TOP 10 PREDICTIONS Asia/Pacific (Excluding Japan) 2011 Top 10 Predictions

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PREDICTIONS
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Following 2008 and 2009 the two years dominated by the worldwide economic crisis, 2010 that saw the worldwide economy slowly recover and, at least so far, staying clear of any "double dip" recession patterns. In IDC's 2010 top 10 predictions, we had anticipated 2010 to be dominated by two themes: recovery and transformation. 2011 is projected to be a natural extension of those themes. As Asian businesses and the ICT space are projected to be defined by the leap from recovery to sustainable (and in some cases high) growth, ICT transformation will go "mainstream". Asian businesses looking to expand their businesses which IDC expects to be substantial majority both in terms of market shares and market reach in 2011 will leverage and exploit ICT as a key enabler. The ability of ICT to deliver business outcomes will become a key requirement and expectation from CIO and their business peers in 2011. IDC's top 10 Predictions for 2011 are: 1. 2. 3. Socialytic Applications Will Transform the Collaboration Market Mobilution Mobility Will Make A Leap Into IT "Less for Less" Self-Service Customer Portals Will Spearhead Low-Cost Customer Centricity Analytics Will Accelerate the Chase for Asian Consumption Apple's iPad Will Catalyze Interest in Client Virtualization Services and Federation Will Lead "Enterprise-Class" Cloud Deployments Smart Enterprises Will Adopt Catalog-Based IT Business-as-a-Service Will Be the Answer to IT-Business Integration Telecom Services Providers Will Return to IT

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4. 5. 6. 7. 8. 9.

10. Telecom Service Providers Will Look to Cloud Computing for Operations

Filing Information: December 2010, IDC #AP6684601S, Volume: 1, Tab: Markets Asia/Pacific Emerging Technologies: Top 10 Predictions

TABLE OF CONTENTS
P Predictions In This Study S i t u a t i o n O ve r vi ew 1 1 1

2010: Accepting Recovery and Moving Ahead ......................................................................................... 1 Future Outlook 1

Overall ICT Spend .................................................................................................................................... 1 General Business Environment ................................................................................................................ 3 CIO Priorities ............................................................................................................................................ 4 "Consumerization" of IT ............................................................................................................................ 4 Outlook for High-Impact/High-Growth Markets ......................................................................................... 5 Outlook for Emerging Markets .................................................................................................................. 8 Major Vertical Industries Outlook .............................................................................................................. 10 Prediction #1: Socialytic Applications Will Transform the Collaboration Market ....................................... 15 Prediction #2: Mobilution Mobility Will Make a Leap into IT ................................................................. 15 Prediction #3: "Less for Less" Self-Service Customer Portals Will Spearhead Low-Cost Customer Centricity .................................................................................................................................................................. 17 Prediction #4: Analytics Will Accelerate the Chase for Asian Consumption ............................................. 18 Prediction #5: Apple's iPad Will Catalyze Interest in Client Virtualization ................................................. 20 Prediction #6: Services and Federation Will Lead "Enterprise-Class" Cloud Deployments ...................... 21 Prediction 7: Smart Enterprises Will Adopt Catalog-Based IT .................................................................. 22 Prediction #8: Business as a Service Will Be the Answer to IT-Business Integration ............................... 23 Prediction #9: Telecom Services Providers Will Return to IT.................................................................... 25 Prediction #10: Telecom Service Providers Will Look to Cloud Computing for Operations ...................... 26 Essential Guidance 27

The Impact of IDC's Top 10 Predictions on the Vendor Community......................................................... 27 The Impact of IDC's Top 10 Predictions on the CIO ................................................................................. 28 The Impact of IDC's Top 10 Predictions on the Channel Community ....................................................... 29 Learn More 30

Related Research ..................................................................................................................................... 31

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LIST OF TABLES
P 1 ICT Market Growth, 20102014 ................................................................................................... 2

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LIST OF FIGURES
P 1 Primary Objectives of Business Analytics Projects by Country in the APeJ Region..................... 20

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IN THIS STUDY
In November every year, IDC analysts come together to review the current year and discuss the emerging technologies and market changes that will impact and drive the future of the ICT market. One of the outcomes of this process is a shortlist of our top 10 predictions for the coming year. This list, discussed in this study, includes factors that we believe will have the biggest commercial impact on the ICT market across the Asia/Pacific (excluding Japan) or APeJ region in 2011.

SITUATION OVERVIEW
2010: Accepting Recovery and Moving Ahead
After two years of stagnation and recession due to the U.S.-led subprime crisis, all economies and businesses were keen on getting back on track and expanding their businesses in 2010. The APeJ region was never directly impacted as hard as North America and Europe, but lower exports to these markets did negatively impact most if not all Asian markets in 2008 and 2009. What became clear though, was that Asia had enough momentum and had become a large enough economy and single market to not only sustain growth but actually emerge from the crisis as a region that is to be taken seriously as a market in its own right, and not just as a manufacturing engine for established markets. Despite the promising signs of growth during the year, the risk of a "double dip" recession is very much still present. Many economists have been arguing that the U.S. economy was overheating yet again and that another high-risk mortgage crisis was impending. Further to that, some European economies like Greece, Portugal, and Ireland were and still are battling with deficits beyond their own control. Greece was ultimately bailed out by Eurozone members and the IMF with a EUR110 billion loan but recent deficit forecasts are now putting that bail-out in question. Similarly, Ireland is now possibly looking at a similar bail-out plan to save its economy. Consequently, there is a sentiment that the worldwide economy is not "out of the woods" yet, but IDC expects markets and companies in Asia to be less worried about these risks in 2011 than they were in 2009 and 2010.

FUTURE OUTLOOK
Overall ICT Spend
Due to the tumultuous circumstances of the worldwide economy in 2008 and 2009, IDC had to reassess its predictions for ICT spending several times during that period. At the end of this period, we found that ICT spending growth in the region slowed down considerably, from 15.1% in 2007 to 8.7% and 5.2% in 2008 and 2009, respectively. Overall spending for these two years was somewhat fueled by the momentum of telecom services however as these were somewhat buoyed by the

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crisis. When looking at IT spending alone (excluding telecom services and telecom equipment spending) overall growth for the region was as low as 8.5% in 2008 and a mere 1.9% in 2009. IDC expects this dynamics between IT and telecom spending to have reversed in 2010 as IT spending (excluding telecom equipment) will grow as much as 17.3% compared to 2009 mostly fuelled by increasing spending on PCs and converged mobile devices. Conversely, we expect growth in telecom services spending to be lower in 2010 than in 2009, only achieving 6.6% growth vs. 7.3% in 2009. Some telecom services were actually boosted by the economic crisis as companies cut down on travel budgets and spent more on conference calls and videoconferencing, and this trend is not as apparent in 2010. Going forward, growth and expansion of services in emerging economies will still create growth in telecom spending, but declines in traditional telecom services in more mature markets are offsetting that. In 2011, IDC expects overall ICT spending in the region to grow by 8.1% to reach a total of US$534.76 billion. This is not as large a growth as seen in 2010, but the growth in 2010 is relative to the crisis-hit low point of 2009. IDC expects PCs and converged devices to remain a key driver for spending growth as recent form factors like tablet PCs and larger screen smartphones are driving the move toward a more mobile IT environment for consumers and businesses alike. In the enterprise space, IDC expects IT services in particular to be a growth driver in 2011. This trend is fueled by the overall drive that IDC expects in 2011 toward transforming ICT into becoming more business-centric and growth-enabling platforms for businesses in the region. Contrary to 2010, where this was mostly a drive seen in the larger enterprise space, we expect this trend to become more "mainstream" in 2011 as medium-sized and smaller enterprises will start reassessing the role of ICT in their businesses. Table 1 illustrates IDC's growth outlook for the IT market in APeJ countries from 2010 to 2014 and also shows how much the 2010 ICT market will have grown over 2009 by the end of the year.

TABLE 1
ICT Market Growth, 20102014 (%)
2010 Australia Hong Kong India Indonesia 5.6 11.3 17.1 11.2 2011 5.6 5.7 14.2 10.2 2012 4.9 4.9 13.3 9.2 2013 4.7 3.8 12.7 10.0 2014 4.4 4.0 11.9 10.0

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TABLE 1
ICT Market Growth, 20102014 (%)
2010 Korea Malaysia New Zealand Philippines China Singapore Taiwan Thailand Vietnam ROAP APeJ 11.1 6.5 2.3 11.3 10.2 9.6 3.9 8.2 22.2 13.6 10.3 2011 2.2 7.1 4.0 9.2 8.6 2.9 2.1 4.7 16.4 14.6 8.1 2012 1.8 7.2 3.5 7.9 7.0 4.1 2.3 4.7 12.9 14.9 7.1 2013 2.2 7.6 3.6 6.5 7.4 3.0 2.2 6.5 8.6 14.4 7.3 2014 2.1 7.7 2.6 7.1 7.9 4.0 2.0 8.0 5.9 13.2 7.4

Note: ROAP stands for the Rest of Asia/Pacific.

