revenues
and the arrival of new skills.
 On a national level, broadband penetration rates remain low; this means that the
sector has considerable growth potential.
 VNPT plans to invest US$1bn in 2009, in order to upgrade its broadband networks
and expand its international internet bandwidth.
 Significant opportunities exist to develop alternative broadband technologies,
including WiMAX and fibre.
 WiMAX services are currently being trialled with a view to licensing a number of
WiMAX service providers in the near future; WiMAX internet services have the
potential to raise the level of internet user penetration in rural parts of Vietnam.
 Draft Bill of Law on Telecommunication has been put forward for discussion at the
National Assembly Steering Committee. If passed, the bill will allow private
companies to build network infrastructure for the first time and will open up the
telecoms market to foreign investors.

Threats
 Fixed-line sector may enter a period of decline, with potentially negative
consequences for ADSL growth.
 As the market for mobile data services grows, this could have potentially negative
consequences for the growth of fixed broadband services.
 Slower economic growth in 2009 and 2010 could undermine wireline investment and
expansion plans.

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Vietnam Political SWOT
Strengths
 The Communist Party government appears committed to market-oriented reforms,
although specific economic policies will undoubtedly be discussed at the 2011
National Congress. The one-party system is generally conducive to short-term
political stability.
 Relations with the US are generally improving, and Washington sees Hanoi as a
potential geopolitical ally in South East Asia.

Weaknesses
 Corruption among government officials poses a major threat to the legitimacy of the
ruling Communist Party.
 There is increasing (albeit still limited) public dissatisfaction with the leadership’s

tight control over political dissent.

Opportunities
 The government recognises the threat that corruption poses to its legitimacy, and
has acted to clamp down on graft among party officials.
 Vietnam has allowed legislators to become more vocal in criticising government
policies. This is opening up opportunities for more checks and balances within the
one-party system.

Threats
 The slowdown in growth in 2009 and 2010 is likely to weigh on public acceptance
of the one-party system, and street demonstrations to protest economic conditions
could develop into a full-on challenge of undemocractic rule.
 Although strong domestic control will ensure little change to Vietnam’s political
scene in the next few years, over the longer term, the one-party-state will probably
be unsustainable.
 Relations with China have deteriorated over the past year due to Beijing’s more
assertive stance over disputed islands in the South China Sea and domestic
criticism of a large Chinese investment into a bauxite mining project in the central
highlands, which could potentially cause widescale environmental damage.

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Vietnam Economic SWOT
Strengths
 Vietnam has been one of the fastest-growing economies in Asia in recent years,
with GDP growth averaging 7.6% annually between 2000 and 2009.
 The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 20% in 2004.

Weaknesses
 Vietnam still suffers from substantial trade, current account and fiscal deficits,
leaving the economy vulnerable as the global economy continues to suffer in 2010.
The fiscal picture is clouded by considerable ‘off-the-books’ spending.
 The heavily managed and weak dong currency reduces incentives to improve

quality of exports, and also serves to keep import costs high, thus contributing to
inflationary pressures.

Opportunities
 WTO membership has given Vietnam access to both foreign markets and capital,
while making Vietnamese enterprises stronger through increased competition.
 The government will, in spite of the current macroeconomic woes, continue to move
forward with market reforms, including privatisation of state-owned enterprises, and
liberalising the banking sector.
 Urbanisation will continue to be a long-term growth driver. The UN forecasts the
urban population to rise from 29% of the population to more than 50% by the early
2040s.

Threats
 Inflation and deficit concerns have caused some investors to re-assess their
hitherto upbeat view of Vietnam. If the government focuses too much on stimulating
growth and fails to root out inflationary pressure, it risks prolonging macroeconomic
instability, which could lead to a potential crisis.
 Prolonged macroeconomic instability could prompt the authorities to put reforms on
hold, as they struggle to stabilise the economy.

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Vietnam Business Environment SWOT
Strengths

Vietnam has a large, skilled and low-cost workforce that has made the country
attractive to foreign investors.
 Vietnam’s location – its proximity to China and South East Asia, and its good sea
links – makes it a good base for foreign companies to export to the rest of Asia, and
beyond.

