By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

April 1999


For the past decade, Asia-Pacific has been the fastest growing IT market in the world. However, the floatation of the baht (Thai currency) in July 1997 was the first in a series of events that rocked the region. As currencies devalued across the region, economic growth rates plunged, political turmoil erupted, and stock and property markets faltered. The robust IT market spiraled downward, with IT spending dropping 4% in 1997, and another 9% in 1998.

Some markets hit harder than others

In a region as large and diverse as Asia-Pacific, not all markets have been equally affected by the region's economic turmoil. As widely reported, ASEAN has been severely hurt – especially Indonesia and Thailand – as well as Korea. IDC reports Korea's IT spending dropped 18% in 1997 and another 52% last year. ASEAN held out for 3% IT growth in 1997, but reported 35% negative growth in 1998. Fortunately, Japan – the IT giant of the region comprising over two-thirds of the region's IT spending – has only been moderately affected. Similarly, the large and mature market of Australia has been relatively unmarred, whilst China and India are the region's shining stars. In fact, China and India seem immune to their troubled neighbours woes and are enjoying phenomenal growth, as they did pre-crisis. With double-digit annual growth forecast for the next three years, China and India may well carry this region out of its predicament.

A fragile existence

Analysts seem to agree that the region has seen the worst of times, and single-digit IT growth is targeted for this year. Though the region may be on the upswing, it is still a period of sustained market challenge and consolidation. The sage will stay focused, as success is a long-term proposition.

For those of us fortunate enough to be living in Asia now, these are fascinating times. Fortunes will rise or fall based on the flexibility of vendors, channel partners and end-users alike to maneuver in what will continue to be the most dynamic IT region in the world.


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By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

May 1999


Rebounding from the regional economic slump, Asia-Pacific's* LAN market is expected to record revenue gains of more than 10% by end of this year. IDC Asia-Pacific forecasts the region's LAN revenue will exceed US$2.3 billion in 1999 and US$3.8 billion by 2003.

Vendors across the region are scurrying to fulfill this increased demand, amidst a time of major market consolidation and fierce competition. Cisco and 3Com dominate the vendor landscape, though vertical market players are carving their niche. Channel and alliance programs, focused on market share acquisition and long-term strategic branding, have become critical as vendors realise that partner leverage is the key to survival in the turbulent LAN arena.

Regional outlook

Strong LAN demand in the region's top four markets – ­China, Australia, Korea and Taiwan – will spearhead regional revenue growth for the foreseeable future.

Leading the region's LAN market growth is Greater China. By year-end, the sub-region will gross over US$1 billion, with the PRC and Taiwan contributing US$800 million and US$200 million respectively. Despite a slowing growth rate compared to recent years, IDC Asia-Pacific analysts expect Greater China to grow 15% next year, and exceed US$2 billion by 2003.

Australia, the most developed LAN market in the region, continues to maintain its regional leadership position, and is currently leading the switching market. Its 1999 LAN revenue is forecasted to reach US$500 million, despite showing signs of saturation with a flattening growth rate.

Meanwhile, both Korea and the ASEAN/India sub-regions are emerging as major regional markets, with rising growth rates forecasted for the coming years. Fueled by a rebirth in infrastructure development, Korea's LAN market will likely reach US$300 million by year-end, and is expected to grow by 8% next year.

Forecast to grow 12% next year, ASEAN/Indian LAN revenue is expected to outpace all other sub-regions in the next few years. The price-sensitive Indian market will be a major market force with its dominance in hubs and NICs. Malaysia, Thailand, Indonesia, and the Philippines are also identified as key emerging markets, with the sub-region targeted to reach US$600 million by 2003.

The switch market- LAN's shining star

Buoyed by market consolidation leading to price erosion, 1998 unit growth for hubs, NICs, routers, and switches was up 20%, 17%, 25% and 130% respectively.

Switch revenue accounted for 42% of 1998's total LAN revenue, climbing 24% over the previous year. Compared to declining regional revenues for hubs, NICs and routers, switches clearly dominate the Asia-Pacific LAN scene.

High-end technologies, including gigabit ethernet, fast ethernet and ATM, are fast replacing low-end technologies, as enterprises invest in networks capable of coping with today's information explosion. Between 1997 and 1998, gigabit ethernet's growth exceeded 16,000%, whilst fast ethernet and ATM grew 47% and 30% respectively.

Increasing demand for LANs

A major demand stimulant for LANs is the growing number of small and medium-sized enterprises (SMEs) in the region, particularly in Australia, Taiwan and India. More SMEs are investing in LAN architecture in an attempt to catch up with the "big boys" in the increasingly IT-enabled market place. According to IDC Asia-Pacific, more than 60% of LAN sites in Australia, Korea and Malaysia are smaller than 250 nodes.

Economic improvements in crisis-battered ASEAN, and stronger economic performances from Korea and China, have also boosted LAN growth, as business confidence returns to the region.