Sources: IDC AP Black Book, 3Q10 (IT and IT Services); IDC Black Book, 2Q10

General Business Environment

Although the financial crisis did not hit Asian markets as hard as it did North America and Western Europe, the crisis did have a lasting effect on the market dynamics in the region. As growth became an uncertainty toward the end of 2008, most companies in the region started increasing their focus on capturing a larger wallet share in their existing markets rather than expanding into new ones. However, even as the crisis has passed and organic and inorganic market expansions are back on the agenda, the impact on competition in the region has intensified. Most companies across all sectors are now faced with increased competition for their products and services, and IDC expects this to remain the case in the next few years. In a sense, increased market competition has become the "new normal" in Asia in 2011 and beyond. But although back on the agenda, the expectations and approach to market growth and expansion will not quite be the same as they were back in 2007, before the crisis. Several factors still pose a sense of uncertainty in many markets, especially as the U.S. dollar keeps fluctuating as speculation of a floatation of the RMB continues and, in particular, as fears of a double-dip recession loom.

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IDC expects these factors to impact the growth plans of Asian companies. Companies in the region will remain more diligent with their risk assessments of future expansion plans and they will have the same approach when it comes to investing in new IT and communications systems and services. The days of "throwing money" at IT are clearly a thing of the past and CIOs will increasingly need a clear business case for any future investments they make.

CIO Priorities
The drive from capex- to opex-driven IT investment that really took off in 2009 was still a factor in 2010. While still on the list of priorities in 2011, IDC's ongoing surveys suggest that it is no longer an obvious top priority among CIOs in the region. Cost management is still a key factor overall, but they are less dominant than seen during the gloom of the economic crisis. In fact, IDC has seen what can be described as a realignment of CIO priorities into a more "leveled" combination of cost-driven priorities and priorities related to business and business growth. Rather than just cost control, IDC expects the key CIO priorities in 2011 and 2012 to focus on transforming their information and communications technology into systems that relate more directly to the business needs. The key concerns will thus relate to efficiency, flexibility, time-tomarket, increased mobility and innovation all falling into the concept of "transformative" ICT. This in turn will translate into an increased focus on virtualization, automation tools, business intelligence (BI), and mobile extension of enterprise IT. Most if not all of these issues can be addressed by adopting the cloud model, and IDC expects cloud computing and cloud services to become increasingly visible in both small and large enterprises in 2011. While many, especially larger, enterprises are still weary of public cloud computing, the concept of private cloud will increase its importance in 2011 as companies continue to consolidate and transform their datacenters. The move toward private cloud will also help provide to tools for another key trend that IDC is expecting to gain ground in 2011: the transformation of enterprise IT from a cost center to a profit center. The charge-back model will gain ground in APeJ in 2011 onward as increased cloud adoption (public and private) provides CIOs and IT managers with the necessary tools for charging IT usage directly to the business units consuming the services. This trend in turn opens up new prospects for how CIOs are measured. IDC expects a growing number of CIOs to be benchmarked not only on "traditional" IT KPIs in 2011, but increasingly to have these KPIs relate to business outcomes and external customer satisfaction.

"Consumerization" of IT
Major markets like India and, especially, China will continue their efforts to change their economies from largely export-reliant economies to more self-reliant markets. China in particular has this as a key focus area of its national Twelfth Five-Year Plan (FYP 12) and this includes building and boosting consumer spending. IDC thus expects consumer spending to become a more important ICT spending driver in 2011 and beyond.

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In other key growth markets like India, Indonesia, Malaysia, the Philippines, and Vietnam, consumer spending power is on the rise. These countries also emphasize another important trend in consumer behavior and in how consumer behavior will gradually impact enterprise adoption of IT: within the next three years or so, the younger age groups referred to as "Generation Y" (Gen Y) and "Generation Z" (generally defined as those born between 1982 and the early 1990s) will make up more than half the population. Generation Y are mostly working today and Generation Z is starting to make its impact on the workspace as well and both generations are hallmarked by their savviness when it comes to use of ICT. These trends will increase the impact of the consumer in the APeJ ICT landscape in 2011 especially in the areas of enterprise use of social media and mobility. This trend will get propelled with Gen Y getting into executive/more senior and influential roles and as more of the "Generation Z" sieves into the workforce as the years move on.

Outlook for High-Impact/High-Growth Markets

The China Outlook
The China economy has seen good growth in 2010. GDP quarter-over-quarter (QoQ) growth has recovered to 9.6% in the past third quarter, nearly achieving the precrisis level of growth. IDC forecasts that China's economic growth is sustainable and will continue to approach the precrisis growth trends in 2011 and in the longer term. 2011 is the first year of the national Twelfth Five-Year Plan (FYP 12). The government will focus on the balance between sustaining stable and high economic growth, adjusting the structure of the economy and managing inflation. Finance and monetary policies will remain stable and the overall economic growth is expected to reach 8% to 10%. As the FYP 12 is being implemented, specific government focus on what are considered as leading and strategic technologies and services should help drive future innovation and opportunities in the China ICT market and for vendors with operations in China in particular. The stable economy and these new driving forces will provide the relative positive environment for the China ICT market. IDC forecast that in 2011, the China ICT market will reach a year-over-year (YoY) growth of 8.6% compared to 2010, reaching a total market size of US$ 247.41 billion. IDC believes that the China government policy and the implementation of FYP 12 are the main driving force of the rapid growth of the China ICT market in 2011. The ICT vendors and solutions providers should pay close attention to the following government policies and investments in 2011: Expanding domestic demand: The FYP 12 set expanding domestic demand as the most important strategy and this strategy will directly drive the development of manufacturing, retail and services industries, and will influence the related industry chains. As a result, this will provide the further development opportunities for ICT in these industries.

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 Energy saving and emission reduction: Energy saving and emission reduction will be one of the most important development and investment areas during the FYP 12 implementation. IDC believes that this will greatly improve the development of the industries such as renewable energy and environment protection and utilities. As a result, IDC expects large investments in ICT in this area. ICT in rural areas: During the FYP 12, the government investment in ICT in rural areas will be doubled and the investment from local governments will increase dramatically. This will also aggressively drive the intelligent city investments. Healthcare reform: The healthcare industry is one of the five key industries in the FYP 12. Supported by government investment and preferential policy, the healthcare industry ICT usage will develop rapidly. Express railway, urban railway, and intercity express: The construction of high-speed railway, urban railway, and intercity express is one of the important plans and projects during the FYP 12. It is estimated that there will be over RMB 3 trillion (around US$ 442 billion) invested in national railway construction during the FYP 12. IDC believes that the construction of high-speed railway, urban railway and intercity express will drive the development of steel and equipment manufacturing industries, as well as the ICT investments in the construction of transportation industries especially with regard to PCs, servers, and specific transportation IT solutions. Digital urban: Digital urban construction is a key focus area in the FYP 12 and is planning to fulfill the digital urban construction in all prefectural-level cities and some county-level cities by the end of FYP 12. In particular, areas such as digital urban planning and construction and high-density networks will have great potential in 2011 and beyond. In-depth combination of ICT and industrialization: Promoting the use of ICT as an integral part of industrialization is one of the core concepts of the FYP 12. The government intends to invest in and promote the use of convergence technology, converged terminals, and connected devices, among others. IDC expects the business models and the market landscape of the telecommunication industry to change dramatically as a result. Strategic and leading technologies: The FYP 12 also covers the planning and investment in what are considered strategic and leading technologies, such as fourth-generation mobile systems and cloud computing. ICT vendors and solutions providers should pay a close attention to the related government investments and plans in these areas in 2011. It should also be noted that given the expected change in the top politicians in 2012, along with being the second year of implementation of the FYP 12, government spending is likely to be "unusually" aggressive in this particular year. ICT vendors should prepare for strong market growth as they plan out for 2012 in the latter half of 2011.

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The India Outlook

India remains the second most important growth economy in the world today along with China. Both countries offer immense opportunities for businesses both from the perspective of large number of consumers, and a growing business investment market. China has taken the lead and is all set to become the second largest economy behind the United States overtaking Japan, while India is all set to follow albeit at its own pace in China's footsteps. With huge foreign direct investments, a vast skill base, strong competitive domestic industry, and a sincere commitment from the government to bolster the economy with the right economic policies, India seems poised to become a power to reckon in the next decade. While we see a host of reasons driving ICT spending in India, IDC wants to highlight some hallmark trends that will have an impact on ICT vendors doing business in India: eGovernance and infrastructure projects continue to invigorate IT spending in 2011. Since long the government sector was branded as slow moving when it came to the deployment of technology. But that is changing now, to the extent that the large government projects in areas of infrastructure and egovernance are pushing IT investment. As we look toward 2011, IDC sees government providing at US$2.1 billion ICT opportunity, with following major trends in governments initiatives: eGovernance: The India government will continue to push egovernance initiatives across states to improve citizen services and achiever higher transparency at the grass-root level. From land records, tax collection, to other critical services like the police, the judiciary government is pushing automation aggressively across states. Infrastructure reforms: The government will continue to push large infrastructure reforms impacting healthcare, transportation, energy, and utilities sectors. Some of the projects like the Accelerated Power Development Program, National ID Card project, National Highway Development Program, and Airport Modernization Project will drive longterm sustainable investment in ICT. PublicPrivatePartnership (PPP): The PPP model of egovernance rollout adopted by the states in India has revolutionized the governance experience for enterprises as well as citizens. Such a model lends long-term sustainability to the egovernance in India and also introduces corporate ideology to the government processes.