Weaknesses

Vietnam’s infrastructure is still weak. Roads, railways and ports are inadequate to
cope with the country’s economic growth and links with the outside world.

 Vietnam remains one of the world’s most corrupt countries. Its score in Transparency
International’s 2009 Corruption Perceptions Index was 2.7, placing it in 22nd place in
the Asia Pacific region.

Opportunities

Vietnam is increasingly attracting investment from key Asian economies, such as
Japan, South Korea and Taiwan. This offers the possibility of the transfer of high-tech
skills and know-how.
 Vietnam is pressing ahead with the privatisation of state-owned enterprises and the
liberalisation of the banking sector. This should offer foreign investors new entry
points.

Threats

Ongoing trade disputes with the US, and the general threat of American
protectionism, which will remain a concern.
 Labour unrest remains a lingering threat. A failure by the authorities to boost skills
levels could leave Vietnam a second-rate economy for an indefinite period.

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IT Business Environment Ratings
Asia
BMI’s Asia IT Business Environment Ratings compare the potential of a selection of the region’s
markets over our forecast period through to 2015. Our Q211 ratings reflect our consideration of the

political and economic risks, as well as risks associated specifically with IT intellectual property (IP)
rights protection and the implementation of state spending projects.
In our updated Asia Q211 ratings, country rankings are unchanged, reflecting stabilisation in most
markets after the impact of the global economic downturn in 2008-2009. Across the Asia Pacific region,
global economic recovery and improved consumer confidence resulted in improved trading conditions for
IT vendors, and a stronger than expected rebound in PC sales.
Australia retains its top regional rating this quarter. The market was boosted following confirmation that
the new government will continue to implement the National Broadband Network project, which will
drive the development of Australia’s digital economy and feed demand for PCs. Sectors such as
government, telecoms, healthcare and banking should continue to supply demand for implementation,
consulting and managed services in future.
One area of opportunity should be growing demand for cloud computing services. In 2010 a wide range
of leading Australian private and public sector organisations launched cloud initiatives, including many of
the country’s leading banks. Meanwhile, the government unveiled a six-year cloud computing strategy.
The smaller, but mature IT markets of Singapore and Hong Kong take second and third positions
respectively in our ratings table, due primarily to their high Country Structure scores. Key sectors of the
Hong Kong economy such as financial services are investing in modernisation as Hong Kong strives to
maintain its regional hub status in the face of competition from rivals such as Shanghai. Hong Kong also
continues to offer IT investors opportunities associated with its growing links to the vast Chinese market.
Singapore benefits from high broadband penetration and initiatives such as the government’s ambitious
Intelligent Nation 2015 plan, and the standard operating environment. Spending on IT services will be
boosted by the continuing boom in IT-enabled services such as call centres and back-office financial
services. Other promising sectors for IT services include healthcare, as the government launches a series
of initiatives to develop health technology. Hong Kong and Singapore are expected to emerge as cloud
computing hubs due to growing interest in cloud computing across the region.
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On the downside, the continued restructuring of both economies, towards a more service-oriented model,
may limit long-term growth prospects. However, this also brings opportunities in sectors such as financial
services and banking. Businesses will probably remain cautious and value-focused over the short term.
BMI forecasts per capita IT spending in South Korea, in fourth place in the table, will rise by one-third to
US$1,000 by 2015. South Koreans will increasingly choose to spend money on IT products due to a
substantial increase in disposable incomes. Consumers appear willing to upgrade their PCs and there is
also a trend for households to own more than one computer. New cloud computing offerings and
increased competition in this segment are expected to fuel growing demand from end-users, to utilise this
technology. There will be many key growth areas and IT outsourcing is expected to show a strong
demand trajectory.
Malaysia remains in fifth position in our Q211 regional ratings. IT spending growth will be driven by the
government’s drive for greater broadband penetration. It has set an optimistic target of 75% by 2015. The
roll-out of a high-speed broadband network will boost IT spending outside the Klang Valley. Other
projected growth IT market drivers include a rise in the PC penetration level from about 35%, tax
exemptions for notebooks, and growth in disposable incomes. There are increasingly attractive
opportunities in the IT services area as the government implements measures to make Malaysia a growing
regional services and outsourcing hub.
In China, factors such as the vast potential rural market and a commitment to modernisation in sectors
such as education, healthcare and manufacturing will help sustain market growth. Over the forecast
period, government spending, an expansion of consumer credit and expectations about China’s long-term
economic growth will also drive IT investments. In the services segment, growing interest in cloud
computing will be stimulated by the establishment of government pilot programmes in five cities.
However, there are still market risks associated with IP rights protection in China, as well as piracy and a
lack of business transparency. Pressure on hardware prices is also a risk in the current environment.
Vietnamese IT demand, although with a rather smaller market than its leading neighbor to the north, is
expected to have several long-term drivers. Vietnam’s improving ICT infrastructure will facilitate the
development of the nation’s IT market in a country with just 15% PC penetration. Government digital
divide programmes to boost internet and digital utility in rural areas will help addressable market growth
and open PC ownership to a growing number of rural inhabitants. Vietnam’s gradual integration into

