The Philippines is looking at a healthy ICT spending performance in 2014. Central to this development is the rosy outlook in the country’s economic indicators, as well as the vibrant spending from the consumer sector.
The expected increase of 22% on smartphones and 40% on tablets are driving the overall IT spending in the country. Smartphones alone will constitute 25%, continuing its grip of the overall IT budget, which was traditionally held by laptops and desktops. This further indicates an ongoing change in the nature of spending in the country.
Jubert Alberto, research manager, IDC Philippines explains that the so-called ‘changing of the guards’ has deeply transformed IT spending habits in the country.
“The younger segment of the population makes up the new workforce. These individuals are the driving force behind the heavy traffic in the social networking sites and are what can be considered as multitasker extraordinaire. They have the utmost need to be connected, updated, informed and entertained. In most cases, they also have lower number of dependents. All these characteristics point to stronger demand for anything mobile, whether devices, services or applications,” says Alberto.
Apart from devices, ICT spending starting this year is seen to be heavily impacted by mobility, cloud, big data/analytics and social business, as the Philippines embraces more of these four key pillars of the 3rd platform.
Usage of these technologies is being driven by the need of companies for new and effective ways to market and reach out to targeted customers. Furthermore, there is an increasing ICT demand from the small and medium enterprises (SMEs).
Alberto adds: “Based on IDC’s annual Continuum survey, almost 60% of the companies in the Philippines will be more aggressive in their IT expenditure in the coming 12 months compared to a year ago. This would translate to a 20-45% overall increase in total IT spending.”
The following are the top 10 predictions that IDC believes will have the biggest commercial impact on the ICT industry in the Philippines in 2014.
1. Riding on the momentum from 2013, IT spending will grow by 11% in 2014
The combined positive impact of sound economic fundamentals, healthy domestic consumption and relative under-penetration will drive the Philippine IT industry to grow by 11% in 2014. This will translate to a total of USD 6.76 billion in total IT spending. Of this, spending on hardware will take about 76%, while software and services account for 7% and 18%, respectively.
Alberto adds: “The expected 6% GDP growth for 2014, rising investments and remittances from overseas Filipino workers (OFWs) and robust domestic consumption will fuel the acceleration of IT spending in the country.”
2. Strong telecom spending growth in the Philippines will continue
With a backdrop of expected economic growth and improved government policies, telecom spending in the Philippines is expected to continue its strong growth in 2014. Unlike in other Southeast Asian countries where mobile data will only surpass mobile voice in terms of overall size in 2014, mobile data will continue to drive the Philippines market. Mobile data is expected to grow by 15%, with voice peaking at 7%.
Karen Rondon-Garcia, research manager, IDC Philippines, states: “Popularity of mobile computing devices such as smartphones, mini notebooks and tablets will increasingly translate to actual mobile data usage especially as 3G and 4G coverage improve, and mobile operators become creative in pricing their mobile data services.”
3. Smartphones and tablets craze will continue, opening up bigger opportunities in the 3rd platform space
The strong demand for tablets and smartphones in the Philippines will carry on in 2014. IDC forecasts a 40% growth for tablet shipments to the Philippines in 2014, with both international and local players keen on growing the market. It is also noteworthy that Filipinos patronize local brands more compared to neighboring countries in Asia. A latecomer in tablet adoption, the Philippines still has a lot of room for growth in the tablet space.
Jerome Dominguez, analyst, IDC Philippines, says: “With the bullish tablet and smartphone growth in the country, novel opportunities within the 3rd platform space of social and mobility will increase which businesses can utilize to their advantage.”
4. Increasing integration of social media and mobility will give rise to dynamic partnerships and new modes of consumption
With the increase of smartphones and tablets in the Philippines, mobile devices have become the preferred primary devices for consumers. Due to this, social media and mobility have increasingly been integrated. This will put monetization models for social media, consisting of advertising, usage based platforms and intelligence gathering, at the center of service providers’ attention this year.
