China's IT Market Will Rebound In 2013

Forrester’s Asia Pacific (AP) team has just published its 2013 predictions report, focused on regional IT spending, technology adoption, and vendor dynamics. The predictions that will most affect the Chinese market:

  • Transformation imperatives will drive IT spending growth. China’s top government priorities for 2013 are ensuring economic stability during the ongoing political transition and counteracting the negative external market factors that have led to an economic slowdown. For 2013, Forrester expects the government to continue economic reform and invest in specific areas: infrastructure, education, and new technologies. We expect these initiatives to positively affect IT-related spending, which will grow approximately 11% in 2013 in local currency versus 9% in 2012.
  • Many device manufacturers will struggle despite surging demand. We expect that sub-$100 and even sub-$50 Android devices will hit the market. With rapid standardization and commoditization of smartphones in AP, tier two device manufacturers will further struggle to differentiate their products and maintain their margins. White-label or original design manufacturers (ODM) from mainland China are leveraging the opportunity to build their own brand and sales channels to gain share from tier two device makers from Japan and Taiwan. Forrester believes that 2013 will be a tough year for vendors like Acer and Asus in the smart mobile device and tablet space.
  • Analytics will be a top CIO priority, but value delivery will remain elusive. Forrester data confirms that BI-related spending will increase over the next 12 months in all markets within the region, including China. With little in the way of legacy systems, the business analytics appliance (BAA) market will gain momentum in 2013 in China. While new technology adoption in the country is usually driven by public sector and state-owned enterprises, private manufacturing companies will be early adopters for BI.
  • Regional telcos will fail to establish strong footholds outside core markets. In China, we may see China Mobile take another look at overseas investment, after its first try at acquiring companies overseas (in Pakistan) 10 years ago. Wel also expect China Telecom, with its cloud subsidiary HQ in Hong Kong, to eye some international expansion. At the same time, online advertising has bypassed the telco’s walled gardens, reducing them to bitpipe players. With their intimate knowledge of consumers, mobile operators will increasingly look to drive highly personalized mobile advertising and establish mobile payment platforms, and make both areas the new growth battlefield.
  • Regulatory concerns will drive cloud data center investments. China’s government explicitly prohibits transferring data online that is considered related to “state secrecy.” These restrictions will drive faster adoption of virtual private cloud-based services among various government agencies versus public cloud services accessed via Internet gateways. Demand for public cloud services will stem mainly from SMBs, but we expect an increase in selective usage by early adopters across different government agencies throughout 2013.

These are some of the trends I believe are most likely to drive IT growth in China over the next 12 months, but there are certainly many others that we’ll be tracking. If I’ve missed anything particular important to you, definitely share your thoughts.