global trade networks such as ASEAN and the WTO has helped reduce tariff barriers and prices, and has
increased opportunities
In the Philippines, the IT market will be driven by further growth in the local IT and business process
outsourcing (BPO) sector. The Philippines has a lower PC penetration than many other Asian countries
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and the IT market offers corresponding high growth potential over the forecast period. However, there are
challenges such as labour shortages and rising wages.
India also recorded impressive double-digit y-o-y computer sales growth in 2010. The potential is clear,
with less than 2% of the population owning a computer, which is about 20% of the level in China. It was
estimated that 5% of India’s 7.5mn SMEs could implement a technology solution in 2010 and there is
increasing interest in cloud solutions. Realisation of this growth potential depends on fundamental drivers
such as increasing India’s low computer penetration, rising incomes, falling computer prices and the
government’s ambitions to connect the country’s vast rural areas to the rest of the world.
The last three markets in our regional ratings have low scores due primarily to business environment
factors, despite considerable growth potential. In Thailand, the fundamentals of growing affordability and
low PC penetration should keep the market in positive territory during the forecast period. A number of
factors should also support momentum, including the government’s PC for Education programme and 3G
mobile and WiMAX broadband service roll-outs.
Similarly, with ICT penetration of only about 20% and development restricted to richer areas such as
Java, the Indonesian IT market has much growth potential. BMI expects the Indonesian market to be one
of the fastest growing in the region over the five-year forecast period. The SME sector will drive demand
for basic hardware and applications as enterprises focus on enhanced productivity.
Sri Lanka’s IT market has benefited from the restoration of peace and improvements in the security
situation, which helped release pent-up demand for IT solutions. The country has felt the effects of
instability over the years, from disruption of distribution channels and a flourishing grey market to the

underdeveloped telecoms infrastructure. However, the market will feature on IT vendors’ radars as one of
the best potential growth prospects in South Asia. Computerisation has only started in government
services. Major public and private sector organisations remain largely underpenetrated in terms of basic
enterprise software.














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Table: Asia Pacific IT Business Environment Ratings
Limits of potential returns Risks to realisation of returns

IT
market
Country

structure
Limits
Market
risks
Country
risk
Risks
IT BE
rating
Regional
rank
Australia 56

100

71

80

71

75

72.2

1

Singapore 53

100

69

70

85

79

72.1

2

Hong Kong 48

95

65

70

87

80

69.4

3

South Korea 52

75

60

75

71

72

63.8

4

Malaysia 41

50

44

35

77

60

49.1

5

China 52

35

46

35

68

55

48.7

6

Vietnam 36

60

44

35

44

41

43.1

7

Philippines 37

45

40

43

52

48

42.2

8

India 49

15

37

45

56

51

41.4

9

Thailand 40

20

33

35

73

58

40.4

10

Indonesia 38

35

37

35

52

45

39.1

11

Sri Lanka 30

10

23

35

44

41

28.3

12

Scores out of 100, with 100 the best. The IT BE Rating is the principal rating. It comprises two sub-ratings, Limits of
potential returns and Risks to realisation of returns, which have a 70% and 30% weighting respectively. In turn, the
‘Limits’ rating comprises Market and Country structure, which have a 70% and 30% weighting respectively and are
based on growth/size/maturity/government policy of IT industry (Market) and the broader economic/socio-
demographic environment (Country). The Risks rating comprises Market risks and Country risk, which have a 40%
and 60% weighting respectively and are based on a subjective evaluation of industry regulatory and IP regulations
(Market) and the industry’s broader country risk exposure (Country), which is based on BMI’s proprietary Country Risk

