LOOKING GOOD
IT spending in Asia next year will be robust, but there is a high probability of a low-probability event upending expectations.
By Cesar Bacani

IDC, the IT and telecom market RESEARCH firm, forecasts double-digit growth in spending on information technology in Asia in 2006, with India up 20.9% from this year, China up 14.3%, and other countries in the Asia Pacific region, excluding Australia and New Zealand, up 6.9%. Worldwide, however, the expectation is a modest 5.8% increase, virtually just at the replenishment level, as IT spending in the US and western Europe is pegged at 5.3%-5.4% and a paltry 1.3% in Japan.

“Asia is looking pretty good,” says John Gantz, who is chief research officer and senior vice president at IDC. “But there is a high probability of a low probability event taking place.” These include oil prices surging much higher than US$60 per barrel, which is where IDC assumes they will be in 2006, an avian flu pandemic, and natural disasters like a tsunami, earthquake, or typhoon.

Software piracy is a more basic concern. IDC estimates that 90% of computer programs in use in China in 2004 was pirated, 87% in Indonesia, 79% in Thailand, and 74% in India. The median across Asia is a high 61%. “How are you going to grow software spending (and the local industry) if there is no money in it?” asks Gantz.

The result is an imbalance in IT spending in emerging Asia,which is dominated 65% by hardware, compared with just 34% in the US, western Europe, and Japan. Gantz says the ideal mix is spending of roughly a third each on hardware, software, and services.

Longer term, Asian countries also need to improve their computer internet and telecom infrastructures, as well as social infrastructure (such as civil liberties and secondary school enrollment). IDC considers them as essential in building a knowledge economy.

Extending present trends to 2009, IDC gives high scores to the infrastructures of Australia, Korea, Singapore, New Zealand, and Hong Kong. Japan, in part because of its aging population, gets a middling score along with Malaysia (presumably because press freedom is also a variable). China is ranked number 39 and India number 49. Indonesia and Vietnam finish last.