The Asia Pacific technology market is expected to grow by 6.2 percent in 2022 to reach US$675 billion (S$908 billion) as governments reopen economies, according to Forrester.
Frederic Giron, vice president and research director at Forrester, said the assumption behind the forecast is that vaccination rates would continue to increase and this will produce more sustained tech market growth — on par with or higher than the growth “typically recorded before the Covid-19 pandemic started”.
Giron added a caveat: “What could change the numbers is the appearance of a new variant, for which the vaccines are ineffective, which would force Asia Pacific economies to lockdown again.
"This would have a negative impact on tech spending growth rates.”
The report predicts that India, Southeast Asia (SEA) and China will see the strongest growth this year.
Giron said the Philippines, Vietnam, and India are expected to lead the way, with purchases of tech goods and services reaching 9.1 percent, 9.0 percent, and 8.7 percent, respectively in these countries.
Technology spending in Malaysia and Indonesia will grow by about 8 percent and by 7.1 percent in Thailand.
China’s technology market growth will slow, said Giron, from 9.7 percent in 2021 to 8.2 percent in 2022.
“In Australia, we expect massive 6.6 percent growth in 2022, well above the compound annual growth rate (CAGR) from 2015 to 2019,” he said.
Giron added that tech spending in Singapore will also experience robust growth in 2022, driven by significant public sector investments aimed at transforming government digital services, as well as the government's IT operating model to support modern application development.
“We see enterprises in Singapore continue to invest in technologies to support the modernisation of their front-office and back-office operations to improve customer experience, drive creative differentiation, and drive resilience," he said.
"Some headwinds - like availability of tech talent - will likely slow the tech spending growth potential."
Product growth
Product-wise, regional growth will be led by the sale of software which is expected to see a 9.2 percent rise in 2022.
The sale of licensed software recovered strongly in 2021 after a dismal 2020, Giron said.
Cloud software revenue also performed strongly in 2021 and will continue its rapid expansion in 2022.
Customer relationship management (CRM), business intelligence, digital experience, and human capital management projects will be big drivers for software investments across Asia Pacific, Giron said.
Software demand for emerging technologies like 5G, the internet of things (IoT), AI, and blockchain will also fuel growth, albeit from a much lower base.
Technology outsourcing will also see a strong growth momentum at 7.7 percent, led by an increase in public and private cloud infrastructure services.
Categories like managed security and data management services are also expected to do well.
Giron said that while hosting, infrastructure outsourcing, and application management still make up the bulk of the tech outsourcing segment, growth is coming under pressure as organisations accelerate their migration to the cloud.
“Outside of Australia and Japan, Asia Pacific is still a young market when it comes to outsourcing and public cloud - but tech modernisation imperatives and shortages of available skills will drive tech outsourcing’s growth to close to 8 percent in 2022,” the Forrester analyst said.
Forrester anticipates technology consulting and systems integration (SI) services will grow by nearly 6 percent, driven by modernisation projects.
Cloud migration will accelerate and application modernisation will increasingly replace lift-and-shift projects, Giron said.
He noted that technology debt has risen over the past two years as firms rushed to develop new features and digital services to serve employees and customers.
These initiatives, said Giron, highlighted the problems caused by legacy systems; organisations must now modernise their capabilities and “get rid of accumulating tech debt”.
He added that firms will use service providers to help them with remote work transformation initiatives; strong growth in software investments will also drive demand for services in 2022.
“As a result, we expect consulting and systems integration (SI) services to grow by 6 percent in 2022,” Giron said.
A relative laggard in growth over 2022 will be the sale of computer equipment, at 4 percent, Forrester said.
Explaining the slow growth, Giron said the urgent need to support employees working from home drove a surge in investment in PCs, tablets, and related peripherals in 2021.
Cloud infrastructure providers and large data centre operators also increased spending on servers to support higher transaction volumes.
He said growth in 2021 could have been even higher had it not been for the global chip shortage.
“In 2022, we see growth slowing somewhat as supply chain issues continue to plague the industry and the reopening of offices across the region limit further home equipment purchases,” he said.
Giving a multi-year perspective, the Forrester analyst said recent and planned investments from hyperscale operators in the region will drive an acceleration of cloud services adoption.
“We see software, including software-as-a-service (SaaS), being a significant driver of growth for tech spending in the region going forward and as a result, the share of hardware in a firms' tech budget in the Asia Pacific region will continue to shrink over the next few years," he said.
Forrester estimates that the overall Asia Pacific technology market grew by 6.4 percent in 2021 in constant currency, but with significant variation throughout the region.
Growth in US dollar terms was 9.4 percent as most Asia Pacific currencies strengthened against the US dollar.
