Industry Overview

6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d) 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)

1 INTRODUCTION AND BACKGROUND TO ENTERPRISE DATA MANAGEMENT There is increasing integration of Information Technology (IT) solutions as part of mission critical processes for Government operations and enterprises, creating a complex environment of interdependencies. Governments and business enterprises are hosting increasingly large volumes of digital data in their servers, which include personnel information, proprietary knowledge and sensitive data. The growth in data stored is generally fuelled by the increasing capacity of storage media and growing importance of IT in the business environment. Additionally, the usage of mobile devices such as smart phones, notebooks and tablets that extend the boundary of the organisation’s network perimeter is also increasing substantially and these devices may also hold valuable organisational information. Currently in Malaysia, there are more than 3,000 Government application forms and documents that have been digitised and made available online, which is in line with the Government’s goal for zero counter services by 2020. The amount of digital information created and replicated globally was estimated to be approximately 1,800 exabytes or 1.8 trillion gigabytes in 2011. In just a span of two (2) years, the digital information available worldwide increased by 56.0% to an estimated 2,800 exabytes or 2.8 trillion gigabytes. It is projected that with the continuous proliferation of devices such as computers, smartphones and tablets, and increased Internet access within emerging markets, the digital universe will reach a digital information size of approximately 40,000 exabytes or 40 trillion gigabytes by 2020, growing at a Compound Annual Growth Rate (CAGR) of about 46.0%.1 With increasing information being stored digitally, enterprises and Governments are susceptible to occurrences of electronic data loss, which could be caused by a multitude of factors including computer hard drive failure, software corruption and damage to the storage media caused by disasters and other unforeseen circumstances such as floods, fire and virus attacks. The incidences of data loss globally has increased by 40.0% since 2011 2, thus, indicating that it is essential for these data to be systematically protected in order to ensure business continuity as data is critical for enterprises and organisations to operate. As an illustration of the importance of data for business continuity, approximately 90.0% of enterprises that lost their data centre for 10 days or more during the event of a disaster filed for bankruptcy in less than a year and 50.0% of enterprises without data management policies and procedures put in place filed for bankruptcy immediately during the event of a disaster3• SMITH ZANDER defines enterprise data management as the practice of putting in place a set of policies, procedures and technology(s) to allow enterprises and organisations to backup and store important data as well as recover and restore these data in the case where the primary source of data is inaccessible. The objective to ensure data is systematically protected and easily recoverable becomes particularly compelling in the event of a disaster that could potentially destroy or damage an organisation’s ability to operate as a going concern due to the heavy reliance on IT systems. This could include destruction and damage to enterprise servers due to fire, floods, earthquakes and other natural disasters, as well as serious structural damages to the servers. Digital data in enterprises are stored in two categories of storage devices, Le. primary storage and secondary storage. Primary storage refers to first tier storage where data is stored and immediately used by server applications. Primary storage may be internal or external and may include traditional hard disc as well as newer solid state discs or flash arrays. Secondary storage, also known as backup storage, complements primary storage by providing backup copies of data in primary storage. Secondary storage typically consists of higher capacity hard discs, tapes or other optical media and may include technologies like data deduplication to maximise storage capacity. Data deduplication technology refers to a specialised 1 Extractedfromthe Independent MarketResearchReport bySMITHZANDER 2 Extracted from the Independent Market Research Report by SMITH ZANDER 3 Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
data compression technique wtiich eliminates duplicate copies of data. Enterprise data management refers to secondary storage only. The enterprise data management industry can be segmented into enterprise data management solution developers, distributors and resellers, and enterprise data management managed service providers. Enterprise data management solution developers develop data management hardware such as physical tape infrastructure and optical storage devices, and the solutions or software which enables data management to take place. Enterprise data management solution developers are generally large industry players which dominate the industry and can either distribute directly to the clients or end-users, or through a distributor which would have their own network of resellers. Generally, in cases where the solution developers sell directly to the clients or end-users, the value-added services provided such as installation, implementation, technical support, annual maintenance and other after-sales services are directly managed by these solution developers. These solution developers will typically also integrate their solutions with other third party IT supporting solutions which are necessary in the implementation of the enterprise data management solutions. Alternatively, distributors and/or resellers may undertake the provision of most of these value-added services in cases where the sales of hardware and solutions were generated by them and there is less complexity in the value-added services carried out. Enterprise data management managed services is an upcoming cost-effective alternative avenue for clients or end-users to procure data management services. Clients or end-users now have the option to access data management services through a third-party managed services agency. Industry players in enterprise data management managed services typically manage the entire data management process on behalf of the client or end-user, from implementing a set of pol icies, procedures and the relevant technology to managing storage, recovery and restoration of critical operational information through best practices. Nevertheless, there are also instances in which enterprise data management managed service providers reach out to end-user customers through distributors and resellers. (Further details on enterprise data management managed services will be illustrated in Chapter 7 of this Executive Summary). The respective sales processes of enterprise data management and enterprise data management managed services are essentially the same, as they are carried out in one of two ways:­(a) Enterprise data management solution developers sell directly to distributors who sell to resellers. Resellers (or channel partners) sell to end-user customers.
(b) For certain customers, enterprise data management solution developers sell directly to the end-user customers.