Internet deregulation in India is now driving LAN demand, as a growing number of Indian SMEs jump on the Internet bandwagon to take advantage of E-Commerce opportunities. The rosier LAN outlook is further reinforced by infrastructure developments in India and China, as these countries play "catch-up" to meet the demands in the IT marketplace. Strong government IT initiatives in Taiwan and Singapore will continue to spearhead LAN growth in those markets.

The vendor landscape

Market consolidation was dizzying in the 1998 LAN market. Cisco, 3-Com, IBM, and Nortel were the top four vendors in Asia-Pacific last year. Undeniably the market leader, Cisco posted 20% revenue growth in 1998. Cisco and 3-Com, combined, accounted for 79% market share in routers, 58% in NICs, and 40% in switches.

Vendors who bucked the consolidation trend last year were D-Link and Xylan. D-Link's growth strategy focused primarily on price-sensitive users, whilst Xylan dominated the government, education, and medical arenas.

To build share, vendors are now focusing on various push-pull marketing programs tailored to their varied clients. Industry-specific user-seminars target the large enterprises, whilst the SMEs are offered competitive pricing, product bundles, and trade-in offers. Seeding programs and long-term strategic brand building strategies are defining the region's winners.

The telcos are also expected to be key players in the market as the convergence of data and voice brings channel structure change. Their share-growing strategies include consolidation and strategic alliances with channels and ISPs, in an effort to offer "end-to-end" products and solutions.

* The IDC Asia-Pacific research referred to in this article does not include Japan in the Asia-Pacific regional findings.


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By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

July 1999


Mobile computing has finally taken Asia-Pacific by storm, and the region is now leading the world in portable PC growth. According to IDC Asia-Pacific, the global portable PC market is expected to grow by 15.6% this year, whilst the Asia-Pacific* markets will expand by 16.5%. Web-savvy executives, needing to maximise their time and access data anywhere, are leading the region's mobile revolution.

Asia-Pacific accounted for only 7% of last year's worldwide notebook unit shipments, surpassed by the U.S. (41%), Japan (22%) and Western Europe (22%). However, IDC Asia-Pacific is predicting a robust 21.4% regional unit growth rate for the period 1998-2003, which is almost 8% more than the forecasted worldwide growth rate. Although the notebook market in Asia-Pacific contracted by 6% in 1998, with this year's economic recovery, unit shipments should reach more than 1.2 million by year end.

Meanwhile, Australia leads the region in early adoption, representing 25% of the region's notebook shipments. China has emerged as the region's shining star, accounting for 20% of the total notebook market in Asia-Pacific. Posting an impressive 45% growth rate in notebook unit shipments from 1998 to 1999, China is positioned to be a major player in the region's mobile computing industry.

Leading vendors in the Asia-Pacific portable market include Toshiba, IBM and Compaq. Toshiba enjoyed 21.5% market share in 1998, and is ranked first in the region. IBM and Compaq followed, posting 13% and 10% of the region's market share respectively, each gaining share over 1997 figures. Conversely, Samsung's market share eroded by about 4% due to the Korean market fallout, whilst Packard Bell/NEC and Apple lost ground with the inevitable market consolidation. Vendors poised to take a strong market position in the coming years include Dell, IBM and Twinhead.

Mobile computing products revolutionise business

Portable computing devices are fast becoming common business platforms amongst Asia-Pacific enterprises. Whilst notebooks and palmtops have become lighter and thinner, they are now boasting desktop-class performance. As a result, busy Asian executives now work from their hotel rooms or from home offices as efficiently as their office-based counterparts.

As in other global markets, the price/performance gap for mobile computing devices is narrowing due to increasing competition. Units are providing more value for money, offering the latest technology, such as electronic messaging, data capture and web capabilities, at increasingly lower prices. According to IDC Asia-Pacific, the bulk of notebook shipments in the Asia-Pacific region dropped from the US$2.0K-2.5K range in 1997, to US$1.5K-2.0K in 1998. The resulting margin squeeze is forcing vendors to search for new user segments beyond the traditional corporate and small-to-medium business professionals. The education sector and the growing consumer market are emerging as potential target users.

Mobile computing in the future

The web is set to become a key feature in the region's mobile computing arena. Mobile users are becoming highly web-enabled, with devices offering a variety of communication modes. Future mobile computing solutions will have to be application-specific to service all the vertical market players entering the regional user base. As consumers-at-large get on the bandwagon, mobile computing vendors will have no option but to offer tailored service and support programs to cater to the masses.

* The IDC Asia-Pacific research referred to in this article does not include Japan in the Asia-Pacific regional findings.


