IDC Expects Economic Growth in Vietnam to Drive ICT Transformation and Enhance IT Investments in 2011

VIETNAM – January 18, 2011 – The overall Vietnam information and communications technology (ICT) market enjoyed a 24.9% year-on-year (YoY) growth in 2010 despite macroeconomic challenges. In 2011, IDC expects the healthy economy and pro-business government policies in Vietnam to fuel ICT transformation and enhance investments in various business services.

“A number of factors as such increased inflation rate, rising trade deficit, exchange rate risk, weak execution of national IT master plan, and shortage of skilled labors are threatening the speed of development of the ICT market in Vietnam. However, 2011 will mark a transformative year for Vietnam's information and telecommunications marketplace. Macroeconomic policies are expected to boost economic growth, further rollouts of 3G services and investments in IT infrastructures are in the pipeline, and renewed demands from local businesses are predicted to take place in the marketplace this year. New technology services models will also be pushing IT vendors to better understand end users' demands and revisit their business offerings,” says Lam Nguyen, Country Director of IDC Vietnam.

The following are IDC’s top 10 ICT predictions for the Vietnam ICT industry in 2011. These trends are what IDC believes will have the biggest commercial impact on the Vietnam ICT market in 2011.

1. IT spending Growth in Vietnam leads the Asia/Pacific Market

As the economy gets back on track and business growth accelerates, users will demand for more IT resources and services. IDC is witnessing an increasing demand for mobility devices such as notebooks and smart handheld devices. At the same time, developments in IT and network infrastructures are taking place and deployment of 3G networks are also on the rise. IDC predicts that IT spending in Vietnam will project a YoY 17.0% growth in 2011 following a strong 24.9% YoY growth in 2010. This would push its rank up to become the leading market for IT spending in the Asia/Pacific region in terms of growth rate.

The biggest contributor of its IT spending growth will come from IT services. It is expected to exhibit a high YoY 18.5% growth and will surpass US$347.7 million in 2011. Hardware spending is expected to project a 17.0% YoY growth in 2011 and packaged software is projected to grow at 14.4%.

2. Government-based Projects will Fuel IT Spending in the Public Sector

The government of Vietnam recently announced its plans to become “a strong developer in ICT” by 2020. Projects spearheaded by the government for IT developments in Hanoi, Ho Chi Minh City and Da Nang are already in the pipeline and 2011 is predicted to bring about more ICT spending from the public sector. Government agencies will spend either on strategic infrastructure needs or upgrade/replace existing hardware and software investments. Public sector opportunities for IT will come from reform efforts all across public service-based activities, including healthcare, education, energy networks, ecological environment, transportation, and communications.

3. Data Center Services will Further Expand with more Significant Growth

Lately, datacenter rollouts have been quite pronounced in Vietnam. Although the trend has only taken off in the past year, an impressive number of datacenters have been planned and built. Besides the known big datacenters such as Vinadata, Thang Long, Matbao, leading service providers such as Lac Viet, Sao Bac Dau, HPT, Viettel, VDC and FPT have also invested in their own datacenters in 2010. IDC predicts that the Vietnamese market will see more datacenter developments coming from the edium-tier banks and small service providers in 2011 and expects accumulated capital expenditure (CAPEX) investment in commercial datacenters in Vietnam to reach over US$244.09 million by the end of the year.

4. Rural/Remote Geography will Gain Bigger IT Attention

IDC expects to see a significant increase in the IT adoption rate of Vietnamese in 2011. This is largely due to the “high priority” projects, as identified as by the Vietnamese government, in the education and public sector space.

The Vietnamese government will be focusing their attention on pushing stronger IT adoption in the rural/remote areas of the country. A number of projects are scheduled to be completed by 2011 and they include the "One million computer for education", "Development of secondary education" and "Improvement of computer usage and public internet access ability" programs.

At the same time, PC vendors are always reviewing their business strategies to be in line with the new public sector initiatives. For example, in 2011, Intel and broadband service providers in Vietnam will be collaborating to encourage stronger business penetration in rural/remote areas.

5. Social Media Will Play a Bigger Role in Local Business Marketing Efforts

Despite efforts by the government to maintain strict control over social network services such as Facebook, ZingMe, Ohavi and Cyvee, their popularity has been booming in recent years. With over a potential of 26 million Internet users, local business communities are now leveraging cyberspace to conduct marketing campaigns, form executive networks, and recruit employees through sites such as Caravat and Linkedln. In 2011, IDC expects the integration of social media and collaboration tools to transform the way businesses interact online. In addition, social media would play a bigger role in local businesses as they are a cost effective way to help businesses in their marketing efforts.