The key difference in the after-sales process of enterprise data management and enterprise data management managed services is that for enterprise data management managed services, the enterprise data management solution developer manages the backup, storage and recovery of the end-user customers’ data on behalf of the customers, from a remote location via the internet. For enterprise data management, the backup, storage and recovery are handled by the end-user customers’ internal IT staff. As for after-sales technical support in terms of hardware and software failure and other technical-related issues, for both enterprise data management and enterprise data management managed services, complex technical support will be provided directly by the enterprise data management solution developer while basic technical support may be provided by the distributors and/or resellers.
6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Segmentation of the Enterprise Data Management Industry ENTERPRISE DATA MANAGEMENT Enterprise Data Management ‘: ,.’ End-user ” Distributors ~:: Resellers ‘.Solution Developers .’:?~’ Customers ” ” • Enterprise data management hardware including • Distribution ofenterprise • Marketing and retaiting of
• Comprising primarily large physical tape infrastructure and optical storage data management systems enterprise data

enterprises.devices. and third party IT management systems and • Proprieta/y software solutions which enable supporting solutions. tM,d party IT solutions and enterprise data management Ilardware to operate. : • Basic technical support supporting devices.

• Value added seNices which involves complex . (optional). • Basic technical support technical suppolt, consultancy selvices and annual; (optional). maintenance seNices.

• Integration with third party IT supportmg solutions : from distributors / resellers ‘

 

, . ,-; ~ \ “\i~~l End-user ” Enterprise Data Management Solution Developers ‘ ” \ “.:” <‘ :tit: , ~ Customers %. ~’ •• Enterprise data management haldware including plJYsical tape infrastructure and optical storage devices. : • Comprising primarily large I • Proprietary software solutions which enable enterprise data management Ilardware to operate. : enterprises. l • Value added services which involves complex technical support, consultancy services and annual maintenance services.: • Distribution and marketing ofenterprise data management systems. : ,• Integration with third party IT supporting solutions from distributors I resellers. : 1 “_ n __ .. ,,~~ _ • _”. ~. _.’ , __,.-_,,, __ ~ _ ••__.__ • ~ •… _••_ •••__• _ ~ ” ,’c “V _”__ ” •• A _,_. ,. • ‘ ,_ •• ,••• ” _c _. .”_._ .~ __.”~ e” ~.,,, _ •__. ~ “, ~ __ ENTERPRISE DATA MANAGEMENT MANAGED SERVICES ;1.. {‘-%.;: “<~ ¥Qb~~ End-user .•jjl’Enterprise Data Management Solution Developer and Managed Service ~to~ip~~~~j~:” Customers _”5.!!.!;.'”! ,:<if/;~/” ~:!iA :. Enterprise data management Ilardware including physical tape infrastructure and optical storage devices. Comprising all businesses :. Proprietary software solutions Wllich enable enterprise data management hardware to operate. and enterprises, but i· Integration with tbird party IT sUPPolting solutions from distributors I rosel/ers. particularly suitable for :. Enterprise data management managed services wlJich involves data backup, storage. recovery and restoration of smaller enterprises and ; enterprise data on behalfofclients / end·users on a subscription fee basis. larger Small Medium ~:Pi~!'”l~L!~()/}_8..n.C! f1!i’/~~e.tll!q .0Lent~!e~i~f;. C!a.~a. J!1.8..ni’/lll!f!1.ent’!lal!aqe.cf.s,elylc.e.s.·. __•__'” _.__… •_••__•_••_… Enlerprises (SMEs). “‘~’-‘ Distributors ‘” Resellers ‘• c. .”, ,d ~ • Enterprise data management Ilardware including ,• Distribution of enterprise data • Marketing and retailing of Comprising al/ businesses physical tape infrastruoture and optical storage management managed enterprise data and enterprises. but devices. services. management managed partioularlY suitable for • Proprietary software solutions whicll enable • Basic technical support services. smaller enterpnses and enterprise data management hardware to operate (optional). • Basic technical support larger SMEs. • Enterprise data management managed services (optional). wbicll involves data backup. storage, recove/y and restoration ofenterprise data on behalf of clients / end-users on a subscription fee basis.

