BMI's Executive Summary

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Market Overview

With the 'Intelligent Nation 2015' plan placing IT at the heart of the government's strategy to improve economic competitiveness, Singapore's IT market is projected to continue on an upwards path. Conditions appear favourable for growth over the next few years, with the total size of the domestic IT market expected by BMI to increase from US$4.1bn in 2007 to around US$5.1bn in 2012. The main downside to our forecast scenario is a downturn in the US economy having an impact on economic activity in Singapore. However, the recovery in the global IT market in 2007 should have beneficial effects for an economy for which IT and electronics is the main export.

Despite being a mature market by regional standards, growth in the Singaporean IT market continues to exceed analyst expectations. Growth in notebooks sales has given relatively strong momentum to the PC segment as a whole and has stimulated new vendor retail tactics. The government was a major source of IT spending in 2007, with a budgeted level of SGD730mn of projects continuing from a high level of activity in 2006. In 2008 government spending should be boosted by the award of the estimated SGD1.5bn tender for the Standard Operating Environment (SOE) project. There were signs last year that business spending was also on the increase, with IT budgets of smaller and medium firms increasing relative to revenues, and collectively accounting for around one-half of total Singaporean IT spending.

Industry Developments

In late 2007 the Infocomm Development Authority (IDA) announced a delay in the award of the longawaited Standard Operating Environment tender. The winner of the SD$1.5bn tender, which was first launched in April 2007, is now expected to be announced in February 2008. The aim of the project is standardize the desktop, messaging and network environment for the public sector to enhance operational efficiencies. Agencies will share a common infrastructure enabling them to work seamlessly as one government.

Meanwhile, the Singaporean government has launched a new phase in its Intelligent Nation 2015 ten-year masterplan to grow the infocomm sector. The new emphasis is on encouraging local SMEs to innovate and benefit from the programme through co-operation with multinational companies in Singapore. Companies in sectors ranging from financial services and tourism to healthcare are getting involved, and the government has set aside SGD$5mn to help SMEs innovate.

Reviewing one year of the landmark Intelligent National 2015 (iN2015) plan last year, the government said that much progress had been made but much remained to be done. The Minister for Information, Communications and the Arts Dr. Lee Boon Yang said that since the launch of the Singaporean ICMasterplan iN1015 in June 2006 a number of programmes and initiatives had been rolled out collectively by the Government and Industry.

Company News

Strong opportunities for IT vendors in the Health sector were highlighted in 2007. Leading local IT services company Singapore Computer Systems (SCS) announced the completion of the latest stage of the iPharm implementation for Singapore's National Healthcare Group (NHG). Meanwhile, IBM Singapore won a major contract from SingHealth, the nation's largest public healthcare group, to standardise hardware and software platforms across its various institutions. IBM was commissioned to consolidate the varied IT infrastructure into a single platform to create a better flow for patient care delivery.

Meanwhile, Singapore's status as a regional IT hub received a major boost in 2007 when Dell announced plans to split its world headquarters between the city state and its current Austin, Texas base. The new move will make Singapore its global support hub for both manufacturing and distribution. Some 300-400 jobs are likely to be added in the Singapore region alone. Among other IT companies investing in Singapore last year, EMC opened a new South Asia Development Lab (SADL) inside Changi Business Park.

Focus: Financial Vertical Opportunities

Singapore's banking sector has been successful over the last few years in attracting a new wave of investment by multinationals in outsourced operations, thus creating opportunities in this sector for IT vendors. With bank deposits in the Asia Pacific region projected by Deloitte to exceed US$1trn by 2010, financial services providers have an increasing need to deploy advanced technology to streamline and enhance end-to-end operations. In the last couple of years, Credit Suisse has announced the creation of 900 outsourced jobs, including IT functions, in Singapore, as part of an exercise to cut costs in backoffice operations; Merrill Lynch announced plans to add 800 back-office jobs in Singapore; and Barclays Bank is another global player centralising its AP functions in Singapore.

The government is keen to encourage the trend, with the IDA stating that Singapore can use its ability to harness IT to be a 'showcase for innovations in the financial services industry'. Internet and telephone banking have already swept through the region, but now the ability to integrate data warehouses and manage information relating to different customer segments – and from front-office delivery systems to trading platforms and distribution channels – is becoming increasingly important. The bank's decisions are a boost to the Singaporean government, which has been concentrating on higher-end businesses and offering financial incentives to multinationals to create a hub for international banks and funds. A further attraction of Singapore is its superior infrastructure, compared with other destinations in the region.

