Vietnam information technology report q4 2011

Q4 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 Q4
2011

INCLUDES 5-YEAR FORECASTS TO 2015


Part of BMI's Industry Report & Forecasts Series
Published by: Business Monitor International
Copy deadline: October 2011
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CONTENTS
Executive Summary 5
Market Overview 5
Competitive Landscape 6
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
Regional It Business Environment Ratings 13
Asia Markets Overview 17
IT Penetration 17
IT Growth And Drivers 19
Sectors And Verticals 20
Vietnam Market Overview 24
Government Authority 24
Background 24
Hardware 25
Software 27
Services 30
Industry Developments 33
Industry Forecast 37

Table: Vietnam IT Sector (US$mn unless otherwise stated), 2006-2015 40
Industry Forecast Internet 41
Table: Telecoms Sector Internet Historical Data And Forecasts 41
Macroeconomic Forecast 43
Table: Vietnam – Economic Activity 44
Competitive Landscape 45
Hardware 45
Software 46
IT Services 50
Company Profiles 53
FPT Software 53
FPT Software 54
Country Snapshot: Vietnam Demographic Data 55
Section 1: Population 55
Table: Demographic Indicators, 2005-2030 55
Table: Rural/Urban Breakdown, 2005-2030 56
Section 2: Education And Healthcare 56
Table: Education, 2002-2005 56
Table: Vital Statistics, 2005-2030 56
Section 3: Labour Market And Spending Power 57
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Table: Employment Indicators, 1999-2004 57
Table: Consumer Expenditure, 2000-2012 (US$) 57
BMI Methodology 58
How We Generate Our Industry Forecasts 58

Transport Industry 58
Sources 59

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Executive Summary
Market Overview
The Vietnamese IT market is estimated to report 18% growth in 2011. In January – August 2011, PC
imports grew by a double-digit factor in dollar terms, but economic cooling measures are forecast to have
an impact later in the year. Factors such as rising PC penetration, economic growth, a range of
government ICT initiatives and a drive to develop Vietnam's domestic IT industry will help to sustain
continued expansion going forward.
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
South East 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$4.3bn by
2015. An increasing number of Vietnamese companies have shown an interest in cloud services.
Industry Developments
In 2011, various Vietnamese government departments have started to utilise cloud services. In July 2011,
the Ministry of Education and Training (MOET) said that it had instructed local education and training
departments to shift to cloud computing. Meanwhile the Ministry of Natural Resources and the
Environment (MONRE) has put in place a strategy for more utilisation of cloud computing in IT
applications.

The Vietnamese government has also 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
Vietnam's largest software company, FPT has unveiled a major new restructuring plan which will
consolidate five technology subsidiaries in a search for higher growth. The company's five subsidiaries;
FPT Information System; FPT Telecom Corp; FPT Software; FPT Online and FPT Trading Group; will
be merged, with the company either buying out minority shareholders or facilitating a share swap. In May
2011, FPT also announced a cloud-computing alliance with Microsoft.
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.
Taiwanese PC vendor Asus has launched a new partnership with local company FTP Distribution which
has a nationwide network of 400 dealers. FTP, a member of FTP Trading Group, will distribute Asus
products, with Asus planning to introduce the full range of its new products in Vietnam during
Q211. Asus also plans to open between new service centres in Vietnam in 2011.

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$1.4bn in 2010. The main growth driver will be affordable notebooks. BMI
projects growth of around 17% in the Vietnam PC market in 2011, after strong growth in the first half of
the year.
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$194mn, and software CAGR for
2011-2015 should be in the region of 21%. Software spending comprises around 9% of total Vietnamese
IT spending currently.
The market is expected to reach a value of around US$412mn 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$409mn in 2011, up from US$342mn in
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2010. The market showed signs of stabilisation in 2010 after the economic crisis had an impact in 2009,
with projects being put on hold. Sectoral CAGR is projected at 18% over the forecast period, as the
market approaches US$791mn 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 of Vietnam remains committed to market-oriented reforms and
we do not expect major shifts in policy direction over the next five years. The one-
party system is generally conducive to short-term political stability.
 Relations with the US have witnessed a marked improvement, 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 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
 Macroeconomic instabilities in 2010 and 2011 are 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 recent years 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 7.2% annually between 2000 and 2010.
 The economic boom has lifted many Vietnamese out of poverty, with the official
poverty rate in the country falling from 58% in 1993 to 12.0% in 2009.

