The Asia Market for Enterprise Software - Just How big is it?

The hunger for tech in Asia is ramping up, with software and services spending set to rise by up to 8% (a value of over USD 129 billion) by 2018, according to the Asia Pacific Tech Market Outlook For 2017 To 2018 report from Forrester. Software and tech consulting services are expected to be the fastest-growing tech market categories in the region in 2017 and 2018. Software and services spending will rise by 7% to 8% and software purchases will grow by 7% in 2017 and 8% in 2018. Outside of Australia, New Zealand and Japan, tech outsourcing services will see 10% USD growth in 2017 and 7% growth in 2018.

Heading in the right direction

The vast potential of the Asia Pacific business to business market and government initiatives in next generation technology infrastructure are drivers of the growth in technology company investment in Asia.  Western companies that had previously not ventured into Asia or kept their participation at arms-length by limiting their exposure to partnerships or resellers, are also accelerating their presence. For example, about 70 hyper-scale data centers are planned for deployment in Asia over the next 3 years, according to new research from BroadGroup.

“In the US and Europe, software and tech consulting services have become two of the largest and fastest-growing tech budget categories. The Asia Pacific region has not reached this point yet, as many countries are still assembling the hardware infrastructure that underpins modern technology. But it is heading in that direction, with software becoming the third-largest tech market category in the region after computer equipment. More important, software and tech consulting will be the fastest-growing categories in 2017 and 2018.”

Fueling the growth

The Global Enterprise software market is set to exceed USD 500 Billion by 2022 according to the Global Enterprise Software market size, share, trends and forecast to 2022 by Orbis research. In India and China, both economic growth and adoption of technology are still behind those of other, more highly developed Asia Pacific countries including Australia, Singapore and Japan. However, it is important to note that while tech market growth tends to reflect economic growth, the size of a country’s tech market is often only loosely correlated to the size of its economy.

With software and services spending set to rise, what is fueling this sector’s growth in the Asian market? 

Japan remains the largest regional market and is expected to spend more than US$248 Billion on tech goods and services in 2017, closely followed by China. The Japan market strength is being driven by many factors, including government-led initiatives. Such initiatives include the promotion of new technologies, corporate governance reform, more flexible labour markets and more agile working practices. One such government initiative in Japan is “hataraki-kata kaikaku” (働き方改革 or work-way-revolution), an ambitious program to reform working norms of disparate pay and long working hours. Tech will go a long way to helping Japan achieve these goals and for that reason, Japanese investment in the sector will continue to grow.

Driving the digital customer experience

The trend for business technology and a shift to cloud services that enable businesses to win, effectively service and retain customers, is a major trend in the global tech market. Where investment in technology spending accounts for 32% of all tech spending in the US, only 14% of the overall tech spend in Asia Pacific originates from technology.

Most organisations have now recognised the importance of investment in digital customer experience for business growth and retention. In metropolitan areas in China, India, Korea and Thailand, consumers are leading the charge to demand digital empowerment. With shoppers interacting daily with brands like Amazon and Tencent, which offer digital engagement from mobile devices, consumers want to take advantage of the shop-on-the-go facility. Incumbents now need to continue their improvement of digital customer experience to compete for business and answer consumer demand.

Incentives for foreign investors in Southeast Asia

Foreign investments have played an important role in economic development in South East Asia with Malaysia, Singapore Indonesia, Philippines and Vietnam all eager to attract investment from around the world. In Malaysia, where the government is seen to take a pro-investment stance, it offers tax breaks on capital expenditure for research and development. Singapore takes an even more aggressive view towards attracting outside investment by offering no restrictions on repatriation of earnings, as well as a wide range of financial schemes and grants. Vietnam is one of the fastest growing economies in the region, are investing in transport infrastructure, have low land prices and despite some ‘glitches’ in currency rates, have now built the trust of foreign companies including Intel and Samsung. Thailand is investing heavily in infrastructure with logistics, engineering, airport, and public transportation. Indonesia reforms include a “one stop shop” where business licenses processes are streamlined and continued policy reforms intend to ease red tape.

"I've lived in Europe, I've lived in Japan, I've spent a lot of time in Taiwan and other countries. From a proactive standpoint, Singapore is about as good as it gets," said Wayne Allan, vice president of global manufacturing at Micron, adding the Singapore government's long-term vision was key to Micron expanding its investment.”

 Taking advantage of government grants, Micron is investing $4 billion to make more flash-memory chips in Singapore. It increased output by a third in the second half of last year and expects similar growth in the first half of this year.

The future in summary

There is a clear trend for growth in the enterprise software market in many countries in Asia Pacific, as they focus their efforts on building and improving infrastructure to support their growing technology economies. Technology spending is set to rise across the region and is being driven by economic market stability and maturity.  

The opportunities for established global players and market entrants are vast and regional tech hubs, such as Singapore, offer a strong springboard for tapping into the potential of the wider region.

AME Business Development asia, technology, software