Business analytics (BA) will have increased adoption in 2011 on the backdrop of rapid growth and industry transformation. Fundamental reasons that drove BA investments during the precrisis era were related to the organic growth of data. As application deployment continued to mature, there was more pervasive use of BA and a mandate for shorter decision cycles. However, during the postcrisis the need for predictability, customer retention, transforming industry need, and compliance is pushing BA to mainstream. IDC expects the

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India BA software market to reach US$266 million in 2011, growing at 19% in constant currency terms. Some of the areas witnessing increased attention in BA will be data quality and governance, gaps between structured and unstructured data, predictive analytics, query reporting, and analytics tools. Connectivity, convergence, and content to push enterprise mobility adoption in 2011. Increasing sophistication of mobile users, penetration of smartphones and improving connectivity will push enterprise mobility adoption in 2011. The smartphones in India are projected to reach 7.6 million unit shipments in 2011, growing at 49% YoY. The total mobile phone market is expected to grow at 11.5% reaching 173 million unit shipments in 2011, increasing the overall mobility penetration and reach. On this backdrop India represents a huge untapped opportunity for enterprise mobility. The enterprise mobility will expand beyond basic collaboration, sales, and location-based application to critical business application being extended on the mobile. IDC expects key opportunities in logistics, retail, transportation, banking, discrete manufacturing, and government verticals. Some of the applications that will witness increased adoption are supply chain management, proof of delivery, distribution and sales tracking, microfinance, and electricity and water meter reading applications.

Outlook for Emerging Markets

The Indonesia Outlook
Indonesia's economy is on an upswing. Its economy continues to improve with its healthy growth rate through the period of global financial crisis. Indonesia is expected to reach a gross domestic product (GDP) growth of 6% in 2011, up by 0.1% from 2010. With the increase in exports that are growing faster in recent years and optimism in recovery of foreign investment, the local economy is still very much dependent on its large base in household spending. On the whole, Indonesia's economy remains in a very strong position. While inflationary and regulatory issues remain, with robust growth in the economy, Indonesia is poised for increased economic and political influence within Southeast Asia. Indonesia's ICT market experienced a more modest growth rate in 2009 due to the ongoing crisis, which immediately improved in 2010. IDC expects that, total ICT spending in Indonesia will surpass US$21 billion in 2011, a growth of 10.9% YoY. Government financial initiatives, improving unemployment, and strong investments are contributing to the Indonesia positive business outlook. Furthermore, robust ICT spending and investments in new telecommunication projects will also be driving the growth. However, some companies will remain cautious in their spending in 2011 as many enterprises will embark on the wait-and-see approach while following the economic recovery progress in North America and Western Europe. In 2011, IDC expects Internet penetration to increase rapidly across the country as telecommunications and Internet infrastructure investments continue. Projects such as the Universal Service Obligation (USO) which will provide Internet access to about 3,000 rural communities and the project will certainly raise the Internet penetration in

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the Indonesia. Furthermore, with the connectivity, communities will be able to perform online communications and transactions with their peers and businesses. The Palapa Ring is another project that will contribute in expanding connectivity in the archipelago. IDC is forecasting that the Indonesia Internet subscriber's number will increase by 63% from 2010 to 2011. With the improvement in the Internet infrastructure, cloud computing is expected to generate increasing interest among the enterprises albeit the state of adoption is still in the infancy stage. Enterprises are still eager to learn about this delivery model and explore how they can maximize ROI of their expenditure. IDC observes a growing number of cloud computing services providers from the software and services space who are establishing their presence in the country. With continuing investments from the cloud computing vendors such as in educating the industry, there will be an increase interest from the enterprises in incorporating cloud computing in their IT strategies and roadmaps.

The Vietnam Outlook

Comparing with developed markets, Vietnam still has a relatively low informationcentric level along with an infrastructure that really needs to be developed and expanded. In the recent years, Vietnam's emerging market status created an ideal marketplace for IT vendors to guide end users adopting on new technologies and IT products that were driving the changes. Moving into 2011 and beyond, IDC believes that local end users, both commercial and consumers, will be a driving force behind how the technology vendors would conduct their businesses in Vietnam. In addition, key vertical sectors such as financial services and public sectors, and other business initiatives will continue in generating demands for ICT that will help to stabilize local business operations and fuel infrastructure investments. In 2010, the overall Vietnam ICT market continued on a growing trend despite some inhibiting factors from seasonal business challenges and domestic inflationary pressures. In 2011, IDC believes that transformation is the key theme for the IT and telecommunications market in Vietnam. 2011 will serve as an ICT stepping-stone to take Vietnam into a new frontier of digital information, IT-enhanced public services, technology-enabled marketplaces, outsourcing opportunities, and advanced infrastructure readiness. Datacenter trend has been quite pronounced recently in Vietnam and is expected to gain more traction in the coming year. Major state-owned banks and telcos were among the early investment adopters, while the lower-tier players seek refuge in external datacenter facilities. Datacenters of some big enterprises such as Vinagame, SeAbank are beginning to offer their services to the industry. Although much datacenter investments are coming from telco players in the past years, IDC predicts the market will see more datacenter development coming from the medium-tier banks and small service providers. These banks are seeking for operational security and improved business processes from data managed needs, while the service providers are leveraging datacenter services to generate additional revenue and retain customer accounts. IDC expects capex investment for commercial datacenters in Vietnam to reach US$232.73 million by 2011.

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IDC expects BPO opportunities in Vietnam will surface in 2011 more than ever before. At the moment, BPO services still remain at early stage of adoption, yet the search for better cost alternative and operational efficiencies are pushing local businesses to engage external supports. Capturing the largest share of the business process outsourcing (BPO) market, customer care services cover outsourcing functions such as call centers, customer analytics, fulfillment, and technical support. Leading players in Vietnam including Havey Nash, operator1080, Minh Phuc, TelePerformance, GHP Far East, with service offerings covering telecom, banking, finance, and retail sectors. The other major BPO services are finance and accounting and HR processing. The adoption of cloud computing remains a challenge for the business and vendor communities in Vietnam. Despite the financial advantages such as cost reduction in software investment (license's cost), hardware, and IT infrastructure, enterprises are still not embracing the model with confidence. Their adoption challenges such as in Internet infrastructure, data security, and resiliency remain the major obstacles for local companies that are planning to subscribe to these services. At present, there are only a few ICT services providers providing cloud computing services to the market such as IBM, FPT through a partnership with Microsoft, and Trend-Micro, all at the early stage of development. IDC believes that cloud computing services in Vietnam will need more time to take off, soonest after 2011.

Major Vertical Industries Outlook

Banking, Financial Services, and Insurance
Cost control in technology investments, which gained prominence at the height of the crisis, proved to be a short term, reactionary theme. Financial institutions soon enough realized that they had to invest in "countercyclical strategies" that supported risk management, a "return to basics" in business models, customer retention, and selective revenue generation. Taking into account recovery and better growth prospects for 2011, financial institutions are poised to be slightly more aggressive in investments in technology spending. Some transformational projects that were put on hold in the previous two years are being restarted, for example, huge core banking projects and customer experience programs are steadily gaining momentum. However, having weathered the crisis by focusing on optimizing IT assets, consolidating infrastructure, and focusing on ROI, banks will still keep to these IT investment principles in the period of economic revival. We also see greater willingness to look at innovation a little bit more seriously not too long ago, innovation was seen as a costly, self-indulgent exercise (and of course, product innovation was in some ways seen as a cause of the crisis). However, we see that innovation is back on the agenda, especially as financial institutions want to distinguish themselves from their peers in the postcrisis landscape. We expect innovation in channels, customer interaction strategies, and new retail banking propositions as competition further heats up. This innovation will be facilitated by strategic and tactical use of analytics (see Predictions #1 and #4). A major shift is afoot in industry dynamics, especially seen in the emergence of Asia/Pacific-based "super-regional institutions." IDC FI defines these as Asian-based

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organizations that have made aggressive moves to acquire operations across the region, filling the vacuum left by global players that chose to focus on their core markets of the United States and Europe. The super-regionals' technology strategies are understandably distinct from domestic-focused institutions. These will be brought to life in regionwide platforms that are more than likely standardized applications and assets that will be used across the organization's various operations in the region. There will be country- or market-specific overlays, but the real and ultimate drive would be toward a common platform. For these regionwide deals, decision makers will look for, primarily among other things, regional credibility. For vendors in contention, this will call for recalibrations of regional/local delivery strategies, partnerships, and alliances. A few super-regionals have just recently made decisions on their core banking vendors, and a few more decisions are tipped to be made within a year. These deals will be handed to a wider number of vendors than expected, preventing an "oligopoly" of super-regional references for just a few core banking vendors. As purse strings tightened amidst the down cycle, IT executives found that a modular approach to the consumption of IT was more easily justifiable to the board. However, even as economic pressures have eased, we still see continued interest in utilitybased consumption of technology the model has proven to be not just a stop-gap measure, it is increasingly becoming the norm. What this underscores is that financial institutions are taking to results-based principles in IT spending: "I pay for what I need and require." We see this not only in time- and materials-based pricing, SLA-based and performance-based contracts, as well as other pricing models to account for risks taken (by either bank or the third party, or both) or business objectives met. All these and the pay-as-you-go pricing (on offer through private cloud, internal shared services, utility processing firms and so on) align with the results-based principles, smart pricing a term coined by IDC for usage and outcome-based pricing that have gained ground.