• Integration Witll II/ird palty IT supporting solutions from distributors I rosellers.

 

Note: I—1 Industry segment where Kronologi Asia Berhad competes inL. ‘ Source: Extracted from the Independent Market Research Report by SMITH ZANDER rrhe rest of this page is intentionally left blank] 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)

 

 

2 OVERVIEW OF THE GLOBAL ENTERPRISE DATA MANAGEMENT INDUSTRY The development of the enterprise data management industry differs in each country, depending on the present stage of its market lifecycle. There are typically four (4) stages in a market lifecycle, Le. introduction, growth, mature and decline. The enterprise data management industry in the developing South East Asia (SEA) countries, namely Malaysia, Thailand, Indonesia, Philippines and Vietnam are still in its introduction stage. Storage processes and technologies were introduced here later than in countries where the markets are more mature, though these technologies are evolving rapidly to keep up with global technological advancements. Owing to the later adoption of technologies in these countries, the enterprise data management industry is still very much nascent and has significant potential for growth. Meanwhile, the enterprise data management industry in more developed countries such as Singapore, Hong Kong, Japan, Germany and Australia are in the growth stage. In these countries, the enterprise data management industry is no longer new to the market and thus, has a relatively more established market. In other developed nations including the United States, the United Kingdom, Canada and Denmark, the enterprise data management industry is at its mature stage and thus, these countries are the largest and most established markets for enterprise data management presently. With the enterprise data management industry at its introduction stage in many countries in SEA, such as in Malaysia, Thailand, Indonesia, Philippines and Vietnam, there are significant growth opportunities in these markets as they move up the market lifecycle into the growth and maturity stages. Market Lifecyc\e of Enterprise Data Management (Global)
Source: Extracted from the Independent Market Research Report by SMITH ZANDER The enterprise data management industry can be quantified by the devices utilised for the purposes of data backup and secondary storage, which includes external disc-based and tape-based storage systems. External disc-based and tape-based storage systems are the devices utilised for the purposes of data backup and secondary storage and includes software and server node engines to perform data backup 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
and replication using technologies such as deduplication, compression, encryption, remote replication and
support interfaces. The industry size for enterprise data management can be measured in terms of revenues of major industry players in the global environment which manufacture and develop enterprise data management solutions, such as EMC Corporation, IBM Corporation, Hewlett-Packard Company, Symantec Corporation, Quantum Corporation and Oracle Corporation. Overall, the global enterprise data management industry has been growing at a CAGR of 5.8% over the last five (5) years, from 2009 to 2013.
Between 2009 and 2013, the global enterprise data management industry grew from about USD31.0 billion (RM109.2 billion) to about USD38.8 billion (RM123.0 billion). Moving forward, the global enterprise data management industry is expected to grow by a further CAGR of 5.8% from approximately USD41.1 billion (RM130.3 billion) in 2014 to approximately USD46.0 billion (RM145.8 billion) in 2016.
Demand for enterprise data management has been boosted in light of the increasing number of enterprises and increasing requirements for storage capacity. The growth in the number of enterprises can be attributed to the developing economies from the Asia Pacific region, in particular. Additionally, requirements for storage capacity is also increasing amongst enterprises due to the growing importance of IT in the business environment, the increase in the usage of devices such as computers, smartphones and tablets as well as the decreasing cost for IT equipment and storage media.
Enterprise Data Management Industry (Global), 2009·2016 (f)
2009 2010 2011 2012 2013 2014 (f) 2015 (f) 2016 (f) Year  USD billion  Industry Size  RM billion  2009 > 2010 …. ;/2011/1  .;  .’.  31 0 34.9 36.6  1092 112.0 111.9  ‘.  2012  38.8  119.4  20t9;  …..  38.8  123.0
6. INDUSTRY OVERVIEW AND OUTLOOK (Conl’d)
Industry Size Year USD billion RM billion
1. Exchange rates from USD to RM between 2009 and 2013 were converted based on average annual exchange rates extracted from published information from Bank Negara Malaysia: 2009: USD1 =RM3.5236 2010 : USD1 =RM3.2105 2011 : USD1 =RM3.0572 2012: USD1 =RM3.0785 2013: USD1 = RM3.1700
2. Exchange rates from USD to RM between 2014 and 2016 were converted based on average annual exchange rates extracted from published information from Bank Negara Malaysia for 2013 at USD1 =RM3.1700

