Vietnam information technology report q4 2010

Q4 2010
Published by Business Monitor International Ltd.
www.businessmonitor.com
INFORMATION TECHNOLOGY REPORT
ISSN 2044-9631
Published by Business Monitor International Ltd.
VIETNAM
INCLUDES 5-YEAR FORECASTS TO 2014
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VIETNAM
INFORMATION
TECHNOLOGY REPORT
Q4 2010
INCLUDES 5-YEAR FORECASTS TO 2014


Part of BMI’s Industry Report & Forecasts Series
Published by: Business Monitor International
Publication Date: October 2010

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Vietnam Information Technology Report Q4 2010

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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 IT Business Environment Ratings 13
Table: Asia Pacific IT Business Environment Ratings 13
Asia Regional IT Markets Overview 16
Vietnam Market Overview 23
Background 23
Hardware 25
Software 27
Services 29
Industry Developments 31
Industry Forecast Scenario 34
Table: Vietnam IT Sector (US$mn unless otherwise stated) 36
Internet 37
Table: Telecoms Sector – Internet – Historical Data And Forecasts 37
Macroeconomic Forecast 39
Vietnam – Economic Activity 40
Competitive Landscape 41

Hardware 41
Software 42
IT Services 45
Internet 47
Company Profiles 48
FPT Software 48
BMI Methodology 49
How We Generate Our Industry Forecasts 49
IT Industry 49
IT Ratings – Methodology 50
Table: IT Business Environment Indicators 51
Weighting 52
Table: Weighting Of Components 52
Sources 52
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Executive Summary
Market Overview
The Vietnamese IT market is estimated to grow at a CAGR of 12% over the 2010-2014 period. The

addressable domestic market for IT products and services is projected by BMI to reach US$1.9bn in 2010
and US$2.9bn by 2014.
The PC market rebounded in Q210 following a sluggish start to the year. Government and business IT
spending remain subject to fiscal restraints and caution, and the devaluation of the dong will also
inhibit demand. Going forward, however, factors such as growing PC penetration, economic growth, a
range of government ICT initiatives and ambitious plans to grow Vietnam's IT industry will help to
underpin market progress.
The addressable domestic market for IT products and services is projected by to reach US$2.9bn by 2014.
An ambitious 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.
Industry Developments
The Vietnamese government has unveiled ambitious plans for developing the country's IT industry over
the next five years. The plans, which state of 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 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. The discounts will be available through
VNPT's 30 retail outlets and 200 agents in the city. In August 2009, the Ministry of Education and
Training launched a national programme to supply 1mn affordable computers to Vietnamese schools by
2011.
Competitive Landscape
Multinational brands dominate the Vietnamese PC market, with HP the top-selling PC brand in 2009,
ahead of Acer. HP's sales have been boosted by government and education sector projects, as well as by
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its strategy to target the consumer segment. Other multinational PC vendors including Dell, Toshiba and
Asus have enjoyed strong recent growth in the booming market.
Government plans to expand the local software industry, and develop a number of new software bases, as
well as two new software businesses with revenues of more than US$200mn, could potentially have an
impact on the local software competitive landscape. Vietnamese software producers have a greater
presence in their domestic market. The Ministry of Information and Communications (MOCI), which
developed the plans, has also called for the localisation of some open-source software products for use in
state agencies.
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 and this is due by the end of the year. The decree will stipulate procedures and operational
requirements for firms providing IT services.
Computer Sales
BMI projects that sales in Vietnam's computer hardware market will be worth around US$1.3bn in 2010,
up from an estimated US$1.4bn in 2009. The main growth driver will be affordable notebooks, with
various models of the smaller form factor netbooks selling well in 2009.
PC penetration in Vietnam was around 9.6% in 2007, according to World Bank figures, and in 2010 is
estimated by BMI at around 15%. 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 2010, Vietnam software sales are projected by BMI to grow to US$178mn, despite the uncertain
economic conditions, and software CAGR for 2010-2014 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$312mn by 2014, with steady growth in demand for