Healthcare and Pharmaceuticals

The healthcare scene in Asia/Pacific in 2010 was brimming with exciting milestones and anticipation. While recovering from the budget cuts during the economic crisis, healthcare providers had benefited from the increased infrastructural spending from governments as part of economic stimulus packages. The recovering economy translated to renewed spending power by consumers, more returned visits by patients for non-acute treatments and preventive health packages, as well as a revival of the medical tourism industry. At the technology front, many countries in the region including Australia, New Zealand, Malaysia, Singapore, China, and Thailand are all moving toward national and state developments of electronic health records, while hospitals continue to evolve their internal hospital information systems and electronic medical records to enable higher efficiency in workflows and information sharing. Most notably, Singapore's Ministry of Health finally announced the award of the US$144 million tender to the consortium led by Accenture, to develop the National Electronic Health Records exchange platform. Both public and private sectors around

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the region will be closely monitoring the progress of the development, as Singapore takes on the colossal task of setting up technical exchange standards, workflows, and information policies, and integrating with multiple hospital information systems. In 2011 and beyond, IDC expects the use of technologies among Asia/Pacific healthcare providers to grow in sophistication and personalized, patient-centric solutions will start to emerge. Providing a continuum of care goes beyond mere exchange of medical records. By embedding elements of mobility, clinical, and business intelligence through flexible delivery platforms, healthcare solutions can further address the needs of the region's increasingly ageing population that now demands a deeper look into chronic treatments and long-term care.

Government
Notably, the Asia/Pacific public economy has emerged stronger in 2010. Optimistic regional recovery sentiment has propelled the Asia/Pacific forward with tremendous growth potential, changing the global economic dynamics into one that is "multipolar". Increased public sector infrastructural spending with economic stimulus packages have brought about notable transformations in the ICT landscape. Uniquely, advanced economics are beginning to open themselves to competition in ideas and experience from rising economies. Such economic pressures are also encouraging the Asia/Pacific public sector to focus not only on expanding their international trade based, but also improving internal efficiencies to promote backsourcing/insourcing programs. This means creating an enterprise political-ecosystem through the extensive grooming of the "leaders of tomorrow". This included the creation and clustering of technological "hot-spots" that provide the critical mass of advanced knowledge sources (universities, advanced public, and corporate research labs), venture capital, entrepreneurial talents, knowledge workers, specialized professional services, sophisticated end users, and empowering institutions like intellectual property protection, public exit markets, among many other factors. Technologically, with an increasingly mobile population of key stakeholders for the public sector, the following initiatives are noted: Pursuit of cloud computing initiatives especially the private cloud Integration of social analytics to assist the communications revolution in today's social age/exabyte age Getting on board with next-generation mobile devices for citizen- and government-centric applications A whole new ICT security paradigm to deal with international terror threats and attacks with the emergence of abovementioned initiatives such as cloud, mobile technologies, and Web 2.0 In the year 2011 and beyond, IDC expects a growing crucial role of Asia/Pacific local governments. These authorities will be expected to promote swift advances in their state's technological evolution and also to attract and retain ICT economic

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investments through state-level mega projects that focus on specific sector/industry developments. Consequently, the central government of these states will assume the role of being the national coordinator and facilitator of interoperability and unification.

Manufacturing
2011 for ICT in manufacturing is going to be one where those companies that have put in place a structured, organized approach, with clear roadmaps and business/IT integration will differentiate from those that have not. The budget for CIOs is going to remain basically flat, causing the CIO to have to carefully orchestrate the organization, balancing cost-saving measures with newer application demands from the line of business (LoB). Those organizations that have the structured approach, will be putting in place strategies to embrace the newer applications that will differentiate the business, or adopt newer infrastructure or licensing models, such as cloud services, which will lower costs. For those companies that do not have the structured approach, we will see "keeping the lights on" costs increase, with the LoB becoming increasingly frustrated as they see the need for newer applications, but which IT cannot provide. Gaining momentum in what we are already seeing in 2010, companies will focus on growth and efficiency/productivity, rather than cost-cutting in 2011. This means that organizations will try to achieve cost efficiency through leaner and agile processes. We also expect that companies will become more customer-centric and align various business functions to be more responsive to market dynamics. Across the different applications, where organizations will be expanding will be outside of the core enterprise resource planning (ERP) system. Looking across the enterprise we expect product lifecycle management (PLM) to be the next big area of strategic, cross-functional investment. We also expect to see select investments in demand planning and supply chain, for enterprise looking to improve their visibility into customer requirements and supplier capacities. Within the plant we expect to see organizations build outward from the ERP system, integrating with the shop-floor operations, to provide real-time visibility and control, and also the increasing use of dashboard-driven strategic decision making, as the use of command and control centers integrating disparate factories and design centers becomes key as companies seek to drive efficiencies across their entire operations. For the partner/vendor ecosystem, the drive for efficiencies will be somewhat of a double-edged sword. Companies have leaned their operations and workforce to such a level that long drawn-out decision processes cannot be tolerated. However, the expectation on the vendor/partner community is that "you had better know my business". Vendor/Partner ecosystems that have increasingly verticalized, with deep industry knowledge, will have an edge over those companies that are still selling horizontal solutions. The other expectation is around the speed of implementation, once the purchase decision is made, the expectation and return on investment has to be delivered extremely quickly, the expectations being days and weeks, rather than months.

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Telecom
The telecom industry is undergoing turmoil as the sector has been and continues to experience declining margin along with an expanding competitive ecosystem with the return to IT (for the telco providers) and entry of cloud services. This industry is an area of significant opportunity because of the transformation it is undergoing/planning to undergo. First and foremost, the telecom industry is seeking help in consulting, strategy, technology, and go-to-market areas with regard to finding commercially viable and attractive services to launch. From the CIO to the CTO to the LoB to the top management, this single largest focus and priority determines what a telco will buy, invest, and do in the years to come. 2011 will see intensified competition as more will enter into the cloud services space with a deeper development and upskilling in the creation and delivery of IT services to harness the rising dependence of the network. With new services like cloud to be provisioned, back-end systems and operations as well as the broader network infrastructure will also have to be relooked and transformed to ensure that customers are adequately supported and competition is kept at bay. From a telco spending perspective, the APeJ total equipment spending including services forecast for 20102014 will decline at a compound annual growth rate (CAGR) of 6.5% from US$54.9 billion to US$41.4 billion as most of the major mobile coverage expansion projects are completing in 2010. Routers, switches, packet core, and optical transport will continue to the highest CAGR ranging from 310%. IDC forecasts that capex services will decline 9.2% CAGR from US$14.98 billion in 2010 to US$10.17 billion in 2014 as most of the capex spending has peaked in 2009 or 2010 in most markets in APeJ. Network integration services for systems such as operations support system (OSS)/billing support system (BSS), subscriber management, and service delivery platforms will be the only real growth segment in capex services growing 14% CAGR from 2010 to 2014 to reach US$1.84 billion in 2014. Although there has been a lot of discussion in the market about the shift from capex to opex, we do not see this to be a significant steep growth trend yet in APeJ as most incumbents, many of which are partially owned by the governments and employ large numbers of people, are expected to drop total capex spending back to 2008 or 2007 levels over the next two to three years but not beyond those levels as fiber to the home (FTTH), mobile broadband, fixed mobile convergence, and mobile applications take center stage and will require steady incremental capex investments. However, IDC forecasts that opex services will nicely increase at 13.4% CAGR from 2010 to 2014 to reach US$5.1 billion or roughly half the value of capex services. In terms of absolute value, opex services will grow to become half the size of capex services by 2014. Opex services will show nearly double-digit growth as NEPs and value-added solution providers have realized the opportunities in this area. Both types of vendors have now put in place resources and strategies to assist service providers in better managing and containing opex/subscriber increase through multivendor maintenance contracts, capacity outsourcing, and human resource outsourcing.