Source: Extracted from the Independent Market Research Report by SMITH ZANDER [The rest of this page is intentionally left blank] 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)

3 ANALYSIS OF ENTERPRISE DATA MANAGEMENT IN SOUTH EAST ASIA Introduction The SEA market comprises emerging and developing countries ranging from economies which are at an earlier stage of development to economies which have shown significant growth in the past decade. These countries include Singapore, Malaysia, Indonesia, Vietnam, Thailand and Philippines. The SEA economy has been illustrating healthy growth over the years and is expected to continue to grow rapidly at a projected average of 5.5% real gross domestic product (GOP) growth over the next three (3) years. Owing to the fact that the large enterprise data management companies originated from the United States, Japan and China, the SEA market is largely dependent on these large manufacturers in providing enterprise data management solutions. Although the SEA market adopted the enterprise data management technology relatively later than North America and the more advanced Asia Pacific countries such as Japan and Korea, the enterprise data management industry in SEA has been expanding, indicating opportunity for further growth. Key Demand Conditions: Growth Drivers Extremely High Importance of Digital Data to Businesses and Enterprises Over the last 10 to 15 years, an increasing number of enterprises and Governments have begun to adopt IT solutions in their business operations. This is fuelled by the efficiency in terms of costs and productivity which IT solutions offer to enterprises and Governments. To resist the integration of their operations with IT solutions could impact their profit margins and productivity rates relative to industry standards. Thus, in order to remain competitive, most enterprises and Governments have integrated IT solutions into their operations. As such, critical business operations for production, finance, human resource and procurement departments are presently largely dependent on IT solutions and software applications in their day-to-day operations. Moving forward, it is expected that the number of enterprises and Governments with operations integrated with IT solutions will only increase further. This will in turn benefit the enterprise data management industry as with the increase of dependence on IT solutions for business operations, larger volumes of critical digital data will be stored and would require proper systematic recording and data backup to account for the need to restore and recover lost data. Increasing Volume of Digital Data As operations within Government and enterprises become increasingly integrated with IT solutions, a growing volume of digital data is stored or hosted in the servers. As the emerging SEA economies develop and grow, a growing number of enterprises are registered, consequently leading to an increase in volume of digital information stored. The amount of digital information created and replicated globally was estimated to be approximately 1,800 exabytes or 1.8 trillion gigabytes in 2011. In just a span of two (2) years, the digital information available worldwide increased by 56.0% to an estimated 2,800 exabytes or 2.8 trillion gigabytes. It is projected that with the continuous proliferation of devices such as computers, smartphones and tablets, and increased Internet access within emerging markets, the digital universe will reach a digital information size of 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
approximately 40,000 exabytes (i.e. 40 trillion gigabytes or 40 zettabytes by 2020, growing at a CAGR of about 46.0%.4 To put these quantities into context, the measurement of digital data is shown in the table below.
The percentage of emerging markets’ digital space relative to the global universe is estimated to be approximately 20.0% with most of the growth in digital information generated from these markets. Among the main causes of increase in storage capacity is the decline in IT equipment costs, including storage media costs. For instance, the cost of hard disc drives which were approximately USD35-50 per gigabyte in the 1990s had declined to USD5-10 per gigabyte in just 10 years. At the end of the following decade, the cost of hard disc drives fell to an average of USD1 per gigabyte and this has, and will, continue to decrease further. With the decreasing costs of storage media, enterprises are expected to be more inclined to utilise larger