Cecilia Santos, analyst, IDC Philippines, states: “In 2014, more organizations will see the importance of having visibility in the mobile social network and look for more creative ways of selling themselves to their consumers through app partnerships.”
5. Mobile apps will go more “Pinoy” than ever
Over the past few years, Pinoy pride is very apparent across all media. This is driving the need for a plethora of apps developed which have Pinoy flavor and/or specific to Pinoy interests and custom and will most likely continue in 2014.
Santos adds: “Among the countries in Asia/Pacific, the Philippines showed one of the highest growths in mobile phone and tablet shipments and this is fueling the need for more Pinoy-themed apps that provide public information, services and entertainment.”
6. Geolocation will unlock opportunities which organizations should tap into
Within the social media world, there is an ever-increasing trend among Filipinos to let their circles know about the places they frequent, from restaurants, to hang out places to vacation spots. With this, IDC believes geolocation information will be the game changer in 2014. Through this data, deeper consumer insights will be known and would allow for marketers to study the behavior of current and potential customers based on the places they frequent, their social activities, and interests.
7. Pervasiveness of mCommerce and mobile banking will rise in 2014
mCommerce and mobile banking is not new in the Philippines. However, the explosion of smartphone sales, coupled with expanding 3G coverage and LTE roll out and improving affordability of mobile data services are leading to demand for applications that allow mobile users to shop for products, tickets, taxi order, content, among others and conduct banking. The growth in smartphone usage is also putting pressure on banks to provide mobile banking services as more customers demand for it for convenience. Providing mobile banking service has become the next step for them after online banking.
Rondon-Garcia adds: “Additionally, mobile banking is the easiest way for banks to reach a larger population, and bridges the gap between banks and people who have no access to traditional banking facilities particularly in agricultural areas. Furthermore, as online shopping becomes increasingly popular, whether using a smartphone or a personal computer, mobile wallet offered by mobile operators provide customers a means to pay for online purchases even when they have no credit cards, Pay Pal or bank accounts.”
8. “Internet of Things” will revolutionize products and business models
IDC defines Internet of Things (IoT) as a network connecting (either wired or wireless) devices, or “things,” that is characterized by autonomous provisioning, management, and monitoring. It is an idea that everything in the world can be connected through the internet. While the Philippines is not expected to be on the forefront of IoT, there lies a big opportunity for service providers through connection services for IoT, especially in partnerships with solution provider or device manufacturer to build up intrinsic values and differentiated services in their offering. This will also be driven by the rising need for vertical-specific applications such as in healthcare, retail, utilities, transportation and public safety.
9. There will be more higher-value, non-voice outsourcing opportunities in 2014
Given favorable economic conditions for investment, IDC predicts further entry of higher-value knowledge process outsourcing services (KPO) to the country in 2014. Over the past couple of years, the BPO industry has exhibited a shift in the type of services being outsourced – from purely contact center services, there are now more knowledge-intensive services being outsourced to the Philippines. Some of the KPO services which IDC expects to further increase come 2014 include services in the fields of IT, research, accounting and engineering.
10. Rising investment in “next wave cities” will oblige IT vendors to rethink their channel strategies
With increased expansion of technology-dependent commercial activities outside Metro Manila, IDC predicts a rise in IT spending across the next wave cities in the country.
Dominguez adds: “This scenario will necessitate IT vendors to realign their channel strategies to tailor to the specific requirements of consumers and enterprises in newly emerging ICT hubs. Suki relationship will have to come into play more than ever, as well as channel hybridization to become both consumer and commercial technology seller and provider.”
Next wave cities include Sta. Rosa in Laguna, Bacolod, Iloilo, Metro Cavite (Bacoor, Imus, and Dasmariñas), Lipa in Batangas, Cagayan de Oro, Malolos in Bulacan, Baguio, and Dumaguete.
