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By: RAJU CHELLAM
Publication: The Business Times 24/02/2011

However, growth in 2011 is expected to moderate, reports RAJU CHELLAM

IF YOU have any doubts about the resurgence of the infocomm industry, both globally and in Singapore, here's a reality check: spending on IT in 2010 saw its fastest rate of growth in Singapore and worldwide since 2007, driven by a pent-up demand for hardware upgrades and infrastructure investment, with Singapore's growth rate more than double the global average.

On a global basis, the IT market crossed the US$1.5 trillion mark in 2010, up some 8 per cent over 2009. Including telecom services, the overall global ICT market reached US$3 trillion in 2010, up 6 per cent year-on-year, according to the latest study by research house International Data Corp (IDC). Singapore, in fact, bested the worldwide average on both counts.

"Singapore's IT market jumped a robust 16.8 per cent in 2010 over 2009 to more than US$7.3 billion going by constant currency basis in 2009 US dollars," IDC's associate vice-president of IT spending research for the Asia-Pacific, Gary Koch, told BizIT. "Including telecom services, Singapore's overall ICT market grew by 12 per cent to almost US$12 billion in 2010."

Much of this spending came from companies updating their infrastructure equipment in Singapore. Spending on computer servers rose by a healthy 13.8 per cent, enterprise storage was up 10.3 per cent, and PCs by just 3.9 per cent.

"In effect, hardware spending jumped by 26 per cent to more than US$3.8 billion, the fastest rate of growth for hardware investment since 1996," Mr Koch said. "The star, however, was converged mobile devices that grew 100 per cent as demand for the latest devices shot up here."

Can Singapore keep up such high levels of growth this year? Overall IT spending growth in 2011 in Singapore will remain healthy but slacken to 6.8 per cent. "That's because the pent-up demand driving much of the growth in 2010 has been addressed, particularly in hardware," Mr Koch said. "We expect a stronger outlook at 12 per cent growth for packaged software, as application investment and upgrades become a priority. There will also be higher demand for apps development and deployment tools (6.8 per cent) as well as robust spending on infrastructure software."

On a global basis, spending on data storage saw the fastest growth at 14 per cent, followed by PCs at 11 per cent, and servers at 9 per cent. "Like the global economy, the global IT industry performed better than expected in 2010," said Stephen Minton, IDC's vice-president of IT markets and strategies group.

"Many organisations took the opportunity to make up for lost time by upgrading mission critical systems and infrastructure last year. While macroeconomic risks are still present, the world entered 2011 on the back of a resounding rebound for the technology industry."

As for this year, the prognosis looks good, led by companies jumping on the cloud computing wagon. The overall IT market is set to grow 7 per cent this year to US$1.65 trillion worldwide, with another year of double-digit growth for hardware (10 per cent), followed by software (5 per cent), and services (4 per cent).

"The global economy could still be a wild card," said Anna Toncheva, an economist in IDC's IT markets and strategies group. "However, the consensus opinion is currently that such a downturn is much less likely now than six months ago, and this continued economic stability will provide the foundation for another year of strong growth in the IT industry."

Meanwhile, researcher Gartner Inc has just raised its outlook for global IT spend from 3.5 per cent to 5.1 per cent for 2011. Gartner forecasts global IT spend to reach US$3.6 trillion in 2011, compared to US$3.4 trillion in 2010.

"Aided by favourable US dollar exchange rates, global IT spending growth may exceed 5 per cent in 2010," said Richard Gordon, research vice-president at Gartner. "But a similar level of growth in 2011, while forecast, is far from certain, given continued macroeconomic uncertainty."

One big boost comes from the telecom equipment market which is poised to grow 9.1 per cent this year, its strongest growth in many years. Hardware is another hot candidate. "The computing hardware segment is set to grow 7.5 per cent in 2011," Mr Gordon said. "However, vendors face possible challenges, particularly in the area of PC growth, given likely weak economic growth through the first half of 2011."

As for the Asia-Pacific region as a whole, businesses plan to spend US$312 billion on IT in 2011, up 7.6 per cent over 2010. "Growth in 2010 was strong, due in part to pent-up demand following budget freezes in 2009 and the need to replace ageing hardware," said Peter Sondergaard, Gartner's global head of research. "Emerging economies continue to be the locomotive of enterprise IT spending, outpacing developed economies. By 2012, hardware spend in Asia-Pacific will surpass that of North America."

To be sure, the Asia-Pacific region represents only 7 per cent of the global IT services market. However, 16 per cent of the contribution to market growth between 2011 and 2014 will come from the Asia-Pacific region. The charge will be led with 11.3 per cent growth in software spending, followed by hardware (10.1 per cent), IT services (9.3 per cent), and telecoms (7.6 per cent).