2009-11-25 14:47:27 - Hong Kong Information Technology Report Q4 2009 - a new market research report on companiesandmarkets.com

www.companiesandmarkets.com/Summary-Market-Report/hong-kong-info ..

Market Overview The Hong Kong IT market is forecast to grow from around US$4.5bn in 2009 to US$5.9bn in 2013. The market was boosted in Q209 by a revival in consumer spending, while long-term drivers include investment by key IT verticals such as financial services and logistics. The Hong Kong SAR government should also continue to spend on key modernisation and informatisation initiatives as part of its ‘Digital 21’ programme.

This year brought challenging trading conditions for IT vendors, but retail sales in Q2 picked up due to a revival in consumer spending, which reversed the 2.0% decline in Q1 to grow by 4%. PC shipments were also boosted by the popularity of low-cost netbooks, which are now expected to account

 

 

for between 20- 25% of notebook sales this year. However, this trend added to downward pressure on average sales prices.

The IT market will be supported by initiatives encouraging the integration of Hong Kong’s economy with its large neighbour and the abolition of taxes on cross-border trade. Recent integration of PCs with wireless networking technologies and the roll-out of 3G mobile networks and popular converged services such as IPTV are also drivers.

Industry Developments

Government IT spending for the 12 months to March 2009 was estimated at HKD5.49bn, up from HKD4.09bn in the previous fiscal year. In 2009, projects being implemented by Hong Kong public sector organisations included development of a city-wide system for sharing electronic health records and an e-procurement system for the office of the Chief Information Officer.

Moves to increase the number of mainland residents visiting Hong Kong by making it easier for them to apply for visas was expected to provide a boost to the Hong Kong computer market. Many mainlanders visit Hong Kong to purchase notebook computers as well as digital cameras and other devices. The visa reform was widely perceived as a gesture by Beijing to help Hong Kong fight the economic crisis.

Competitive Landscape

In August 2009, Hong Kong mobile telecoms operator Smart-Tone Vodafone launched its Videsse brand 10.1-inch screen netbook, which came with built-in webcam and was available free with a 24-month unlimited data contract.The growing popularity of broadband applications and wireless connectivity was a key factor driving PC sales growth in mid-2009, particularly of notebooks and small form factor mobile devices.

Microsoft hopes that the launch of its Windows 7 operating system, scheduled for October 2009, will drive local sales. In summer 2009, Microsoft continued to lay the groundwork for the new operating system launch in Greater China and anticipated that support from leading PC makers, coupled with its own extensive distribution network in China, would underpin success for the new system. The company recently appointed former HP executive Peter Yeung to head its Hong Kong operation.

In 2009, Hong Kong continued to receive new investment in outsourcing/managed services facilities from global vendors. COL, the IT Services arm of telecoms operator Wharf T&T, launched a partnership with US software giant Oracle, while VanceInfo Technology, a leading software development company in China, acquired the operating subsidiaries of TP Corporation, a Hong Kong provider of customer relationship management (CRM) software and call centre solutions.

Computer Sales

The report forecasts the Hong Kong computer hardware market at US$2.0bn in 2009, with low single-digit growth from 2008. In Q209, the market rebounded as consumer spending recovered; however, the most popular area of the computer market was netbooks, and there was evidence of consumers exhibiting a preference for lower-priced products. Sales are expected to pick up in Q409, but much will depend on consumer and business confidence in the economic recovery.

In Q109, retail sales were down year-on-year (y-o-y), but a number of factors have subsequently provided support to spending. The popularity of lower-priced netbook computers sustained growth in the notebook segment, which had become the main PC market driver. Netbooks are expected to account for 20-25% of Hong Kong notebook sales this year. Meanwhile, Beijing’s move to make it easier for Shenzhen residents to visit Hong Kong offered a boost to the carry-trade in consumer electronics goods.

Software

Software sales are forecast at US$1.1bn in 2009 and are expected to reach around US$1.2bn in 2010, before then growing to US$1.5bn by 2013. Hong Kong boasts one of the most advanced software markets in the region and software accounts for around 25% of IT revenues. Indeed, the territory has long been an important market for new launches of packaged software products.

In October 2009, the scheduled launch of Microsoft’s new Windows 7 operating system has the potential to stimulate the market. The current economic crisis has led some companies to cut IT budgets but others, however, see IT as a way of bringing greater efficiencies. Beyond basic enterprise resource planning (ERP) applications, growth opportunities include CRM and business intelligence. As vendor attention turns to smaller companies, the software-as-a-service (SaaS) model is enjoying increasing popularity.

IT Services

In 2009, the IT services sector is forecast at around US$1.4bn, with growth flat compared with the previous year. IT service revenues are then projected to grow at a 2009-2013 compound annual growth rate (CAGR) of 7%. The market is expected to build on a trend towards larger outsourcing projects evident in both the public and private sectors over the past couple of years: IBM and HP are among those to have won large deals.

The government’s Digital 21 initiative will continue to generate a number of projects, while one of the highest IT spending verticals should be the financial sector, where IT systems and processes still generally lag some way behind Hong Kong’s status as a leading global financial centre. The IT Services industry benefits from Hong Kong’s excellent telecoms infrastructure, with Hong Kong being the first city to fully digitise its fixed-line telecoms networks.

Cyberport The Cyberport was designed to provide the city with a major regional hub that would attract leading IT companies and professionals. The first phase of the HKD13bn project, developed by local company PCCW, was inaugurated in November 2001. After the science park opened in June 2003, it came under criticism for having failed to attract enough tenants to fill the 38,000m2 of office space. This was mitigated slightly when the Dutch electronics firm Philips agreed to rent a floor and when Microsoft announced it was moving its 250 Hong Kong-based employees there. However, the high-tech blue chip companies seem to have lost interest, with commentators pointing to the lack of a mature venture capitalist (VC) community, favourable e-government policy or even ‘entrepreneurial spirit’. As the Cyberport does enjoy some advantages, including a favourable location and proximity to the vast mainland market, there is increasing demand for the government to revive the project.