ratings. The ratings structure is aligned across all industries for which BMI provides Business Environment Ratings
and is designed to enable clients to consider each rating individually or as a composite. Source: BMI
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Asia IT Markets Overview
IT Penetration
Across Asia, government ICT initiatives and growing affordability will drive increases in PC penetration
during BMI’s five-year forecast period. While some cities and regions stand out, there is an unbalanced
pattern of regional development, with PC penetration in countries such as Singapore being above 50%,
while in other countries such as Indonesia, it is less than 2%.
The two Asian leaders, China and India, embody the region’s growth potential, as computer ownership
remains the preserve of a minority in both countries. In China, PC penetration was only around 18% in
2008 – although it was far higher in cities such as Shanghai and Beijing – and is projected to pass 30%
overall by 2014. In India, less than 2% of people own a computer. However, some 45% of the population
is under 25, which provides a promising demographic context for increased PC ownership.
Lower prices will help to drive higher PC penetration in developing markets. The average price of a PC in
India has nearly halved over the past few years, and rising incomes and greater credit availability will
continue to bring computers within reach of lower-income demographics.
Around the region, affordable computer programmes continue to find favour with governments. In 2009,
China launched a subsidised PC initiative aimed at rural residents. Australia’s computers for schools
programme had provided almost AUD260mn of computers by the end of 2009. In Indonesia, penetration
of around 2% could double by 2013 if government initiatives are followed through. The Indonesian
government is also rolling out new e-learning initiatives, with a target of raising the current 1:3,200 ratio
of PCs to students in public schools to 1:20.
A similarly broad range is found with respect to internet penetration. The highest levels of internet
penetration are found in South Korea, Hong Kong and Australia, with estimated 2010 narrowband

penetration rates of 74.3%, 73% and 67.7% respectively. Singapore has by far the highest rate of
broadband penetration, which was estimated at 154% in 2010. Meanwhile, the Philippines has the lowest
level of internet usage, with just 6.6% narrowband and 4.9% broadband penetration estimated in 2010.
The fastest growth is expected in Indonesia, where narrowband penetration is projected to leap from 30%
in 2010 to 61.2% by 2014. India is now above 20% narrowband penetration despite a lack of fixed-line
infrastructure, and this should reach 30% by 2014. Fast growth is also projected for Sri Lanka, where
penetration is projected to increase from 10.9% to 21.6% by 2014.
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Some 48.3% of Malaysians had internet access in 2010. Across the region, government programmes are
an important driver of ICT penetration. The Chinese government has a five-year plan to make the internet
available in every administrative village in central and eastern China and every township in the west.
Dial-up technology is still the dominant access method in many states. However, even in developing
markets, the number of broadband subscribers continues to gain ground steadily. In China, broadband
penetration is on course to reach 34.3% by 2015, surpassing narrowband penetration of 33.6%. In India,
where the government designated 2007 as ‘the year of broadband’, penetration should increase eightfold
to reach 8% by 2013 from around 1% currently. This is, however, a long way below government targets.
Singapore will also see continued strong growth in broadband penetration, which is projected to reach
202% by 2015.
Meanwhile, the growth of Wi-Fi coverage will be
one driver of notebook sales in places such as
Hong Kong, where the government has committed
another HKD200mn to the deployment of a Wi-Fi
network covering more than 200 public venues.
IT Growth And Drivers
Most Asian IT markets were expected to report

