The Market for Software among Fledgling Asian Companies

In the not so distant past, the perception was that Asian businesses would be the last to adopt new software technologies and that Asia became a priority once your sales slowed in the lead markets of North America and Europe.  Now, the landscape has changed, perhaps even flipped, as Asian businesses are aggressively buying or building software solutions to help them compete.

BUSINESS TECHNOLOGY SOFTWARE GAINS A FOOTHOLD IN ASIA PACIFIC

Although Asia Pacific markets have significant IT needs and room to grow, most Asian markets now have the maturity to embrace the business technology transformation agenda to the same extent as the US.   Business technology segment accounts for just 14% of Asia Pacific tech spending, versus 32% in the US, so business technology spending is expected grow much faster than IT spending in Asia to the end of 2018 as firms work to meet the changing expectations of empowered customers.

"CEOs are saying, you know what, we're going to grow, and they're focused on top line revenue growth and they think they can do that in the current economic environment by bringing new services to market -- so it's less about IT supporting business, but now enabling it.”

Asian companies are spending more on modern business intelligence systems that complement machine learning. To build new systems based on machine-learning, IoT and smart machines, companies are also getting help from big service providers, fuelling growth in IT services by 3.1 percent in 2016. The Asia Pacific enterprise application market is anticipated to witness growth owing to the rising number of startups and the presence of a large number of small-scale industries.

DIGITAL TRANSFORMATION IN THE CLOUD ERA

Globally, companies are refreshing enterprise software platforms for the cloud era and stitching together new systems to support digital business projects. In traditional markets, spending on CRM and ERP is slowing. However, in some Asian countries, sales are expected to rise by 35 percent this year.  Overall, Asian enterprises are expected to spend $30 billion on ERP and $39 billion on CRM systems.

"We're getting to the post-modern ERP systems, we're replacing and wrapping existing systems with cloud, and CRM (customer relationship management) is growing gangbusters because CRM is easy to bring on in a cloud offering." - John-David Lovelock, Research Vice President at Gartner

EMERGING TECHNOLOGY STANDARDS

In Asia, the emergence of IoT infrastructure in manufacturing, blockchain technology in financial services and "smart machines" in retail, are the driving forces of growth in business technology transformation spending.  

"CIOs are going to have to become builders again.  They're going to have to combine the existing software that’s out there with pieces that aren’t, in order to provide new products and offerings built on their intellectual property."

Look around the large cities in Asia and you will find vibrant tech sectors, from fintech, to insurtech, to healthtech, utilizing emerging technologies to transform industries. Large Asian corporations are playing increasingly on a full Asian stage, and most are on a global growth path.  They are adopting and deploying emerging technologies, building platforms and scaling applications with global standards to match global market aspirations.

SMALL AND MEDIUM BUSINESS TECHNOLOGY SPENDING

SMBs around the world are increasingly interested in investing in resources to improve employee productivity and improve their competitive positions. Digital transformation is now necessary for Asian SMBs to compete. The Asia Pacific enterprise application market growth is in part a result of the rising number of startups and presence of a large number of small scale industries in Asia.

"SMB IT spending growth continues to track about two percentage points higher than GDP growth across regions. But beneath that slowly rising tide are faster moving currents that reflect the changing ways SMBs are acquiring and deploying technology." Ray Boggs, Vice President, SMB Research at IDC

Medium-sized businesses (100-499 employees) are expected to be the largest market throughout the 2016-2021 forecast with 38% of worldwide SMB IT products and services revenues coming from this group of companies. The remaining revenues will be generated about equally by large businesses (500+ employees) and small businesses/small offices (1-99 employees).

Medium and large firms are also expected to experience the strongest spending growth with CAGRs of 4.6% and 4.5% respectively, slightly above small business spending growth of 4.4%. The SMB opportunity for both near-term and long-term IT spending growth extends across all company sizes and technology categories.

“We see today the rise of SMBs that were born in the digital era, that are very innovative and attracted by 3rd Platform and Innovation Accelerators (particularly cloud, mobility, and IoT).  Even if these companies represent only a small percentage of the overall SMB market, they can set the scene and pave the way to a broader adoption of innovative IT solutions." Angela Vacca, Senior Research Manager, Customer Insights & Analysis

From business technology software to cloud transformation to emerging technology to SMB spending, Asia is clearly emerging as a lead market for software at both large corporate and SMB levels.  Increasingly, competing regionally means competing with the powerful emerging tools that are enabling this era of digital transformation.  From my vantage point in Singapore and my involvement assisting companies build presence in the region, there are repeated signs that the market for transformative software technologies is vibrant and growing.

Thanks for reading. Next month, we will be writing about the growing role that unified communications has in the Asia Pacific region.  By leveraging Asia Market Entry’s extensive network across the region, we can save companies years in establishing a footprint in the region.  We invite you to connect with us to learn more about how we can help you accelerate your presence throughout Asia.   Please connect with us on LinkedIn.

ABOUT ASIA MARKET ENTRY

Proving the Asia market before you make a scale investment in the region is prudent practice.  Adopting a series of outsourced business development services to execute at low cost can help your company expand in Asia the market without spending a fortune.  The effort starts by engaging local experts with a platform of local knowledge and expertise that helps you make good decisions about your long-term Asia business development strategy.  

Using an outsourced expert to help you prove out markets in Asia is similar to the best practices you now use in home markets. Assemble a team of highly capable people and then systematically try limited initiatives to learn and grow. Invest aggressively only when you know you have the right model to scale.

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