6. Cloud Computing Services Will Become More Than Just Hype

IDC is witnessing a growing number of IT service providers that have made investments to provide cloud services in Vietnam. However, the deployment of cloud computing still faces challenges such as security risks. The IT services providers offering cloud computing services in the market such as Cloud Computing Lad at IBM Vietnam, FPT and VNTT remain in the early stages of their market development and positioning. IDC is also witnessing a number of early cloud adopters such as Vietnam National Institute of Software and Digital Content Industry (NISCI), Software Business Incubator (SBI), Ambition & Custom Solutions, Vietnam National University, Tan Binh Hotel, Hochiminh City Computer Association (HCA), Ministry of Science and Technology (MoST), and companies located in the Binh Duong industrial zone.

IDC foresees that the ability of cloud computing services to transit from being just a hype to become a more concrete trend is based on the needs of its citizens. For cloud computing to be successful in Vietnam, it would depend heavily on the transformation plans of Vietnam’s IT infrastructure by the government as well as public support for “consuming” IT using the cloud model.

7. Security Is a Must: There Will be Potential for Security-as-a-Service

In recent years, local enterprises have been turning their attention to IT security due to greater awareness about the detrimental effects of online fraud and computer hacking. The importance that

enterprise and public sector organizations place on IT security is expected to grow with greater usage of digital technology. In the near future, especially in 2011, IDC foresees that security-as-a-service will be offered by IT service providers for verticals as such financial industry services in niche areas such as security and vulnerability management (SVM).

8. Business Process Outsourcing (BPO) Services Will Gain Traction in Enterprises

Faced with the pressure to better manage cost and gain greater business efficiencies, many local companies are keen to leverage BPO for their businesses. At the moment, BPO services still remain in the early stages of adoption although more than ever, IDC expects BPO opportunities in Vietnam to surface in 2011 as local businesses search for better cost alternatives to achieve operational efficiencies.

Total BPO service revenues for Vietnam reached US$23.6 million in 2010. IDC predicts that customer care BPO will continue to increase. It is expected to grow at a five-year compound annual growth rate (CARG) of 17.9%, reaching US$20.53 million by 2014. Financing and accounting are expected to be the key BPO service in the coming years.

9. Digital Content Will See Increased Commercialism

Vietnam’s digital content industry leapfrogged into commercialism when the Vietnam Ministry of Information and Communications (MIC) announced its project "Program for Digital Content Industry (DCI) by 2010" to enable its current digital content to be available for commercial use by 2011. With the country's inherent strength as an offshore outsourcing destination, as well as the government's aggressive push to promote Vietnam as a viable alternative location for outsourcing services, IDC believes that the digital content industry will be a key industry to look out for in 2011.

Although MIC indentified six content areas to be develop for mass market offerings, only four key areas will be commercially-generated content. They are mobile network services, online games, online advertising and e-commerce.

10. 3G Deployments Will Raise Mobile Operators Value-Added Services

Most of Vietnam’s mobile operators have fully deployed the 3G infrastructure in 2010 with total investment value of US$2 billion. The 3G geographic coverage in Vietnam will be close to 98% by the end of 2012. The introduction of 3G technologies is expected to boost the supply and demand of more 3G-based mobile services in 2011.

Vietnam's 3G subscribers are expected to reach 8 million in 2011. In 2014, there will be 16 million users. To increase 3G consumer demand, service providers will need to offer competitive pricing and provide other value-added services for their customers. Usage of 3G-based internet, mobile TV, video call, and on-demand video/music download services is expected to spike in 2011 as early adopters try out the same services on a new platform.

For more information about this report, please contact Trinh Ma at +84-8-3521-8015 or tma@idc.com. For press enquiries, please contact Sasithorn Sae-iao at +66-2-651-5585 ext. 113 or sasithorn@idc.com.

-ENDS-

About IDC

International Data Corporation (IDC) is the premier global provider of market intelligence, advisory services, and events for the information technology, telecommunications, and consumer technology markets. IDC helps IT professionals, business executives, and the investment community make fact-based decisions on technology purchases and business strategy. More than 1,000 IDC analysts provide global, regional, and local expertise on technology and industry opportunities and trends in over 110 countries. For more than 46 years, IDC has provided strategic insights to help our clients achieve their key business objectives. IDC is a subsidiary of IDG, the world's leading technology media, research, and events company. You can learn more about IDC by visiting www.idc.com.

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