Weaknesses
 Vietnam still suffers from substantial trade, current account and fiscal deficits, leaving
the economy vulnerable to global economic uncertainties in 2011. The fiscal deficit is
dominated by substantial spending on social subsidies that could be difficult to

withdraw.
 The heavily managed and weak dong currency reduces incentives to improve quality
of exports, and also keeps import costs high, 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 rising 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 2010 Corruption Perceptions Index was 2.7, placing it in 22nd 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, 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
Regional It Business Environment Ratings
Limits Of Potential Returns

Risks To Realisation Of
Returns

IT
Market

Country
Structur
e

Limits

Market
Risks

Country
Risk

Risks

IT BE
Rating

Regiona
l
Ranking

Australia 55.5

100

71.08

80

71.21

74.7

72.2

1

Singapore 52.5

100

69.13

70

85.1

79.0

72.1

2

Hong Kong 48.3

95

64.7

70

87.4

80.4

69.4

3

South Korea 52

75

60.05

75

71.4

72.8

63.9

4

Malaysia 41.3

50

44.4

35

76.7

60.0

49.1

5

China 51.88

35

46.0

35

68.42

55.1

48.7

6

Vietnam 35.63

60

44.2

35

44.9

40.9

43.2

7

Philippines 36.7

45

39.6

42.5

52.23

48.3

42.2

8

India 49

15

37.1

45

55.6

51.3

41.4

9

Thailand 40

20

33

35

72.6

57.556

40.4

10

Indonesia 37.5

35

36.625

35

51.6

45.0

39.1

11

Sri Lanka 30

10

23

35

44.19

40.514

28.3

12

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, which 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 (BER) compare the potential of a selection of the region's
markets over our forecast period through to 2015. Our Q411 ratings reflect our consideration of the
political and economic risks, as well as the risks associated specifically with IT intellectual property (IP)
rights protection and the implementation of state spending projects.
There are no changes in country rankings in our updated Asia Q411 BER ratings. Australia therefore
retains its top regional rating this quarter. One area of opportunity in 2011 is growing demand for cloud
computing services. A wide range of leading Australian private and public sector organisations have
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launched cloud initiatives, including many of the country's leading banks. Meanwhile, the government
has unveiled a six-year cloud computing strategy.
IT verticals such as government, telecoms, healthcare and banking should continue to supply demand for
implementation, consulting and managed services in future. The government's commitment to continue to
implement the National Broadband Network project will drive the development of Australia's digital
economy and feed demand for PCs.
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. Hong Kong and
Singapore are expected to emerge as cloud computing hubs due to growing interest in cloud computing
across the region.
We forecast solid IT market growth in these markets in 2011. However, this will depend on continued
business and consumer confidence in the economic recovery, which could feel an impact if China
experiences a slowdown. 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.
Meanwhile, Singapore's ambitions to emerge as a regional cloud computing hub will fuel vendor
investment in service capabilities. Moreover, ambitious projects such as the national healthcare register
and the schools standard operating environment will bolster the IT market. Singapore benefits from high
broadband penetration and initiatives such as the government's ambitious Intelligent Nation 2015 plan.
Singaporean 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.
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 that 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.
Meanwhile, South Korea's government is encouraging the utilisation of cloud computing by small
businesses. New cloud computing offerings and increased competition in this segment are expected to
fuel growing demand to utilise this technology. IT outsourcing is also expected to show a strong demand
trajectory.
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Malaysia remains in fifth position in our Q411 regional ratings. Demand is expected to stay resilient, even
as economic growth moderates. Government spending may become more constrained, because of
commitments to tackle the budget deficit, but there will be growth areas. 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 rollout of a Malaysian high-speed broadband network will boost IT spending outside the Klang
Valley. Other projected growth and PC 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. Cloud computing will also
be a growth area and the government has named cloud computing as one of its top 10 strategic technology
priorities.
In China, despite an expected moderation in investment and retail spending over the next year, an
expansion in consumer credit will help drive IT market growth. The rural electronics subsidy programme
will continue to boost demand from the vast, underpenetrated rural areas. The lower tier city and towns
are expected to be the fastest growing segment of the PC market but pressure on hardware prices is also a
risk in the current environment.
Factors such as the vast potential rural market and a commitment to modernisation in sectors such as
education, healthcare and manufacturing are among other expected drivers. In the Chinese IT 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.
Vietnamese IT demand, although with a rather smaller market than its leading neighbour 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. PC subsidy
programmes will support the PC market this year as the government continues to roll out the One
Teacher-One Computer programme.
Vietnamese 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 the local IT and business process outsourcing (BPO)
sector. The BPO industry, which accounts for around 30% of IT spending, continues to grow. The
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Philippines has a lower PC penetration than many other Asian countries and the IT market offers
corresponding high growth potential over the forecast period.
However, the Philippines faces challenges such as labour shortages and rising wages. In the enterprise
segment, surveys suggest that many businesses including small and medium-sized enterprises (SMEs)
plan to increase IT spending again in 2011.
India also recorded impressive double-digit year-on-year (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. Significant opportunities will be created by demand from Indian businesses and government
agencies to help utilise cloud computing.

