Kuala Lumpur, October 5, 2012 – The 2013 Budget appears to be an "analogue" approach towards achieving an innovative digital economy by the year 2020, although there are initiatives which will have a direct or indirect impact on Malaysia’s IT future.

"The absence of significant ICT specific initiatives within this budget has made it difficult to infer any large scale shifts in IT spending in the near future. At present, IDC anticipates Malaysian IT spending to achieve US$11.4 billion by 2016, with a 8.7% Compound Annual Growth Rate (CAGR), with a large part of this driven by two Economic Transformation Programme (ETP) initiatives in Outsourcing and Data Center,” says Sudev Bangah, Senior Research Manager, IDC Asia/Pacific.

“While pockets of innovation and technology based initiatives were announced, there was little to cause an inflection point for the IT industry," added Sudev.

IDC has selected five (5) crucial initiatives announced within the budget, which will have an eventual direct or inadvertent impact to the Malaysian IT sector:

1. Outsourcing and Leveraging on Technology

While details remain vague, the announcement remains a positive one in the face of stiffening competition from neighbouring outsourcing countries. In a direct link to Entry Point Project (EPP) 2 – Building globally competitive outsourcers; it is envisioned that the Domestic Investment Strategic Fund of RM1 billion will contribute towards creating globally competitive local outsourcing companies by creating well rounded and industry specific talent. IDC expects this initiative to further drive the local outsourcing companies to up-their-game in the face of global delivery.

2. Technology and Agriculture

The budget announcement made two specific mentions of technology and innovation for Agriculture industry. An often overlooked industry when it comes to ICT, IDC expects these announcements involving agriculture based applications and management systems to cause some interest within IT vendors in the country. While Agriculture spending in IT remains small, the interest in this sector will cause a slight shift away from the over-saturated ICT-enabled verticals such as FSI and Resources.

3. Subsidized Mobile Phone Packages for Youths

This initiative will have a limited impact on the acceleration of smart phone adoption in the country, as well as for mobile phone vendors. While the initiative remains positive, there are many aspects such as the duration of subsidy, number of brands covered, authorized dealers and method of disbursement which will impact the planned initiative. A definition of a "smart phone" will be required and IDC does not expect a deluge of smart phone purchasing to occur simply because of a RM200 rebate. In a conservative scenario, dealership may be restricted to larger chain stores which would alienate smaller urban and rural areas of the country.

4. Broadband Programme for Urban Poor

At this juncture, there are a lot more questions than answers for this specific initiative, however, it is seen as a positive one as the government attempts to boost IT literacy across the urban population to better equip itself for the impending digital economy. A large budget (RM150 million) has been set aside although it is yet to be seen how this funds will be utilized on infrastructure, facilities, broadband and hardware (PCs/Laptops/Devices). This initiative will have a positive impact in creating an ICT literate society and may increase the interest from youth in working within this sector in the future.

5. SME Enablement via IT

This initiative ties in quite neatly with specific goals within the Digital Malaysia framework to enable traditional sectors in expanding geographically and increasing market access via digital commerce offerings. The consumerization of IT has caused many organizations to consider alternative methods of sales and penetration strategies. With the increasing smart phone and tablet PC scene across all countries in ASEAN, this method of sales enablement is seen as an inevitable paradigm shift within markets both domestically and globally. IDC expect this shift and "modernization" of micro to small SMEs to force the hand of infrastructure providers to ensure connectivity and network availability across the country. Additionally, this will also encourage basic adoption of basic IT usage, increasing their confidence in ICT spending – which has traditionally been a flat year-on-year performance due to the conservative nature of this segment.

For more information, contact JC Ting at email: jting@idc.com or tel: +603-2177-9215.

About IDC

IDC is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 48 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

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