stronger growth in 2010. Across the region, IT
spending should have been boosted by systems
upgrades deferred from the previous year,
although much will have depended on business
confidence. In some cases, companies had IT
budgets that were not spent due to economic uncertainty, and in H110 vendors reported a pick-up in
project flows.
Strong fundamental demand drivers of IT spending mean that there will be continued opportunities. Key
factors common to most markets include cheaper PCs and reform in sectors such as telecommunications
and finance, as well as government initiatives.
In the largest market, China, an expansion in consumer credit, as well as a commitment to modernisation
in sectors such as education, healthcare and manufacturing, will help to sustain market growth. BMI
expects China’s IT market growth to be maintained by an expansion into the western region, rural areas
and lower-tier cities, as well as growing demand from small and medium-sized enterprises (SMEs). IT
spending will also receive a boost from government spending and IT projects associated with the
Shanghai World Expo in 2010.
2010 IT Market Sizes

US$mn*

* estimate. Source: BMI

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The long-term potential of India’s IT market is plain: less than 3% of people in India own a computer
(about one-fifth of the level in China), meaning there is real potential in the lower-end product range.

India’s IT market appeared to be positioned for a strong recovery in 2010 thanks to an improving
economy and stronger consumer sentiment as well as government support for modernisation in lagging
sectors. It is estimated that around 5% of India’s 7.5mn SMEs may have implemented a technology
solution in 2010. Meanwhile, India’s business process outsourcing industry is growing at around 40% per
annum and will continue to generate opportunities for vendors of IT products and services.
The Philippines is one of the countries currently
benefiting from low-priced PC programmes
(PC4ALL), which provide opportunities for
vendors to penetrate the low-income segments.
Other regional computer sale drivers over the
forecast period include education, lower prices,
IP telephony, cheaper processors as well as
notebook entertainment and wireless networking
features. Meanwhile, in Indonesia, the basic
demographics of rising computer penetration
and growing affordability should drive growth.
SMEs represent a growth opportunity, as
currently only around 20% of Indonesian SMEs
are estimated to make use of IT. Compliance
with government and international regulations will be a driver in financial, manufacturing and other
sectors.
In more developed markets such as Hong Kong and Singapore, robust retail sales led the way in early
2010 as spending recorded positive growth following a contraction in 2009. In Hong Kong, consumer
spending was expected to remain strong in 2010, as evidenced by the positive early reception of Apple’s
iPad. IT market growth will be driven by government IT spending as well as cross-border trade and co-
operation.
The largest IT market in the region is, unsurprisingly, China, estimated at US$92.5bn in 2010, trailed
distantly by Australia (US$19.4bn), India (US$16.1bn) and South Korea (US$16.1bn). Singapore’s IT
market (including communications) is the largest as a proportion of national GDP (2.66%), followed by
Hong Kong (2.07%).

The fastest-growing IT markets over the forecast period look set to be Sri Lanka and India, with 2010-
2014 compound growth of 109% and 104% respectively, driven by increasing PC penetration. China is
third, with the IT market growing by an estimated 64% over BMI’s five-year forecast period.
IT Market Sizes As % Of National GDPs

2010-2014


Source: BMI

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Sectors And Verticals
Regional IT markets remain hardware-centric, with hardware accounting for 42-71% of total spending in
all markets in 2010. However, spending on software and services will grow faster. Notebook sales are
growing much faster than the PC market as a whole, with growth driven by falling prices and more
features.
BMI expects a trend of rising hardware
investment to establish itself over the next few
quarters. The PC market contracted in many
markets in H109, following a slowdown towards
the end of 2008. However, growth had returned in
most markets by the end of 2009. Sales of
Microsoft’s Windows 7 operating system and new
Intel core technology also had the potential to help
trigger a new cycle of hardware upgrades in 2010