In 2011, having postponed IT projects during the economic slowdown, many Indian private and public
sector organisations are now investing again in upgrading their IT infrastructure. Realisation of India's
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 rollouts. BMI's view is that the fundamentals of growing
affordability and low PC penetration will keep the market on a positive growth trajectory.
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. Spending in some key IT verticals,
such as financial services and banking should continue to be significant in 2010. Government IT spending
is also expected to increase and could have accounted for as much as 25% of the IT market in 2010. 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, Sri Lanka 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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Asia Markets Overview
IT Penetration
Across Asia, government ICT initiatives and
growing affordability will help to 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
above 50%, while in other countries, such as
Indonesia, it is below 5%.
The two Asian leaders, China and India,
embody the region's growth potential, as in
both countries computer ownership remains the
preserve of a minority. In China, PC penetration was only around 25% in 2010 – although it was far
higher in cities such as Shanghai and Beijing and urban PC penetration is projected to pass 60% by 2015.
In India, less than 5% of people own a computer. However, some 45% of the population is under 25,
which provides a promising demographic context for increased PC ownership. PC penetration in Vietnam
was estimated by BMI at around 15% in 2010. Notebooks are owned by an estimated 7% of the
Vietnamese population, which points to
significant growth potential for the local PC
market.
Lower prices will help to drive higher PC
penetration in developing markets. The average
price of a PC in the Indian market 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. Even in more

mature markets, there is room for development,
however, with official data suggesting that as
many as 25% of Hong Kong households do not
have a computer at home.
Narrowband Penetration

Per 100 Population


e/f = estimate/forecast. Source: BMI

Broadband Penetration

Per 100 Population


e/f = estimate/forecast. Source: BMI

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Around the region, affordable computer programmes continue to find favour with governments. In China,
a subsidised household electronics products initiative aimed at rural residents has helped to boost PC sales
in areas where penetration was low. In Australia in 2010, national and state governments continued to roll
out new initiatives, with the Victoria government investing more than US$150mn in IT in schools.
In Indonesia, PC 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. Meanwhile, in 2010, the Vietnamese
government launched a programme entitled One Teacher-One Computer, which offered discounts on PCs
for teachers and students.
A similarly broad range is found with respect to internet penetration. The highest levels of internet
penetration are found in Singapore, South Korea, Hong Kong and Australia, with estimated 2011
penetration rates of 78.5%, 76.4% and 75.5% and 67.4% respectively. Singapore has by far the highest
rate of broadband penetration, which was estimated at 160.2% in 2011. Meanwhile, the Philippines has
the one of lowest levels of internet usage, with just 7.1% narrowband and 6.1% broadband penetration
estimated in 2011.
The fastest growth is expected in Indonesia, where internet penetration is projected to leap from 36% in
2011 to 67.4% by 2015. India is now at above 28% internet penetration despite a lack of fixed-line
infrastructure and this should reach 36% by 2015. Steady growth is also projected for Sri Lanka, where
penetration is projected to increase from 14.1% to 19.4% by 2015. Some 60.4% of Malaysians had
internet access in 2010.
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. Broadband penetration
has been boosted by growing numbers of mobile broadband users, as 3G mobile services are expanded
across the region. In China, broadband penetration is on course to reach 33.1% by 2015. In India,
penetration should increase sixfold to reach 9.4% by 2015 from around 1.5% currently, although this
remains below government targets. Singapore will also see continued strong growth in broadband
penetration, which is projected to reach 186% by 2015.
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. In Australia, the government's commitment to develop
the National Broadband Network should further the development of Australia's digital economy.
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.
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IT Growth And Drivers
Across the region in 2011, IT spending should
benefit from improved economic circumstances
and tenders, previously deferred as a result of
the economic situation, although much will
depend on business confidence. 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 some of the region's largest markets, such as
China, lower-tier cities and towns will be among the fastest growing segment of the IT market. BMI
expects China's IT market growth to be driven by an expansion into western China and rural areas well as
growing demand from small- and medium-sized enterprises (SMEs). The Chinese IT market will also
receive a boost in 2011 from a 50% increase in import tariffs on some electronics products, such as
laptops.
In Thailand in 2011, demand will be bolstered
by market expansion in the relatively
underpenetrated rural areas. SIS forecasts that
market growth in upcountry areas will be 30%
in 2011, double that forecast for the country as
a whole. A similar situation pertains to India
where in 2011 there are expected to be strong
growth opportunities in smaller cities.