Computer Sales

Spending on IT hardware is expected to rise to around US$1.9bn in 2008 from around US$1.8bn in 2007, as healthy economic growth leads a pick up in the IT market. In 2007, spending on PCs continued to exceed analyst expectations for this mature market. According to the latest report of the IDA, 74% of Singaporean households now have a PC and, following PC demand growth of close to 20% in 2001-2005, this level of saturation would be expected to act as a constraint. However, consumers have appeared willing to spend on upgrading their notebook computers. Moreover there still exists a significant digital divide in Singapore, particularly between income groups, something that represents a source of potential demand given the government's intention to address the issue. Given overall high rates of penetration, the increasing number of products and services available on the internet is likely to be a major driver of demand for computer hardware.

Software

Software accounted for about 15% of the domestic IT market in 2007 with estimated spending of US$614mn. As the market focus moves from hardware to services and solutions, the share of the IT market accounted for by software should rise to 17% by 2011, with enterprises seeking greater leverage from their investments. ERP and other e-business products will find increasing popularity with the SME market, as enterprises look to enhance productivity through the automation of essential functions. As evidence of the importance of this segment to vendors, Microsoft is offering SMEs six different options to migrate to the Windows Vista operating system, along with a variety of financial packages.

IT Services

IT services accounted for about 40% of the domestic IT market in 2007, with spending of US$1.6bn, up from US$1.5bn in 2006. CAGR for the segment is estimated at 5% over the 2007–2012 period. The BPO market is currently growing at a double-digit rate, and the IDA said that it would devote US$12mn in 2006 and 2007 to developing Singapore's BPO industry. Finance and accounting will remain the most important BPO categories, with Singapore currently enjoying revived popularity as a BPO location for financial sector organisations. The government is to tender a major outsourcing contract in 2008, following large deals in the private sector in recent years, with companies such as Singapore Airlines. Local companies are also following the trend, with Singapore Computer Systems (SCS) recently handing business continuity and disaster-recovery solutions provider SPRING Singapore a three-year deal to outsource its infrastructure and applications.

E-Readiness

Internet penetration in Singapore is estimated at around 66% in 2007, and broadband penetration at around 20%. The National Broadband Network is at the core of the government's 'Intelligent Nation2015' project. The contract for the first phase of the project, which will link businesses, schools, hospitals and homes, involves 45% of the network being rolled out within three years and the entire network by 2012. The second phase of the project will place an emphasis on pervasiveness and the provision of wireless access at affordable rates. The NBN will be capable of offering high speeds of 1Gbps or more, and aims to provide affordable broadband for 95% of all homes and businesses by 2012. Broadband has become an increasing important driver of PC and notebook sales in mature market such as Singapore, with vendors such as Acer and HP rolling out new models with popular multimedia and entertainment features.

Key Issues For Investors

• Further government-enforced reductions in labour costs and mandatory corporate contributions to pensions;
• Cuts to corporate and income taxes if the government sticks to its budgetary commitment to lower
business costs;
• Competitiveness is at risk of being eroded by cheap labour in China.

Contents

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Chapter 1 - Executive Summary

Market Overview

Industry Developments

Company News

Computer Sales

Software

IT Services

E-Readiness

Chapter 2 - SWOT Analysis

Singapore IT Sector SWOT

Singapore Business Environment SWOT

Key Issues for Investors:

Chapter 3 - Asia Regional IT Markets Overview

IT Penetration

Market Growth And Drivers

Sectors And Verticals

Chapter 4 - Market Overview

Government Authority

History And Market Structure

Hardware

Software

Services

Industry Developments

Chapter 5 - Industry Forecast Scenario

Table: Singapore IT Sector Historical Data And Forecasts

Chapter 6 - Macroeconomic Forecast

Economy Demonstrating Resilience

Table: GDP, Output & Population"

Chapter 7 - Country Snapshot: Singapore Demographic Data

Section 1: Population

Table: Demographic Indicators (2005)

Table: Rural/Urban Breakdown

Section 2: Education And Healthcare

Table: Education

Table: Healthcare: Vital Statistics

Table: Healthcare: Expenditure

Section 3: Labour Market And Spending Power

Table: Employment Indicators

Table: Consumption And Stratification

Chapter 8 - Competitive Landscape

Company Profiles

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

IT Industry

Forecasts

Sources

Chapter 10 - Appendix: Regional Demographic Data

Table: Population

Household Spending Per Capita, US$

Private Consumption Per Capita, US$ PPP

Market Size, GDP, US$bn

Competitive Landscape for Asia Information Technology: Sample of  
Companies Ranked

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Company profiles, including SWOT (strengths, weaknesses, opportunities and threats) analyses, business activity, leading products and services. BMI forecasts for all headline macroeconomic indicators, including real GDP growth, inflation, fiscal balance, trade balance, current account and external debt. Company profiles and SWOT analyses covering competitive positioning; leading products, services and brands; annual sales and share of domestic hardware, software and components markets; headline financials and M&A; pan-regional expansion strategies and strategic partners. Companies covered include:

Network of Information Technology Sources

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BMI's Asian Telecommunications Reports are based on an extensive network of multilateral organisations, government departments, IT industry associations, chambers of commerce and company reports. Information sources include: