Opportunities for the taking amidst challenging times in 2017
By Edwin Yapp January 24, 2017
- C-level priorities on globalisation, new regulations, lack of new business models, relevant skills
- Journey to digital hampered by lack of clear cloud strategy, poorly defined business outcomes
THE Malaysian business landscape has experienced a challenging year in 2016 but amidst these tougher times, industry leaders and observers believe that there are still opportunities for businesses to take advantage of in the coming year.
However to do so effectively, enterprises – both large and small – will have to capitalise on all that technology has to offer, leveraging on cloud computing, big data, mobile technologies and the Internet of Things (IoT).
According to IDC, the overall economic outlook for Malaysia in 2016 was somewhat weaker than 2015. Political and economic uncertainties have also impacted the private sector’s spending and investments, causing a slowdown in the overall economy, the analyst firm added.
“Following a weak economic growth, enterprises have been cautious with IT investment, in particular those from the banking, insurance, public, and utilities sectors, said Jun-Fwu Chin, the research director for IDC Asia/Pacific. “Enterprises in Malaysia are looking at reducing their capital expenditure and moving towards operational investments.”
Concurring with this view was Pikom, Malaysia’s national information and communication technology (ICT) association. Its chairman Chin Chee Seong said the association had recently lowered its forecasts for Malaysia's 2016 and 2017 gross domestic product (GDP) to 4.2% and 4.0%, respectively. Pikom previously estimated that the country's 2016 and 2017 GDP growth to be at 4.5% for both years.
Chin said factors such as the depreciation of the ringgit against the greenback, the unexpected outcome of the Brexit vote and the US presidential election results, as well as the uncertain future of the Trans-Pacific Partnership Agreement (TPPA), had affected the forecast for Malaysia’s GDP growth.
“We are living in uncertain times and we cannot ignore the impact that these factors could have on the future of our economy and our country; in particular the potential changes in US economic policies and the threat of a slower economy in China,” Chin had told the media recently. “The lower forecasts are based on concerns over uncertainties and upward risks in the external environment.”
Still, Malaysia’s ICT custodian, the Malaysia Digital Economy Corporation (MDEC) also reported earlier in 2016 that MSC Malaysia saw RM19.8 billion (US$4.4 billion) in new investments, with RM15.2 billion (US$3.34 billion) coming from existing investors, while RM4.57 billion (US$1 billion) came from new investors – the highest since its establishment in 1996.
Of the new investments, 87% came from foreign direct investments while the rest were via direct domestic investments, MDEC added.
Despite the somewhat gloomy outlook forecasted, not all Malaysian organisations are reluctant to spend, preferring to invest in strategic initiatives instead.
MDEC chief executive officer (CEO) Yasmin Mahmood had said that while 2016 was a challenging year, nevertheless local companies are realising the potential of the digital economy.
This is especially true for enterprises wanting to take advantage of the slowdown to gear themselves to transform their businesses to become more digital in nature, according to IDC’s Chin.
As indicator of this trends, the analyst said that in the past two years, C-level priorities have somewhat begun to change. In 2015, the top three priorities were: The escalating cost of operations, new government regulations and new competitors in the market.
In 2016, the top three priorities were: Globalisation, new government regulations and the lack of new business models and relevant skills sets to manage talent, Chin noted.
These shifts – especially that of globalisation and the need for new business models – in priorities necessarily imply that business leaders are turning towards several key technologies that have emerged in the last three years, namely cloud computing, big data, mobile technologies and to a lesser extent the IoT in a bid to digitise their businesses.
“The common understanding resides in the fact that cloud will be the base technology architecture driving the digital transformation as it’s known for agility and flexibility,” Chin argued. “Organisations in mature markets are leveraging cloud as it is an agile IT resource delivery model that enables business transformation and gains competitive advantage.”
The analysis by IDC is confirmed on the ground by IT software and services provider, Dimension Data, which noted that there is a significant increase in on-premise operational expenditure/ consumption-based models being adopted as organisations opt to reduce their capital expenditure.
“Fully managed services models with private cloud, hybrid or public cloud are on the uptrend,” said Henrick Choo, managing director of Dimension Data Malaysia.
“We see organisations wanting to embrace new business strategies, with CIOs and enterprise IT organisations leading their transformation to hybrid IT to be more flexible, agile,” he noted. “They also want to deliver new applications and solutions swiftly across the world as they expand geographically.”
Choo said there is also strong interest in IoT and big data and that cloud computing continues to remain as the core and driving force towards digital transformation as organisations find ways to deploy their businesses across multi-vendor platforms to deliver a consistent application experience.
“For IoT, some of our manufacturing clients are looking into their machine maintenance windows in order to predict when they need to perform maintenance,” Choo explained.
“In retail environments, we’re beginning to see solutions where the network can track where shoppers are walking, and how long they dwell in a particular area. This information can be linked back to architectural maps to provide rich insights for retail marketers about the foot traffic through their stores.”
Choo also argued that the marriage of big data and IoT has some significant infrastructure implications and in order to expedite the returns from their big data investments, many organisations are opting for cloud or managed services-based infrastructure for IoT and big data.
“This approach allows them to focus on the value of the data instead of spending months or years building infrastructure themselves,” he said.
There are challenges
As more business go digital however, companies are also facing challenges in the transformation process. Some of these include the lack of a clear cloud strategy, poorly defined business outcomes, and the lack of skilled technical resources, according to IDC’s Chin.
Chin said organisations have to realise that adopting any cloud strategy is not just about cost reduction, although that could be one of the measurements to define success. More importantly, there is a need to define the business and technology metrics that are expected as outcomes of cloud services.
“Organisations should work closely with cloud service providers and leverage their experience in defining a solid cloud strategy,” Chin advised. “This will also help organisations in overcoming the challenge of the lack of skillful resources as cloud service providers will be responsible in configuring, implementing, and supporting the cloud environment.”
Another point to note, said Dimension Data’s Choo, is that business leaders are also starting to make IT decisions and studies have shown that these are now sitting with business units rather than IT departments, as the new generation of business leaders are IT savvy, and often they play significant roles in the IT decision making process.
“Meanwhile, investment decisions are increasingly coming from outside of IT, from general managers, business development executives, or the heads of functions, such as marketing, finance and human resources, Choo explained. “Technology providers have to develop a new go-to-market model, providing diverse offerings, pricing, sales force and post-sales support to meet their (corporate) customers’ diverse needs.”