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Prediction #1: Socialytic Applications Will Transform the Collaboration Market

Last year, in our 2010 Top 10 Predictions, IDC predicted that business intelligence (BI) would emerge as a key technology area in 2010. IDC also predicted that enterprise use of social media would increase, partly because social media was starting to "come of age" and prove its value but also due to the fact that social media, coupled with BI, was becoming a very powerful and available tool for enterprises to derive real value from for marketing and customer relationship purposes. IDC predicts that 2011 will be the year where this trend of combining social media with BA will make its mark across most of the key enterprise applications in use today. Applications are beginning to be embedded with unified communications (UC) and social features today but IDC expects virtually all types of business applications to undergo a fundamental transformation in functional structure by fusing traditional business applications with both social/collaboration software and analytics in 2011 and beyond. Enterprise applications will thus become both "social" and "analytic" in nature, and IDC refers to these new types of business applications as "socialytic" applications. Social features are now being built into applications across the enterprise. Today, there are examples of software for HR systems, ERP, supply-chain management (SCM), sales force management, customer relationship management (CRM), and, of course, UC and collaboration that all embed social features into their core functions. The next step, which IDC believes will largely take place in 2011, is the marriage of these social applications with real-time BI. These types of socialytic applications hold the promise of greatly empowering the enterprise as they can drive both internal and external collaboration while deriving valuable information from all these collaborative transactions that take place. This will not only transform the collaboration market in 2011 and beyond, but it will transform the full stack of enterprise software in the years to come.

Prediction #2: Mobilution Mobility Will Make a Leap into IT

Enterprise mobility has been on the agenda for years in fact, it is something that we take for granted in order to access some of our key business applications when we are moving around and are away from the office. But although we are taking the concept of mobility for granted in some areas, the products and services companies and users have had access to have been pretty much limited to mobile email, solutions offering fixed-mobile-convergence and basic applications that could run on smartphones. All of these undoubtedly have added value to businesses using them, but they have been limited in the way they have been able to extend enterprise applications and enterprise data to the mobile workforce.

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Today however, IDC is seeing what we could call a "perfect storm" created by the evolution of different areas of technology combining to create a revolution in mobility. It truly is "everything" going mobile and IDC believes 2011 will be a catalyst year for this. Media tablets like iPads and large-screen smartphones can now run almost fully functional versions of all enterprise software and services. They can rely on 3.5 and, soon, 4G networks for access. Smarter and more capable mobile operating systems are providing the market with platforms to mobilize new applications, extending the functionalities of virtually all IT systems to the mobile device. In addition, with the move toward cloud computing, we are now seeing many of these IT systems being delivered in virtualized environments minimizing the importance of device-based computing power. All you really need to access and use enterprise IT systems today is a screen. Tablets, iPads, Cisco's Cius, smartphones, Android, iOS, Windows Phone 7, WebOS, among others, will enable all areas of enterprise IT to be extended to the mobile device. Apple with iTunes and RIM with Blackberry App World in particular are already seeing many if not most of the major software vendors offering mobile applications that extend their CRM and ERP platforms to the mobile device. Google's Android market has so far been trailing behind in this aspect but IDC expects the numerous Android-powered tablets and smartphones, supporting English and doublebyte markets like China, Korea, Thailand, and Vietnam, will hit the market in 2011 to help change that. The fact that Cisco chose Android as the platform for its Cius "collaboration tablet" will no doubt also help Android being seen as a bona fide platform for the enterprise space. The move toward a mobile application-based ICT environment has implications of how enterprise IT vendors and telcos go to market with their products and services. The dominant apps stores become important channels for vendors wishing to be active in this space a development that is both a threat and an opportunity for telcos. A threat because they risk becoming marginalized by existing app stores now dominating each their platform. An opportunity because the mobile apps space is still in its infancy and there may still be room for operator driving models if they can develop the right ecosystem. For CIOs, the implications of a mobilized IT environment are many fold. Mobilizing key enterprise applications is an obvious way of making them more relevant and useful to an increasingly mobile workforce and thus a big step toward aligning IT with business. It is also beginning to be used as an intelligent platform to provide customer and BA for companies as they determine a more relevant profiling dashboard of their customers, an important differentiator in the "new" competitive Asian landscape. The flipside of this coin is that it may further complicate an already complex IT environment and, in particular, have serious implications on security. With this move towards an environment of "mobile everything", CIOs and IT managers will need to revise their ICT policies and in particular their policies on governance, risk management, and compliance.

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Prediction #3: "Less for Less" Self-Service Customer Portals Will Spearhead Low-Cost Customer Centricity
Given that the next decade will be an Asian one, there is anticipation that market competition, regardless of industry, will only intensify in the next three to five years as existing vendors expand their positions and new vendors seek a toehold or acquisition target. Most of the attention and likely market entry points will be concentrated in those countries that have either the largest revenue potential or the biggest growth rates: China, India, Indonesia and Vietnam in particular, although key regional hubs like Singapore, Australia, and Hong Kong will also see an influx of new businesses. As a result, many businesses will face the challenge of finding a unique competitive differentiation in the marketplace. Hence, IDC predicts that customer centricity the adaptation of products and services to match changing markets - will become the single most important driver for most, if not all organizations. At the same time, we are also seeing the rising influence of Gen Y (Note: the oldest group of this population will hit the age of 30 by end of the 2010) in the corporate world. With these two forces at work, the role of self-service (via the Internet) will become significant. A competitively differentiated customer centricity initiative requires multi-channel customer-care touch points and the self-service portal is simply one of these channels. But it is a very important one as businesses and governments compete in a global and increasingly borderless marketplace, not to mention the influence of mobility, collaboration, Internet tools and applications in both the consumer and business markets. As customers' and citizens' demands become more sophisticated and wide ranging, businesses and governments need to find a cost-optimal approach to serve them. These customers and citizens are also demanding greater convenience and flexibility in being served. They want their questions and problems to be solved at the time they desire. However, it is not just self-service that is required; it is self-service that is optimized for both ease of use and broad functionality. These two characteristics are sometimes seen as mutually exclusive and the journey toward a competitively differentiated customer centricity goal will not be an easy one. Thought leadership is central in strategy development and execution of the strategy requires proven experience and a good understanding of both the customer installed base and the targeted customer segment. Many organizations can do well in some but not all areas, and few have the thought leadership and mentorship to develop a well-thought out strategy and roadmap. IT will play a critical role in a "less for less" self-service customer centricity environment as the notion of 'less for less' refers to the achievement of spending less on service delivery with what appears to the customer as a less complex, easy to use customercare environment. However, delivering an easy to use service will provide new challenges to IT because "simple to use" conversely requires the delivery of systems which are actually more onerous in their requirements. Simplicity means the

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application must cater for all possible scenarios, and it must be bulletproof if not customers will desert the site rapidly. Investments in technology from platforms, tools to services will, in IDC's opinion, increase substantially. The options of on-premises and cloud/hosted will remain applicable although we believe that many will opt for on-premises or a private cloud environment for some applications unless customer records can be separated from the hosted solution/application where privacy legislation mandates it. As public cloud security improves, and more in-country cloud data centers are constructed, public cloud delivery options will also emerge. In these cases, the service will become more affordable as it will be a standardized service which has all the benefits of shared infrastructure and none of the requirements for management by the enterprise. The pricing models will by necessity be varied as vendors seek differentiation by way of innovative pricing. This will test the imagination and risk appetite of vendors and service providers alike. For the smaller and less complex organization environments, the potential of customer-care applications and services will be strong. For large enterprises and the government sector, where the internal ICT environment is relatively more complex, there will be great opportunities for business consulting, IT professional services, integration services, customer-care platform, customer analytics, database mining, among others. The era of mainstream self-service has begun. We will move from customer-care to other business processes in no time.

Prediction #4: Analytics Will Accelerate the Chase for Asian Consumption
The "new normal" in Asia is clearly multifaceted; while the region is increasingly being viewed as the engine of growth for most organizations, volatility as well intensified competition will become more the status quo for the region moving into 2011. A large component of this competition is being driven by the emergence of what IDC terms the "Asian Enterprise Customer". An entity that is hungry for growth and geographical expansion is agile and has a much better understanding of the importance of increasing speed to market. More importantly, this type of organization is willing to look at the value of technology in terms of driving its differentiation in the competitive market in which it is looking to increase its market share. In these organizations, CIOs are looking at disruptive models (e.g., cloud) and game-changing technologies to compete more effectively and shorten time to value in terms of ICT investments. Specifically, analytics as an "accelerator" is increasingly being viewed as an enabler for these types of organizations to compete more effectively. Examples of the use of analytics by the emerging Asian Enterprise Customer include: In India, Max New York Life (a life insurance provider) has increased the number of new sales from existing customers from 7% to more than 20% and improved the premium revenue by nearly 40% with shorter sales cycles using customer analytics.

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 In South Korea, Korean Air is using multidimensional profitability analysis by flight within just three hours of departure as well as revenue management in real time. In the Philippines, Jollibee (a fast-food chain) is leveraging cloud-based reporting, integrated analytics, audit trail analysis, and financial consolidation to augment an on-premises solution that was implemented in the United States to underpin its growth strategy for Asia. In Malaysia, AirAsia the low-cost carrier is using a revenue management system to understand, anticipate, and react to the behavior of customers to maximize revenue. The system takes into account the operating costs and aids AirAsia to optimize prices and allocate capacity to maximize expected revenues. The optimization is done on two levels: Seat: Every seat is considered an opportunity to maximize revenue. Seats are available at various prices in different points of time. A reservation done at a later date will be charged more than the one done earlier for the same seat. Route: By adjusting prices for routes/destinations that have a higher demand when compared to others.