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 strong growth thanks to an
improving economy and consumer sentiment, and government support for modernisation in lagging
sectors. 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.
2011e IT Market Sizes

US$mn


e = estimate. Source: BMI

IT Market Sizes

As % Of National GDPs


e/f = estimate/forecast. Source: BMI

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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 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$105.4bn in 2011, trailed
distantly by Australia (US$20.8bn), India (US$19.7bn) and South Korea (US$17.8bn.) Singapore's IT
market (including communications) is the largest as a proportion of national GDP (2.2%), followed by
Hong Kong (2.1%). Thailand's IT market was affected last year by a number of exogenous events
including floods in the north east of the country, and political unrest. However, in 2011 the country looks
to be back on track.
The fastest growing IT markets over the forecast period are projected to be India and Indonesia with
2011-2015 compound growth of 109% and 91% respectively, driven by increasing PC penetration. Sri
Lanka is third with the IT market growing by an estimated 89% over BMI's five-year forecast period,
while China's total growth is estimated at a still healthy 70%.
Sectors And Verticals
Regional IT markets remain hardware-centric, with hardware accounting for 25-74% 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.
IT Markets Compound Growth

2011e-2015f (%)


e/f = estimate/forecast. Source: BMI

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In mature markets such as Australia and Singapore, PC sales are dominated by replacement sales. In
Australia, 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.
Tablet sales will lead to a new PC market growth area, with triple-digit growth projected in many
markets. In China it is estimated that tablets could account for around 6-7% of computer sales in 2011.
However, partly thanks to the tablets surge, demand for netbooks has lost momentum in some markets.
Sales, although initially promising, have sometimes fallen short of perhaps unrealistic expectations. In
Australia, netbooks sales growth slowed from the first quarter of 2010, and this has continued into 2011.
In less-developed markets, demand from under-penetrated rural areas, affordable computer programmes
and growing broadband penetration should generally drive growth. In China, as in much of emerging
Asia, demand from smaller towns and rural areas where PC penetration is relatively low will provide the
main source of growth. Another driver will be 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.
Falling prices is another major driver, placing pressure on margins. As of the third quarter of 2010, the
average price of a PC in China was estimated to have fallen to around US$600, considerably below the
price level in developed markets. In India, the average price of a PC 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.
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. Meanwhile, broadband plans will also help to popularise tablets.
At the end of 2010, Australian telecoms operators such as Telstra were competing to offer affordable
tablets bundled with data services.
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, RIM, 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 9-25%
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.
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In 2011, sales of Microsoft's Windows 7 operating system and new Intel core technology retain the
potential to help trigger hardware upgrades, although much will depend on business confidence.
Hundreds of large enterprises and thousands of small enterprises in China have already started migrating

to Windows 7, and this process is expected to continue in 2011.
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). As Asian companies have become more
integrated into the global supply chain, their multinational business partners often encourage them to
install back-office systems to meet efficiency requirements.
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. Although the market remains relatively
small, more companies are looking at computing solutions such as Software-as-a-Service (SaaS). Cloud
computing business models such as SaaS offer smaller businesses a cost-effective way to deliver
applications such as payroll, tax-return processing and recruitment.
The hosted application model may already account for between one-fifth and one-quarter of Chinese
software revenues and SaaS has also enjoyed steady growth in the Hong Kong market over the past few
years. Improved broadband infrastructure will assist the popularisation of the rented software model in
markets such as Indonesia. Meanwhile, around one-third of Australian organisations already use some
cloud computing.
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 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 have helped to drive IT-related investments, while in Singapore government ICT
projects such as SOE2 provide significant opportunities. 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
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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 and Hong Kong have both seen
a trend towards larger outsourcing projects in the public and private sectors.
Market Structure (% Of Total IT Market)

2011e

2015f



e/f = estimate/forecast. Source: BMI

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Vietnam Market Overview
Government Authority
Government Authority Ministry of Information and Communications (MIC)
Minister Le Doan Hop

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$1.9bn 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$42 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$159mn
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,

provincial and municipal levels will provide important opportunities to vendors. A number of