South Korea Information Technology Report Q1 2012 - new market research report

London 5/17/2012 08:55 AM GMT (TransWorldNews)

The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.

South Koreas IT market has a forecast value of US$18.7bn in 2012, with slower growth compared to 2011. BMI expects South Korean IT spending to increase at a CAGR of 8% to US$25.2bn in 2016. There will be a number of key drivers and growth trends including cloud computing, IT outsourcing and industry-specific software applications.

In 2012, consumer and business segment IT growth are expected to moderate as South Korea faces diverse economic issues. We see consumer demand decelerating because of mounting consumer debt and we have revised our forecast downwards. Corporate IT spending should also slow, due to a weaker outlook for the export sector in 2012.

Growth opportunities include cloud computing offerings, which should fuel further demand from companies to utilise this technology and drive investment in data centres. South Korean financial services institutions are investing more in customer-oriented strategies and streamlining complex operating environments.

Industry Developments

South Korean government agencies are adopting cloud computing and The Ministry of Public Administration and Security is investing in cloud technologies for national computing resources. The Ministry of Knowledge Economy has launched a study of how to combine green IT with cloud platforms.

Another government focus is encouraging small businesses to utilise cloud computing. In 2011, the Korea Technology and Information Promotion Agency for SMEs (TIPA) will launch an SME programme, according to which, between 50%-70% of the costs of cloud services are eligible for subsidy. A pilot project was run in 2010 and many leading telecoms and IT service providers are expected to participate in the tender.

In August 2011, the South Korean government unveiled a new initiative to develop national mobile and desktop operating systems. One aim is to reduce local dominance of operating systems from foreign vendors such as Apple and Google. The government said it would hope to establish what it called a habitat where users would be encouraged to choose the local operating system over foreign alternatives. .

Competitive Landscape

South Korean telecoms companies are moving aggressively into the IT services space. In H111, South Korean telecoms giant KT announced it will make the transition to an information technology convergence group from a telecoms service firm. Non-telecoms sales made up 27% of revenue in 2010.

Meanwhile in 2011, Microsoft launched plans for a new Internet Data Centre (IDC) in South Korea. The new centre will be used as a base for provision of cloud computing services in the Asian region. In July 2010, Microsoft had announced that it was partnering LG Uplus to launch cloud computing services in South Korea.

Computer Sales

According to BMI projections, sales in South Koreas PC market will be worth around US$4.5bn in 2012, with single-digit growth from 2011. Total PC hardware revenue including notebooks and desktops are forecast to rise to US$5.2bn in 2016, at a compound annual growth rate (CAGR) of 4%.

New PC form factors such as tablet computers will drive demand in 2012, boosted by telecoms operator subsidies, and 3G wireless network expansion will also drive sales. Laptops already dominate the consumer PC market, accounting for more than 60% of household PC sales.

Software

Software is forecast to report high single-digit growth in 2012, accounting for about 35% of total spending. As the market focus moves from hardware to services and solutions, the share of the market accounted for by software should rise, with enterprises seeking greater leverage from their investments. However, software piracy in South Korea is above the global average and remains a problem.

The trend in the South Korean software market is towards specialised vertical-specific application packages for industries such as autos, pharmaceuticals, healthcare and financial services. Vendors such as Microsoft and Oracle are trying to keep ahead of smaller competitors by targeting key client groups with industry-specific software.

IT Services

IT services are projected to account for about 40% of the domestic IT market in 2012, with spending of US$7.6bn. The CAGR for the segment is estimated at 10% over the 2012-2016 period, making it the fastest-growing IT market segment. The cloud computing market has yet to fully take off, but vendors and service providers are investing heavily in preparation.

Sectors such as government, telecoms, healthcare and banking should continue to supply demand for implementation, consulting and managed services. Outsourcing has become a significant factor and is estimated to account for up to 24% of IT services spending. In recent times, traditional IT services providers have faced strong competition for a share of the outsourcing market from internet data centres (IDCs).

E-Readiness

South Korea has one of the most sophisticated mobile telephony markets in the world. Given the dramatic increase in 3G subscriber numbers seen by KTF, SK and LG Telecom, as well as increased marketing for 3G services by KTF, BMI expects this healthy growth to continue.

There is some confusion as to what technologies South Koreas operators regard as 3G. All three operators have had CDMA2000 1x networks since at least 2001, which the International Telecommunication Union defines as third generation. However, KTF and SK did not regard their networks as IMT-2000, until they upgraded to CDMA2000 1x EV-DO in 2002. SK and KTF have now upgraded to W-CDMA-based HSDPA networks, launched in 2006, which are 3.5G. LG Telecom has lagged behind on the technological front and only in April 2009 did it commercially launch a CDMA2000 1x EV-DO Revision A network and start offering 3G services.

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