Business model changes required as enterprise enters recovery phase in Malaysia

Technology spending in Malaysia during 2020 is expected to decline by 8.3 per cent as opposed to the 8.2 per cent growth expected before the Covid-19 outbreak.

Against this backdrop, enterprise organisations across the country must adopt new digital technologies and re-evaluate business models to regain the lost ground in the post pandemic world.

While Malaysia's domestic ICT spending had grown by 8.5 per cent in 2019, Covid-19 will lead to a decrease in investment from last year across almost all segments of the market.

Spending on hardware is expected to fall by 9.1 per cent, against the growth of nine per cent in 2019 and the projected growth of 7.3 per cent before the outbreak. Enterprise customers in Malaysia are moving aggressively to contain costs and defer all capital expenditures on upgrades, which will strongly impact the spending on hardware this year.

The demand for software is also set to fall, with large-scale organisations delaying the roll-out of applications in 2020. The market for enterprise collaboration platforms however, is set to increase by 29.7 per cent owing to the rise in remote working.

The market for technology services in Malaysia is also set to go down, with enterprises looking to delay new projects, hold-off non-critical IT deployments and pause long-term digital transformation initiatives until at least next year.

Public cloud will be the silver lining however, with the market expected to grow by 3.5 per cent over 2019. Enterprises in Malaysia are expected to continue to invest in cloud, as cloud-based applications and storage options offer strong business continuity from an operational perspective.

Looking at the sector-wise impact of Covid-19, travel and leisure, transport and logistics, and manufacturing will be the most affected, with ICT spending expected to decline by 21.9 per cent, 18.7 per cent and 16.7 per cent, respectively in 2020 when compared to 2019.

On the brighter side, the government and healthcare sectors will remain largely unaffected, with technology spending for these sectors expected to remain relatively flat for the rest of 2020.

Covid-19 is driving in the demand for increased internet bandwidth, adoption of cloud-based services and increased usage of collaboration platforms, despite the overall ICT spend declining across all major verticals.

The government has also announced a stimulus package of RM250 billion to lower the degree of impact. Moving forward, Malaysian enterprises will need to adopt new technology, restructure their business and workforce and undertake a transformation of their digital infrastructure, all of which will be essential for the recovery of the ICT market of Malaysia.