licensed software from government, enterprise and household segments. However, some vendors and
distributors saw a slowdown in 2009 due to global economic headwinds. Vietnam's software market is
developing, despite the problem of software piracy, which still accounts for around 85% of software,
compared with 76% in neighbor Thailand.
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Services
Vietnamese IT services spending is forecast to reach around US$306mn in 2010, up from US$297mn in
2009. The economic crisis had an impact in 2009, with projects being put on hold. However, sectoral
CAGR is projected at 13% over the forecast period, as the market approaches US$501mn by 2014.
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.
 2010-2014 CAGR of 12% forecast as per capita IT spend reaches US$31 by 2014,
from US$21 in 2009.
 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 neighbour 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 undemocratic 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 wide-scale 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 2007.
 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 currency, the dong, 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 as well as 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 22
nd
place in the Asia Pacific and 120
th
worldwide.

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 knowhow.
 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 IT Business Environment Ratings

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
Ranking
Australia 56

100

71

80

71

75

72.2

1

Singapore 53

100

69

70

84

78

71.9

2

Hong Kong 48

95

65

70

87

80

69.4

3

South Korea 52

75

60

75

71

73

63.9

4

Malaysia 41

50

44

35

77

60

49.2

5

China 52

35

46

35

68

55

48.7

6

India 49

15

37

45

58

53

41.9

7

Philippines 37

45

40

43

50

47

41.9

8

Thailand 40

20

33

35

73

58

40.5

9

Indonesia 38

35

37

35

52

45

39.2

10

Sri Lanka 30

10

23

35

43

40

28.0

11

Scores out of 100, with 100 highest. 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 upon growth/size/maturity/govt 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 the 14 industries for which BMI provides Business Environment Ratings
methodology and is designed to enable clients to consider each rating individually or as a composite, with the choice
depending on their exposure to the industry in each particular state. For a list of the data/indicators used, please
consult the appendix at the back of the report. Source: BMI

BMI's Asia IT Business Environment Ratings compare the potential of a selection of the region's markets
over our forecast period through to 2014. Our Q410 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.
Across the Asia Pacific region, the onset of the global economic recovery and an upwards trend in
consumer confidence has led to improved trading conditions for IT vendors. India and Malaysia were the
gained most in our rankings for Q410, but many markets recorded stronger than expected year-on-year
growth in computer shipments in Q110.
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Australia retains its top regional rating this quarter. In Q110, a number of IT projects delayed from 2009
were launched across sectors, ranging from telecoms to retail, underlying the opportunities in the market.
Market development will be underpinned by government ICT programmes, such as the National
Broadband Network project, which will drive the development of Australia's digital economy and feed
demand for PCs. Government tenders will also generate opportunities in years to come in areas such as
education, e-government, transport and healthcare.
The smaller, but mature, IT markets of Singapore and Hong Kong take second and third spots
respectively in our ratings table, due primarily to their high Country Structure scores. Computer sales
were strong in Hong Kong in Q110, as the economy recorded positive growth following a contraction in
2009. Hong Kong continues to offer investors in the IT field 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. IT services spending 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.
On the downside, the continued restructuring of both economies to a more service-oriented model may
limit long-term growth prospects, although this also brings opportunities in sectors such as financial
services and banking. Businesses will probably remain cautious and value-focused over the short term.
South Korea, in fourth place in the table, should have a resurgence in business orders in 2010 and BMI
forecasts that per capita IT spending will rise from US$750 in 2010 to US$921 by 2014. Consumers
appear willing to upgrade their PCs and there is also a trend for households to own more than one
computer. There will be a number of key growth areas, including industry-specific software applications
and IT outsourcing, which is expected to show a strong demand trajectory.
In China, factors such as the vast potential rural market, government spending and demand from key
verticals such as telecoms should drive growth. Over the forecast period, expectations about China's long-
term economic growth will drive IT investments. Key sectors include telecoms, government, energy,