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By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

June 1999


Asia-Pacific's Internet industry will far outpace other global markets in the next five years. IDC Asia-Pacific predicts the number of Asia-Pacific Internet users will grow at a 38% compound annual growth rate (CAGR) to reach 57.5 million by 2003. Compared to projected growth rates for the U.S. of 6% and global forecasts of 32% for the same period, Asia-Pacific is set to be a major Internet player in the new millennium.

As usual, growth will not be consistent across the varied markets of Asia-Pacific. Today, Australia is leading the region with almost 5 million Internet users, followed by China, South Korea, Taiwan and India. By 2001, China is expected to surpass Australia by way of Internet users. IDC Asia-Pacific expects China to have 16 million users by 2003, vying for the top market position outside the U.S. Though India has had a slow start in the Internet world, mainly due to a poor telecommunications infrastructure, its CAGR is expected to reach almost 80% over the next five-year period.

Last year, 85% of Asia-Pacific's Internet users accessed the Internet for business purposes. The key user sectors were education (27%), sales and marketing (19%) and information systems (13%). Though traditional telephone modems with higher speeds (33.6 kbps and 56.6 kbps) are the most common Internet devices, cable modems and Integrated Services Digital Network (ISDN) lines are gaining a foothold in the region.

Despite the boom in Internet users, regional Internet service providers (ISPs) are facing major consolidation trends. To grow market share, the larger players are focusing on breadth and quality of service, whilst the little guys are fighting for market share with a host of pricing tactics.

e-Commerce revs up

Regional Internet commerce revenue, excluding Japan, stands at less than US$2 billion today. With a CAGR of over 200% forecasted over the next five years, the region's e-commerce revenue growth is outpacing global rates by 30%. Australia, again, is the current regional leader, and is expected to maintain its premier position, generating more than US$9 billion per year in e-commerce revenue by 2003. China, Hong Kong, South Korea and Taiwan are the other key markets in the regional e-commerce race.

Up until now, e-commerce has been largely focused close to home. According to IDC Asia-Pacific, 73% and 69% of last year's e-commerce transactions, in Korea and China respectively, were posted in their local markets. Part of the reason for this is only about a quarter of all Internet users in South Korea and China speak English, and there is a shortage of Korean and Chinese language sites outside those individual markets.

Regional Internet market drivers include the need for businesses to lower overheads and seek low cost communication and sales alternatives. In addition, across the region, the various governments have made major commitments and investments in national Internet adoption programs.

Obstacles to Internet growth in Asia-Pacific include the high cost of Internet connection time in many markets in the region. In addition, there is a common fear that security issues and channel conflicts will impede growth once e-commerce really takes off.

Internet IPO craze

Internet venture capital opportunities are on the upswing in the region. More and more local Internet companies are going public, and regional Internet stocks are gaining in popularity. Two of Asia-Pacific's leading ISPs, Ozemail (Australia) and Pacific Internet (Singapore), are currently trading on global stock markets. As Asia-Pacific's economies pull out of their two-year slump, the Internet is poised as one of the key catalysts for change.


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By Cindy Payne, Managing Director
Asia-Pacific Connections Pte Ltd

August 1999


According to IDC Asia-Pacific, regional IT spending reached US$129 billion in 1998. Since 85% of these purchases involved third-party channel partners, recognising and adapting early-to-market developments are requisites for vendors and channels alike to survive in these fluid times.

Many vendors in the region, suffering from lower margins, have tightened their budgets on discretionary spending. As a result, they are leveraging their channel partner relationships more than ever before by increasing sales incentives, tightening inventory turns and lessening credit. At the other end of the spectrum, end-users have also had an eye on the bottom line, cutting back on any projects not deemed critical. The focus is now on total cost of ownership, with many end-users opting to outsource projects including professional services, marketing and training support.

No doubt, Asia-Pacific channel partners are being squeezed from both sides, with a major shift in demand for value-add in marketing, logistics and support services. Like other global markets, Asia-Pacific channel margins keep shrinking. The most dramatic margin drops have been related to sales of PCs, network hardware, packaged software and custom software, all dropping by more than 30% from 1997 to 1998.

In an effort to build margin last year, more channel partners focused on vertical market solutions, many of which are Internet and E-Commerce related. IDC reports Asia-Pacific (excluding Japan) will boast almost 20 million Internet users this year, purchasing over US$3 billion worth of products over the Internet. Ironically, as the Internet provides a whole new playground for applications-oriented VARs and SIs, it is eroding sales from dealers, superstores and retailers. Currently, more packaged software is purchased via the Internet than any other IT products, though analysts predict 10% of all PCs will be purchased online by 2003.

The polarisation between value-added channel players and volume time-and-place distributors continues to deepen. A major consolidation in the channels has transpired, with local channels contracting by as much as 70% in the last two years. With global players like Ingram Micro investing big bucks in the region now, it is clear that there is no room for hybrid partners. Offering a full slate of value-added services, or being a volume time-and-place giant, are the most likely scenarios for long-term success in Asia-Pacific's changing channels.


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