The effective method however is to combine these two levels for all flights, all routes so that both the seat and the route are effectively priced for all the flights Competition in the next three to five years will intensify in Asia with more entering into the region given its growth potential. Within this context, as a result of its ability to improve decision-making and drive revenue growth (see Figure 1), BA as a technology area is predicted to take center stage for CIOs within the emerging Asian customer in 2011.

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FIGURE 1
Primary Objectives of Business Analytics Projects by Country in the APeJ Region

Source: IDC, 2010

Prediction #5: Apple's iPad Will Catalyze Interest in Client Virtualization

In the good old days, client infrastructures within an organization were fairly consistent, with PCs leveraging a standard set of software images and oftentimes coming from the same vendor leveraging interchangeable accessories. Sometimes BlackBerry smartphones would enter the picture to allow for a consistent fleet of mobile devices, all while providing the security that allowed CIOs to rest easy at night. When individual employees would bring a non-approved device into the workplace, it was easy for the CIO to say "no" and simply deny technical support. But with the hype and fever surrounding around Apple's iPhone and more recently the iPad in 2010, this has changed. CIOs are now being approached by C-level executives wanting their Apple products to be connected to the corporate infrastructure and accessing confidential data, despite potential fears that CIOs may have about the risks. And with more products and operating systems entering the market, like Android and many others into 2011, CIOs may have an even bigger headache at hand.

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One possible solution is the use of client virtualization. Creating virtualized sessions would not only allow access to applications regardless of the operating system underneath, but could also provide the assurance that CIOs need in knowing that their corporate data is secure without necessarily residing in the device's local storage. Using client virtualization could also allow employees to bring in their personal choice of computers (again, regardless of operating system), perhaps even boosting employee morale in the process. In theory, everyone wins. But this theory rests upon two very big assumptions, namely consistently dependable network connectivity and very little latency in the user experience. The reality is that network availability will clearly have its limitations (think: a rural area or even on an airplane), while a relatively sluggish response to user inputs could severely hamper the experience, especially when one is accustomed to the crisp nature of a natively run application on their PC. Translating input methods alone could be a problem when one migrates a keyboard and mouse experience to a touchscreen and possibly only a 3in. touchscreen at that. Obviously technology, usage models, and even CIO fears will evolve over time. It will likely take a number of years, but IDC expects more widespread deployments to eventually occur. Indeed, some organizations in the United States have already spearheaded deployments of client virtualization in 2010, and Asia will likely follow behind it. Mature countries like Australia and Korea could help drive this for the region, as could regional offices of multinational organizations headquartered in North America or Western Europe. While 2011 may not be a big year for full-fledged deployments, it will be a year of increased CIO curiosity and experimentation, as well as awareness building and training for channels on this new technology. In many ways, the industry has Apple to thank for this. Without rogue iPads and iPhones entering the corporate network now, interest in client virtualization would probably take much, much longer.

Prediction #6: Services and Federation Will Lead "Enterprise-Class" Cloud Deployments
As in 2010, medium-sized and large enterprise take-up of private cloud technologies and services will accelerate further due to lingering concerns about security, reliability, and performance of public cloud services. However, IDC foresees that users will risk missing ROI targets unless they recognize that their lack of in-house experience in implementing private clouds will mandate the development of clear cloud strategies. Without their own experience, users will turn to third parties for strategy development and for systems integration services to ensure that project goals are met. As they develop their private cloud strategies, alternatives to the do it yourself (DIY) cloud will be considered, such as pretested "cloud stacks" or appliances and solutions from the expanding range of hosted or "virtual" private cloud offerings now on the market. While these are based on standard platforms and thus reduce the SI service requirements for the implementation stage of the project, users will still require consulting services in the areas of identity management and security as well as the roadmap where cloud would lead to the achievement of broader business goals and IT operational preferences.

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The ability to integrate applications or services from the cloud with apps or services from an in-house IT environment or with services from another cloud service provider will also be a key enabler or inhibitor for enterprise cloud adoption. Given that the Asian enterprise will adopt cloud services as targeted solutions for specific needs rather than in a "rip and replace" manner, it is imperative that existing apps and cloud apps are integrated. Without this integration, it will be difficult to achieve ROI targets and siloed apps will again frustrate business users. Very limited end-user experience with the implementation of and integration of cloud environments will limit cloud service penetration unless regional SIs and SPs leverage their experience to provide productized integration methodologies for popular cloud services. If productized integration methodologies are pushed out through the channel, then channel partners will also benefit from increased services revenues at a time of decline in hardware and software revenues. Whether or not cloud will get the foothold that we predict within Asian enterprises will depend on how well cloud infrastructure providers, cloud integrators and public and virtual private cloud providers manage to enable cloud federation.

Prediction 7: Smart Enterprises Will Adopt Catalog-Based IT

As the regional economy gets back on track and businesses accelerate, users will become more demanding for IT resources. Shorter time to market and instant provisioning of computing resources are becoming compulsory requirements. IT organizations will be expected to support ad hoc requirements, almost instantaneously. The only way to meet these expectations is to track and provide IT resources through a catalog-based IT. The provisioning of IT resources via a catalog of standard offerings allows users to make request through a self-service interface at the front-end. Meanwhile, such catalog is available only through the support of a dynamic IT resources tracking and provisioning system at the back-end. Tracking the usage and availability of IT resources, including computing power, storage space, network bandwidth as well as application usage and development, is critical for IT organizations to plan ahead in procurement, while automation is also essential to promptly deliver the users' impromptu request. Thus, smarter IT organizations will start to create IT services and resources catalog, which can systematize business users' requests, as well as bring visibility and automation toward IT resources delivery. The early ICT service catalog could be as simple as supporting PC replacement requests or additional email accounts. But more mature IT management organizations will tap on virtualization technologies and cloud environment to instantly provide more sophisticated IT resources, like server powers to deal with transactional peak or database access for new applications. According to IDC's Dynamic IT Benchmark Survey in early 2010, 49% of the 355 respondents across Asia indicated increased self-service IT for business users as the company's IT strategies. As the regional economy picks up in 2011, IDC predicts

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more than 50% of medium- to large-sized Asia-based enterprises will be building or beginning to build a catalog-based ICT in 2011. In addition to bringing a higher visibility towards an overall IT usage, a catalog-based IT also enables the monitoring of ICT usage from each business units. This would not only allow a better planning for IT procurement, but also builds a foundation to enable crystal computing (a next-generation chargeback model), a natural progression from cloud computing. IDC believes as the evolution of private cloud advance, enterprises will enable not only the sharing of ICT resources, but also the distribution of ICT spending among business units. The clear distribution of ICT resources and spending between business units develops the vision of crystal computing, all in-line with the rise of smart pricing and business-outcome-based SLA engagements. The implication of catalog-based IT is going to be significant for the vendor community, particularly among infrastructure technologies providers. System software providers that manage IT asset, monitors and auto provision computing resources, storage application and network bandwidth will play a critical part in helping these enterprises to build a catalog-based IT. At the same time, the dynamic and auto provisioning of IT resources is going to force hardware and applications providers to offer a much shorter time to market, driving them to provide a more flexible delivery and smart pricing model.

Prediction #8: Business as a Service Will Be the Answer to IT-Business Integration

The cloud services space has been receiving a lot or attention in the last couple of years. Rarely has any new IT concept been leapt upon by so many vendors as fast as we have seen in this space and IDC believes this is with good reason. In fact, IDC believes that the cloud model is a once in a generation technology trend something that will truly redefine how IT is delivered in the next decade. Yet, for a new IT trend as ground breaking as cloud, IDC's forecast for public cloud services remains relatively small when compared to "traditional" on-premises IT indeed even by 2014, public cloud services will only account for about 1% of overall IT spending in the region. This is largely because the cloud services are still new in the region and most vendors are only beginning to push their services to market. It is also in part that the types of cloud services we see today remain in the lower-\ end and soon to be commoditized end of the market (services such as cloud storage, basic cloud applications, among others). Indeed, the prospect of a quickly commoditizing market for most of the cloud services we see today is what is driving the push toward a move up the value chain in the cloud "stack" toward services that add more value to the customer and are thus less in danger of being commoditized. However, if the move from on-premises to cloud-based services is aggressively for the small office/home office (SOHO) and small and medium-sized business (SMB) customer segments, the market can quickly grow. With standardization and a volume business, even commoditization from a pricing perspective can and will generate good margin (in many cases, better margin) for ICT vendors, relative to the mediumto large-sized enterprise marketplace.