and beyond, although much will depend on
business confidence.
In mature markets such as Australia and
Singapore, PC sales are dominated by replacement sales. In the former, upgrades are estimated to account
for at least 80% of business purchases and more than 50% in the case of households. More than 90% of
Australian households now have a PC, but consumers have appeared willing to spend on upgrading their
notebook computers, and it is also becoming more popular to purchase a second household PC. Indeed,
around 30% of households have more than one PC.
In less developed markets, demand from under-penetrated rural areas, affordable computer programmes
and growing broadband penetration should generally drive growth. In much of emerging Asia, demand
from smaller towns and rural areas will provide the main source of growth, along with replacement of
desktops with notebooks. SMEs will be one of the strong growth segments over the forecast period, with
SME demand for servers and networking equipment providing significant growth opportunities.
In both emerging and more mature markets, the growing popularity of broadband will help to support
computer sales. China Telecom is among regional telecoms companies to have rolled out PC bundling
offers as part of its broadband packages. The Australian government’s National Broadband Network plan
should drive the development of Australia’s digital economy and the growth of services such as online
banking and shopping.
Meanwhile, a wave of 3G launches across the region should also provide a stimulus to sales of notebooks,
with Vodafone Hong Kong among service providers offering 3G/HSPA USB modems bundled with
IT Markets Compound Growth

2010-2014f, %


f = forecast. Source: BMI
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their 3G services. However, netbooks and notebooks face competition from other form factors such as
smartphones – from Palm, Research In Motion, Apple and other vendors – and tablet notebooks,
spearheaded by Apple’s iPad.
Due in part to high levels of piracy, software’s share of IT spending is relatively low, ranging from 11-
25% among countries covered by BMI. Efforts are being made to tackle the issue of piracy, but despite
government crackdowns in China and the Philippines, software piracy remains above 70% in most of
emerging Asia.
Across the region, there is a growing trend for smaller companies to seek greater efficiency by using IT to
improve productivity and reduce costs (including labour costs). In general, ERP and other e-business
products still dominate the enterprise software market, but vendors are also looking to other areas such as
CRM and business intelligence, where faster growth is possible.
The economic slowdown may have encouraged companies to consider cloud computing solutions such as
software-as-a-service (SaaS). The hosted application model may already account for between one-fifth
and one-quarter of China’s software revenues. SaaS has also enjoyed steady growth in the Hong Kong
market over the past three years with, according to vendor estimates, around 8% of local enterprises now
use a SaaS security solution. Improved broadband infrastructure will assist the popularisation of the
rented software model in markets such as Indonesia.
Market Structure (% Of Total IT Market)
2010f

2014f



f = forecast. Scores out of 100. Source: BMI

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New platforms and services in the telecoms field are drivers for that key IT spending segment, where an
industry restructuring with the advent of 3G mobile services has led to more competition. Meanwhile,
expanding technology adoption in the logistics industry and public transport will be a source of IT
services projects. Sectors such as hospitals and real estate will also provide opportunities.
The IT services segment accounts for 17-40% of spending in the Asian markets covered by BMI. The
global economic slowdown and credit tightening had an impact on projects in some verticals, but in 2010,
a brightening business climate should have led to more opportunities in key IT-spending verticals such as
financial services, telecoms, government, healthcare and logistics.
Government spending will account for a larger share of spending in many markets. In China, government
stimulus packages should have helped to drive IT-related investments, while in Singapore, government
ICT projects such as SOE2 provide significant opportunities, with the government planning to invest
around SGD1.73bn in ICT projects in its last fiscal year through March 2010. Australia’s National E-
Health Transition Authority has targeted the creation of a ‘paperless environment’ for the health sector
and was also expected to launch a standardised reporting system scheme in 2010. Meanwhile, the Hong
Kong government’s Digital 21 initiative will continue to generate spending.
Regionally, hardware deployment services remains the largest IT services category, with other
fundamental services including system integration, support systems, training, professional services,
outsourcing and internet services. Main spenders across the region include banks and financial institutions
as well as governments. Even in emerging markets such as India, IT vendors are having to pay more
attention to value-added services such as technical support and product troubleshooting, or basic IT and
hardware consulting.
In many countries, the number and size of local outsourcing deals are increasing. Outsourcing could
account for as much as 30% of China’s IT services spending by 2013, while in India there have been
some large contracts such as that awarded by Idea Cellular to IBM. Singapore – where the government
was to tender a major outsourcing contract in 2008 – and Hong Kong have both seen a trend towards
larger outsourcing projects in the public and private sectors.

