Competitiveness of Many Asia Pacific Countries Tied to Cloud Computing

The Business Software Alliance in cooperation with the Economist Intelligence Unit (EIU) recently came out with a study that assessed the competitiveness of various countries in supporting a strong IT production sector as measured by indicators such as legal environment, human capital and R&D spending. The study gives decision-makers insight into how the investments that countries make in education, infrastructure, regulation and other enabling factors contribute to the competitiveness of the country’s IT industry.

Not surprisingly, the US remained on top, based on a mature business, legal, financial and educational environment that promotes innovation, entrepreneurship, capital investment and protection of intellectual property. Interestingly, several Asian Pacific countries are well represented in the list, with seven in the top 20—Australia, New Zealand, Japan, South Korea, Hong Kong, Taiwan and Singapore.

Singapore in particular showed impressive gains, jumping six places to third place, behind Finland at number two. Singapore’s neighbor to the north, Malaysia, rose to number 31, up 11 places from its previous ranking of 42 thanks in large part to a surge in R&D activity as reflected by IT-related patents. China is not far behind Malaysia with a rank of 38, scoring well in human capital indicators (in the top three behind only the US and Australia) but lagging in areas such as protection of intellectual property.

The insight here is that only through sustained investment in the enablers of IT sector competitiveness—such as what Singapore, Malaysia and China have done in education, infrastructure and government support—can countries and their citizens reap the rewards of improved competitive rankings and attract more domestic and foreign investment.

Interestingly, and perhaps corollary to this, is that cloud computing is top of mind for decision-makers in such countries as Singapore, Malaysia and China. Cloud computing is the most important innovation the IT industry has seen in years—comparable in magnitude to the shift from mainframes to personal computing. Countries are now jockeying to position themselves as leaders or centers of innovation in this new area.

It seems certainly wise to do so. Analysts are predicting dramatic growth in investment and adoption of cloud computing. The research firm Ovum estimates that the APAC market will invest US $12 billion into public cloud services by 2016, increasing five-fold from its current size.

While it is expected that Japan and Australia will lead the Asia Pacific region in adoption simply because of the size of their economies, we see the governments of Singapore, China and Malaysia scrambling to not be left behind—providing incentives to jumpstart adoption of cloud computing in their respective countries.

The reasons? One is the lower upfront investment required for cloud systems, plus smaller ongoing maintenance costs—important elements for many small, capital-constrained companies in emerging markets. Another reason is the opportunity for companies in these regions to leapfrog their competition. Unlike many companies in the West, companies in the region have little or no legacy systems to maintain and can quickly jump to newer technologies such as cloud-based systems.

To speed up adoption, Singapore is providing tax incentives for companies to adopt new technologies through a Productivity and Innovation Credit program, and recently announced that cloud computing solutions are eligible items for companies to make a tax credit claim. Malaysia, through the government-owned Multimedia Development Corporation (MdeC), is pushing the use of cloud computing for Malaysian SMEs through special programs and incentives.

This is certainly good news for companies located in the region like Asia Digital Holdings, an online media and marketing firm headquartered in Singapore. Asia Digital runs 11 of their subsidiaries distributed across Asia Pacific in countries like Malaysia and China entirely on NetSuite. Another is Knowledge Universe, a rapidly growing global operation with more than 40,000 employees in the education industry, which also runs many of its international subsidiaries on NetSuite.

Companies in some APAC countries do face challenges in cloud adoption. As the BSA/EIU report noted, infrastructure maturity varies highly from country to country—broadband is inexpensive and super fast in Japan and South Korea, but expensive and slow in countries like Thailand and the Philippines. But as these hurdles diminish and incentives grow, it’s clear that early investment in enabling technologies such as cloud computing can and will pay dividends for APAC companies in the future.

Jan Pabellon — Country Product Manager


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