social security, education and transport. However, there are still risks associated with IP rights protection
and piracy and a lack of business environment transparency. Pressure on hardware prices is also a risk in
the current environment.
Malaysia rose from sixth to fifth in our regional ratings in Q210 and keeps its place. IT spending growth
will be driven by a rise in the PC penetration level from around 35%, rising incomes and a hi-tech-
focused national development plan. The subsidised rollout of a high-speed broadband network will
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address a relative lack of ICT infrastructure outside the Klang Valley. There are also increasingly
attractive opportunities in the IT services area as the government implements measures to make Malaysia
a growing regional services and outsourcing hub.
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
and the IT market offers correspondingly high growth potential over the forecast period. However, there
are challenges such as labour shortages and rising wages.
India was the another country to make gains in our IT market ratings last quarter, following year-on-year
computer sales growth of approximately a third in Q110. Even so, the market has yet to return to the high
growth recorded before the global economic crisis. The potential is obvious, with less than 2% of the
population owning a computer, about a fifth of the level in China. Realisation of this long-term
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.
Three South East Asian markets occupy the final three positions in the table, with low scores due
primarily to business environment factors, despite considerable growth potential. In Thailand, once an
upturn starts IT spending could drive forward again as customers make good on pent-up demand. 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 rollouts.
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 bounce
back strongly from the deceleration in 2009 and become one of the best regional IT market growth
prospects over the five-year forecast period. The SME sector will drive demand for basic hardware and
applications as enterprises look to enhance productivity.
Sri Lanka's IT market has felt the effects over the years of the country's political and economic instability,
from disruption of distribution channels and a flourishing grey market to 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 just got started in government services and major
public and private sector organisations remain largely underpenetrated in terms of basic enterprise
software.


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Asia Regional 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 like Singapore being above 50%, while
in other countries such as Indonesia, it is less than 2%.
The two Asian giants, 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 like Shanghai and Beijing – and 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 price 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
the 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 134% in 2010. Meanwhile, the Philippines has the lowest
level of internet usage, with just 6.6% narrowband and 8.1% broadband penetration estimated in 2010.
Broadband Penetration

(Per 100 Population)


Source: BMI
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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.
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 43.4% by 2014, 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 far below government targets, however.
Singapore will also see continued strong growth in broadband penetration, which is projected to reach
174% by 2014.
Meanwhile, the growth of Wi-Fi coverage will be one driver of notebook sales in places like 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 are expected to
report stronger growth in 2010. Across
the region, 2010 should see IT spending a
boost from systems upgrades deferred
from the previous year, although much
will depend 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 meant 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.
2010 IT Market Sizes

US$mn*


*estimate. Source: BMI
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In the largest market, China, an
expansion in consumer credit, as well as
a commitment to modernisation in
sectors like 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 SMEs. IT

spending will also receive a boost from
government spending and IT projects
associated with the Shanghai World Expo
in 2010.
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 particular potential in the lower-end product range.
India’s IT market appears to be positioned for a strong recovery in 2010 thanks to improving an 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 could implement 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.
IT Market Sizes As % O
f National GDPs

2010-2014f


Source: BMI
IT Markets Compound Growth

2010f-2014f, %


f = forecast. Source: BMI
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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 is expected to remain strong in 2010, as evidenced by the positive early reception for Apple’s
iPad. IT market growth will be driven by government IT spending as well as cross-border trade and
cooperation.
The largest IT market in the region is, unsurprisingly, China, estimated at US$86.9bn in 2010, trailed
distantly by Australia (US$19.1bn), South Korea (US$16.1bn) and India (US$16.0bn). 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.
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 have the potential to help trigger a new cycle of hardware
upgrades in 2010, although much will depend on business confidence.
In mature markets like 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 a significant growth opportunity.
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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 development of Australia’s digital economy and 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
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, enterprise resource planning
(ERP) and other e-business products still dominate the enterprise software market, but vendors are also
looking to other areas such as customer relationship management (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 an SaaS security solution. Improved broadband infrastructure will assist the popularisation of the
rented software model in markets such as Indonesia.

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New platforms and services in the telecoms field is a driver 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 mean more opportunities in key IT-spending verticals like 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 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 remain 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 like 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.
Market Structure (% Of Total IT Market)

2010f

2014f


f = forecast. Scores out of 100. Source: BMI
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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$1.7bn in 2009. Vietnam IT spend per capita, at around US$19 in 2009, is considerably lower than
the US$178 estimated for ASEAN neighbour Thailand. However, IT spend per capita is expected to grow
to US$31 by 2014.
Computer hardware, including desktops, notebooks, and accessories, is the largest IT market segment in
Vietnam, accounting for around 73% of spending in 2009. Packaged software was valued at US$155mn

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 2014. 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.
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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,
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.