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IDC expects this push in 2011 to move all the way up to what can be called "business as a service" an offering that focuses on business processes rather than on technology replacement. It is a trend that illustrates the importance and impact on not only the IT space but on the whole business process outsourcing space in general an example of the cloud model making its impact on not only traditional IT but far beyond that and an example of how cloud services are becoming a much more important trend than IDC's IT-based cloud forecasts would suggest. IDC expects the first real positioning moves into business as a service to take place in 2011. BPO vendors will seek to adopt the cloud model to offer their service to smaller companies or companies who would like to start "small" with one or two (simpler) business processes than they traditionally have been focusing on, and IT vendors and service providers will seek to ally themselves with companies that have knowhow and capabilities in the BPO space. Managed print services that are increasingly integrated with workflows and business processes will also been an area of integration in 2011. As this happens in 2011, the individual weaknesses of each player in different parts of the expanding cloud ecosystem will become more apparent. Traditional IT vendors and telcos have little or no knowledge of how the address the upper business-centric layers of the cloud stack. Conversely, the BPO vendors adopting the cloud model will have very little capability in the lower and fundamental parts of the same stack. This dilemma will put extra emphasis on the importance of partnerships in 2011. While some of the basic reseller partnerships will most likely be made redundant as larger software vendors in particular slowly move towards direct-to-market offerings of their own more platform and application-based cloud services, the partnership between vendors with IT and network capabilities on the one hand and service providers with business service abilities on the other will become more and more important and sought after in 2011 and beyond. IDC in particular expects the larger software vendors, the large IT service providers and the larger telcos to become active in their partnering strategies in the years to come the end goal being the ability to offer a one-stop solution to customers offering IT, telecommunications, and business services in a cloud environment and thus being in a position to own an endto-end business relationship with the customer. For CIOs, the impact of this trend will be two-fold: These new "traditional" cloud and "business services via the cloud" partnerships hold the promise of a simplified environment for managing cloud vendors and contracts; on the other hand, once these "super" cloud service providers emerge and start impacting the marketplace, the power relationship between the customer and the cloud service provider may change drastically. Whereas today the customer holds most of the power when dealing with vendors and service providers for future business contracts, the advent of the "super" cloud service provider is bound to shift that power toward the service provider as companies as customers become more like consumers in a one-to-many service oriented environment.

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Prediction #9: Telecom Services Providers Will Return to IT

In 2003, Deutsche Telekom's IT services arm T-Systems won a five-year outsourcing deal believed to be worth EUR1.3 billion from Deutsche Post which included management and support of over 55,000 desktops. T-Systems was one of the earlier telcos to have ventured into the IT outsourcing space and the years that followed saw many telcos following suit including Telstra, Telecom New Zealand, Singtel in the region, and BT and Orange Business Services globally. This move was largely driven by the stagnation or even decline of many of the traditional telecom services that led telcos to look into new areas for their next leg of growth. This movement into the IT space has been divisive as many industry watchers have sounded out warnings that telcos would not be able to lift their game sufficiently to earn the confidence of IT buyers across the globe. The results over the last decade have been somewhat mixed at best with many telcos suffering high profile setbacks and losses as a result of poor execution of large ICT outsourcing contracts culminating in the region of Telstra's disposal of their IT arm, Kaz, only several years after its acquisition. Over the last few years, telecom providers have gone out of their way to distinguish themselves as network-centric service providers, focusing squarely on network-based managed services with varying degrees of success. This has been largely deliberate because of some rather high profile setback that some telecom providers have experienced when they tried to venture into IT services and have suffered financially in the process. However, IDC believes and have stated many times that cloud will be the defining moment for telecom providers in the ICT arena. Cloud has been described has a once in a generation technology that will allow telcos to dominate as it has all the inherent advantages especially the ownership of networks which essentially what cloud is about. IDC believes that the majority of organizations will migrate to a hybrid cloud model with many organizations preferring to ring fence their critical workloads and applications within an on premise private cloud environment. IDC believes that telecom providers will not turn their backs on the opportunities of on-premises private cloud solutions that consist of a virtualized datacenter with full automation tools and service management with the networks at the heart of its delivery. This market is estimated to be worth close to US$752.3 million in 2011 and is expected to grow to US$1.774 billion in 2014. There are several service providers in the region that have signaled their intention of pursuing this market including Verizon Business Services, SingTel (with NCS), Optus (with Alphawest), and Orange Business Services, and they are all making a determined effort. IDC believes that service providers will soon realize that they cannot ignore this wealth of opportunity which would require a substantial retooling and investment and skills in house (that require understanding of enterprise applications or partnerships around this area). Orange Business Services has coined the term "IT operator" to reflect its new role in IT services by analogy would only suggest that telcos are ready to takes its place in the line of succession in the IT world. For organizations, this would suggest that they have a one-stop end-to-end service provider for all their ICT needs. While many telcos would like nothing than to be in this enviable position, the reality is that as stated earlier is that buyers of IT still do not have much confidence in telcos or for that matter anyone to take over an end-to-end

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ICT engagement. While the case for partnering a telco has been made in this prediction and IDC has also stated the skills and retooling required by telcos, what is most important is them realizing that they do not have the "divine right" to dominate this industry like they did with communications but now have to "earn the right and confidence" of IT buyers, will continue to be their biggest challenge. Telcos would also need to be careful as to not to extravagantly overextend themselves like some did in the past. The cloud rhetoric and spin by telcos also need to take on a more systematic approach that have the buying instincts and concerns of a CIO at the heart, giving them a clear picture of what telcos can do for them in a cloud environment. Moreover, the competitive landscape in IT has been so long dominated by iconic players like IBM Global Services, HP/EDS, and CSC, that have a long and distinguish working relationship with many large multinational companies (MNCs), and a strong track record of innovation that will make it very difficult for telcos to dislodge. Many are also going through a reassessment of their role in cloud and IT. However, networks will remain at the very heart of any cloud infrastructure and who has better networking pedigree than the telcos?

Prediction #10: Telecom Service Providers Will Look to Cloud Computing for Operations
Apart from the traditional discussion on telcos and ISPs offering consumer and enterprise cloud computing services, there is a whole new sub-industry emerging which revolves around the software, hardware, and services network equipment providers (NEPs) that are serving telcos and the transformation of the their products/technologies and services into money-making cloud services. The type of cloud service offered is not the "one-to-many" model that typically comes to mind when talking about cloud services as carriers typically are very hesitant to share the same servers with their competitors. Instead, NEPs are, and should, be looking at offering these services as hosted private clouds with logical separation of infrastructure between carriers, with a future roadmap of moving into virtually separated cloud infrastructure as the carriers become more comfortable with a shared-services concept. Basically, NEPs are looking to offer cloud alternatives in the following areas: Testing of new access networks including radio access networks such as longterm evolution (LTE). Testing of IT and network subsystems including storage systems, cloud virtualization, application networking, and Ethernet fabric. Cloud virtualization tests will typically look to measure virtualization switching between blade servers and other network elements such as the storage fabric. NEPs typically design and build virtual appliances by modifying original appliances in order to allow them to operate in a cloud environment so that the service provider does not have to setup a physical test environment. Testing of quality of experience (QoE) of platform as a service (PaaS), applications as a service (AaaS), and infrastructure as a service (IaaS)

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 Testing of cloud services offered to enterprises including data services such as Ethernet lines, IPTV, and multiprotocol label switching (MPLS), and voice services such as SIP calling, interactive voice response (IVR), call center, conferencing, announcements, and video applications such as video portal, interactive voice and video response (IVVR), video clip sharing, and conferencing. A number of tools are usually provided by NEPs such as the Apache Tomcat, an open source software implementation of the Java Servlet and JavaServer Pages technologies, which enables the vendors to create virtual application servers in software. Cloud alternative offerings of parts of the OSS/BSS, subscriber management, and value added systems where it makes sense to move off-premises but this is primarily limited by the latency times needed to carry out network transactions. Cloud alternative offerings of archiving and other applications that require storage but not with low latencies these would include applications that typically need to be done for compliance and regulatory reasons. In most cases, NEPs will need to modify or even redesign parts of their solutions to enable cloud and this includes hardware modifications as well. Over time, it will become customary for NEPs to design "cloud functionality" into their hardware and software products.

ESSENTIAL GUIDANCE
2011 will be the year where the concept of ICT transformation will move into the "mainstream". Transforming IT into something that has closer alignment with business and business processes has been on the agenda for the last couple of years but mostly with larger enterprises. In 2011 however, IDC expects this concept to become the general "yardstick" for companies of all sizes as expectations grow for ICT to have a direct impact on and value to business operations across the board.