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Vietnam Market Overview
Government Authority Ministry of Information and Communications (MIC)

Minister Le Doan Hop


Government Authority
The Ministry of Information and Communications (MIC) is the main Vietnamese policymaking and
regulatory body in the fields of IT, although its brief also covers a number of other areas such as
telecommunications, broadcasting and publishing.
The MIC’s major functions include proposing and drafting laws, regulations and development plans
related to IT and other policy areas. The current national framework for IT is the Strategy for IT
Development, which was approved in 2005 and covers the 2010-2020 period.
Background
The Vietnamese IT market, including computer hardware, packaged software and IT services, was valued
at US$2.0bn in 2010. Vietnam IT spend per capita, at around US$25 in 2011, is considerably lower than
the US$178 estimated for ASEAN neighbour Thailand. However, IT spend per capita is expected to grow
to US$43 by 2015.
Computer hardware, including desktops, notebooks, and accessories, is the largest IT market segment in
Vietnam, accounting for around 73% of spending in 2010. Packaged software was valued at US$164mn
that year, equivalent to around 9% of spending. IT services and outsourcing comprised 18% of spending.
Tariff reform, expanding internet infrastructure, a growing economy and government programmes will all
play a part in driving Vietnamese IT market growth over our five-year forecast period. Vietnam has a
relatively good IT and telecommunications infrastructure, with particularly high mobile telecoms

penetration. However, with PC penetration at just 15%, there is still a large portion of the population that
do not participate in the digital society and are unable to afford the latest IT products.
The household sector, which accounts for only around 10% of the IT market currently, should increase its
share by 2015. The country’s vast, under-penetrated rural market offers the most PC market growth
potential, with Hanoi and Ho Chi Minh City accounting for most sales currently, also presents a
significant growth opportunity as the government rolls out measures to boost rural incomes.
The government sector is a key segment of the Vietnamese IT market and comprises about 30% of
national IT spending. Public IT spending by around 7,000 government organisations at national,
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provincial and municipal levels will provide important opportunities to vendors. A number of
programmes exist to increase IT utilisation in areas like e-government, e-taxation and education. The
national IT plan has regional components, focused on northern, eastern and southern regions.
The private sector accounts for around 60% of IT demand and both domestic and foreign enterprises are
investing in IT to boost performance. Large corporations are more likely to buy software from top-tier
vendors, but SMEs account for the majority of Vietnam’s 400,000 enterprises and are increasingly a
target for multinationals. There is a lot of potential for Vietnamese enterprises of all sizes to increase
spending on basic solutions, including customer relationship management (CRM) and security.
The Vietnamese IT market remains constrained by high levels of grey market activity, and particularly by
software piracy, which accounts for around 85% of installed software. However, the rate has come down
from 95% in the last two years due to a more proactive government approach to the problem.
ICT Sector
The ICT sector is a key growth priority for the Vietnamese government, which has a plan to grow it.
Currently, the IT industry is relatively small and accounts for just 0.5% of the country’s GDP, according
to government figures. IT industry revenues in 2009 were estimated at US$6.2bn, up 20% on 2008.
Vietnam has around 150 software companies, many of which are focused on export markets.

The government has set an ambitious target of 14% annual growth for the ICT sector, with total turnover
to reach US$50bn by 2014. US$14bn is to come from hardware and US$5bn from software.
Telecommunications is projected to account for half the total, or US$25bn.
Hardware
BMI projects that sales in Vietnam’s computer hardware market will be worth around US$1.7bn in 2011,
up from an estimated US$1.5bn in 2010. The main growth driver will be affordable notebooks. BMI
projects growth of around 13% in the Vietnam PC market this year, slightly down on the nearly
20% estimated in 2010 when the market bounced back from the effects of the economic slowdown.
In H110, overall PC sales were reported to have achieved double-digit growth, compared with 2009. The
growth was driven mainly by imported laptops, with shipments up by around one-third in H110, both
sequentially and y-o-y. Desktop sales, however, remained in negative growth territory. A return to growth
in Q210 followed a disappointing first quarter of 2010, when notebook sales were slower than expected.
The relatively sluggish sales were attributed in part to price cuts in 2009. These meant that traditional
Lunar New Year holiday season price discounting had less appeal to consumers than previously.