The Impact of IDC's Top 10 Predictions on the Vendor Community

The past two or three years have to some degree seen the importance of people in the enterprise other than the CIO rise, at the expense of the CIO and the IT department when it came to procuring ICT solutions. The CFO in particular has become more hands-on with regard to ICT procurement, and vendors have had to learn how to better address this role when selling their solutions in recent years. The importance of the CFO will remain high in 2011, and with the advent of cloudbased solutions, LoB managers too will become increasingly important as the selfservice nature of cloud services and other enabling technologies increasingly allow LoBs to procure their own services with little or, in some cases, no direct involvement of the CIO. The CIO remains perhaps the most important go-to person for ICT vendors though, and as enterprises large and small turn to ICT to help them grow and compete in

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2011 and beyond, chances are that the CIO may become more important again in the next year. But few of the new trends described in this document are easy for the CIO to understand the full impact of. As an example, many CIOs today would admit that they find the concept of cloud computing difficult to deal with, despite the promise of increased simplicity and flexibility it promises. Many of the medium- to large-sized enterprise CIOs are not completely buying into the cost reduction promise of cloud computing, at least not yet. With this increased complexity, CIOs are typically finding it increasingly difficult to put together a clear business justification for some of the more cutting edge solutions that are available today. For vendors, this means that a large part of the selling process lies in assisting the CIO in putting his or her case to the board in order to get the goahead for any new procurement and the buy-in for a transformed roadmap that includes cloud. The ability to clearly explain how a given solution can help drive business will be a key differentiator in this scenario and vendors that have this ability will have the competitive edge in 2011. The key is the ability to deliver business value with business-outcome-based SLAs or engagements will be an important differentiator for any serious ICT vendor chasing market share, new logos, and reducing/managing customer churn in 2011. While being able to demonstrate an ICT solution's ability to drive business or at least business value will be a key differentiator for vendors in 2011, the ultimate edge may be with those vendors who dare "put their money where their mouths are". As solutions can be clearly shown to help drive business, then clear trend is that the pricing for these solutions should somehow be tied to the promised business value. These "smart pricing" models have started to emerge in the last few years initially in very large IT service deals. But IDC expects business-outcome based pricing to start emerging across the board even for more "traditional" ICT contracts in 2011, especially as the increased adoption of cloud services are substituting flat-rate or monthly payments with utility-based pricing models.

The Impact of IDC's Top 10 Predictions on the CIO

IDC expects the key CIO priorities in 2011 and 2012 to focus on transforming their information and communications technology into systems that relate more directly to the business needs, hence the move from IT-business alignment to IT-business integration. Key areas will be efficiency, flexibility, time-to-market, increased mobility and innovation all falling into the concept of "transformative" IT. This in turn should translate into an increased focus on virtualization, automation tools, business intelligence and mobile extension of enterprise IT. Most if not all of these issues can be addressed by adopting the cloud model and IDC expects cloud computing and cloud services to become increasingly visible in both small and large enterprises in 2011. Many CIOs still have major concerns about the adoption of public cloud computing especially with regard to security and the lack of end-to-end SLAs. But as companies continue to consolidate and transform their datacenters, cloud computing model is emerging as a compelling option.

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Cloud computing will also help provide to tools for another key trend that IDC is expecting to gain ground in 2011: the transformation of enterprise IT from a cost center to a profit center. The charge-back model will gain ground in APeJ in 2011 onwards as increased cloud adoption (public and private) provides CIOs and IT managers with the necessary tools for charging IT usage directly to the business units consuming the services. Whichever "flavor" of cloud is chosen, a key aspect for the CIO to consider in 2011 is the concept of cloud federation. One of the most valuable properties of the cloud model is the flexibility it promises. But if a company chooses a cloud technology of a proprietary nature, this flexibility may be lost if virtual machines, virtual storage, applications and data cannot easily be moved from one provider to another or from one type of cloud to another. Cloud federation takes care of this problem but it remains a fairly new concept and it may not apply to all solutions available today. CIOs should thus take care in choosing their cloud partners in 2011. A key concern that needs to be addressed is the security and protection of data in the cloud space. While organizations are comfortable in moving parts of their environment into the cloud, they need to understand clearly where the data will reside and how long/short is the timeframe can the data be removed from the cloud should they choose to "backsource" these areas. Mobility will play a significant role in the enterprise market and CIOs will drive greater mobility usage to deliver business outcomes. CIOs will be expecting a varied portfolio of solutions from application security, device security for newly emerged/emerging media tablet and smartphone platforms, data protection delivered in the cloud, network optimization as big data becomes a norm for businesses and self-service capabilities to better engage customers, partners, and employees. The key trends for 2011 open up new prospects for how CIOs can be measured with regard to their roles. IDC expects a growing number of CIOs to be benchmarked not only on "traditional" IT KPIs in 2011, but increasingly to have these KPIs relate to business outcomes and external customer satisfaction. Customer centricity is arguably the single largest driver for many Asia-based businesses in 2011 with the intensified competitive environment and ICT will be a key enabler to support this initiative. While not many companies today have achieved IT-business alignment, the goal is becoming a critical one and IDC expects some of the enterprises to leap into IT-business integration, leveraging service management and analytics primarily to drive toward this goal.

The Impact of IDC's Top 10 Predictions on the Channel Community

The channel community remains an important route to market in the Asia/Pacific region as the complexity and spread of coverage is simply not possible for any vendor, no matter how large, to cover the marketplace effectively. We project overall health of channel ecosystem to be positive, and the significant changes in 2011 for the channel community are:

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 With the entry of cloud computing, channels are realizing the need to diversify or transform their business model from a largely/solely on-premises/capex or managed to an opex/utility-based model. This transformation requires significant change in internal structure, processes, financial systems as well as go-to-market sales and delivery models. Depending on the savviness of the channel, the level of support needed from the principal vendor community can be significant (i.e., plug-and-play OEM support). Understanding support available for these transformations from principal vendor community will be critical for channel partners, as well as strengthening their advisor role through further development of strategic consulting and assessment services. Channels are also beginning to see telcos and network-centric providers competing in the same IT professional and (in some cases) support services space. This creates tension because telcos in the past did not establish a trusted relationship with the channels. Telcos are beginning to see the importance of alliances and partnerships with the rise of cloud and IT services in their relevance to the telcos' business, hence the burden lies on the telcos to prove they have changed and are now looking for win-win partnerships in the long haul. The channels that are willing and aggressive should make the effort to take the first step because telcos are significant players with strong financial backing and soon, they will be pursued by many in both the large and SMB customer segments. Early-mover advantage can go a long way especially with traditionally relationship-based telcos in Korea, China, Japan, Thailand, and the Philippines. In 2011 there will be strong opportunities in "special project" initiatives like consulting, systems integration, and professional services with regard to management and federation of inter-clouds, customer-care portal, mobility, client/desktop virtualization, IT-business alignment and integration, as well as business and customer analytics. The rise of social business will also present new opportunities requiring new sets of skills among consulting and delivery expertise in channel organizations. These are the "outsourced" skill sets identified by the CIO community as key to their success. Channels with sought-after expertise, presence in key markets including emerging geographies (e.g., western parts of China) and customer segments (e.g., healthcare), and with the ability to sell and deliver greater business value for platform-/productcentric vendors will be in great demand in 2011 especially given all the attention on the region's high growth potential. Identifying, qualifying, and engaging with the most impactful channels will be one of top the priorities for both the supply- and demandside of the marketplace.

LEARN MORE
To see the rest of our predictions as well as the dozens of Top 10 Predictions documents we will publish in December and January, each focused on a different segment of the IT industry visit IDC's predictions page at www.idc.com/research/predictions11/predictions11.jsp.

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Related Research
Asia/Pacific (Excluding Japan) Software 2011 Top 10 Predictions (Forthcoming) Asia/Pacific (Excluding (Forthcoming) Japan) IT Services 2011 Top 10 Predictions

Asia/Pacific (Excluding Japan) Telecommunications 2011 Top 10 Predictions (Forthcoming) Asia/Pacific Cloud Services and Technologies 2011 Top 10 Predictions (Forthcoming) IDC Predictions 2011: Welcome to the New Mainstream (IDC #225878, December 2010)

Synopsis
This IDC study discusses the factors that will have the biggest commercial impact on the ICT market across Asia/Pacific (excluding Japan), or APEJ, in 2011. After the effects of the 2008/2009 financial crisis, enterprises of all types and sizes have begun efforts to transform their usage of ICT, and this is reflected within IDC's predictions for 2011. As the economic climate has recovered, companies in the region are finding themselves in a business environment that has become more competitive that before the crisis and this is directly impacting the types of ICT investments they do. "Increased market competition and the looming fear of a "double dip" recession are having an impact the growth plans of Asian companies. Companies in the region will remain more diligent with their risk assessments of future expansion plans and they will have the same approach when it comes to investing in new IT and communications systems and services. The days of "throwing money" at IT are clearly a thing of the past and CIOs will increasingly need a clear business case for any future investments they make," says Claus Mortensen, Principal, Emerging Technologies Practice, IDC Asia/Pacific.

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Copyright Notice
This IDC research document was published as part of an IDC continuous intelligence service, providing written research, analyst interactions, telebriefings, and conferences. Visit www.idc.com to learn more about IDC subscription and consulting services. To view a list of IDC offices worldwide, visit www.idc.com/offices. Please contact the IDC Hotline at 800.343.4952, ext. 7988 (or +1.508.988.7988) or sales@idc.com for information on applying the price of this document toward the purchase of an IDC service or for information on additional copies or Web rights. Copyright 2010 IDC. Reproduction is forbidden unless authorized. All rights reserved.

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