storage space for digital data, thus leading to the increase in capacity available in storage media. Apart from costs of storage capacity, the proliferation of devices such as computers, smartphones and tablets has driven the upgrading of existing technologies and the emergence of new technologies as manufacturers and developers have to stay competitive in the IT environment in order to remain relevant in the market. An example of new technologies driving the growth of enterprise data management is “big data” storage, which is expected to lead technology innovation. “Big data” refers to the technology of managing and processing large data sets within a short time frame, which otherwise cannot be performed by commonly used software tools. With the emergence of “big data”, storage capacity usage is expected to grow leading to an increase in the demand for enterprise data management. The growing storage capacity usage is an indicator that there will be continuous demand for enterprise data management services amongst both existing and new users. Thus, this is expected to continue to support and boost demand for enterprise data management. Growing Number of Businesses and Enterprises The number of newly registered businesses in the SEA market has displayed positive trends, albeit at a moderate pace. In particular, SEA countries with growth potential, such as Indonesia, Malaysia and Singapore have generally seen a steady rate of newly registered businesses from 2007 to 2012, with an average increase of 6.9% each year. 4 Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
For example, according to latest available data by World Bank, in selected major SEA countries, comprising Indonesia, Malaysia, Philippines, Thailand, Singapore, and Republic of Korea, a total of 182,878 new businesses were registered in 2007, and the registered number of new businesses grew by 39.9% to 255,847 in 2012. Most businesses and enterprises will require data storage and backup to ensure that data is recoverable in the event of disasters or data corruption, and the growing number of businesses translates to greater demand for data storage and backup. As such, the large number of businesses being registered each year provides opportunities for increased demand for enterprise data management in the SEA market. Favourable Government Initiatives for the IT Sector Many countries in the SEA market have recognised the importance of IT in spurring the development of a nation by driving efficiency and reducing excessive costs. As such, many Governments have launched national initiatives to encourage improvement in IT infrastructure and provide subsidies to enterprises in relation to IT solutions. In driving the integration of IT in Government and enterprises’ operations, the enterprise data management industry would benefit from these initiatives taken in the IT sector as more digital data is required to be stored and hosted. Below are some of the initiatives taken by selected SEA countries: Malaysia The Government of Malaysia has embraced the IT sector as a key driver for socio-economic growth. As such, the Government has identified several plans and programmes in driving the industry forward and paving the way for adoption and integration of IT solutions by enterprises across the nation. In the 10th Malaysia Plan (1 OMP), the Government has identified the IT sector as a National Key Economic Area (NKEA), targeting the contribution of IT to increase to 10.2% of GOP in 2015. The IT sector is expected to gain greater momentum, driven by the convergence of industries due to digitalisation. Among the key strategies to be adopted to propel the sector is to aggressively promote the use of IT in all industries in parallel with the development of the IT sector. Under this NKEA, the “Get Malaysian Business Online” (GMBO) drive was launched with the aim to assist enterprises (particularly SMEs) to have internet access, and under Budget 2013 the GMBO included an incentive grant of RM1 ,000 per successful applicant. Apart from that, the EPP also aims to support Government and healthcare sectors in the improving delivery of public services and information sharing. In 2013, about 70.3% of Government services are available online and the EPP targets to ensure the utilisaton of My Government portal through 150,000 logins by end of 2014. Meanwhile, the “1 Gov*Net” project under this NKEA was launched to upgrade internet connectivity at more than 4,000 health facilities in order to encourage information sharing. Specifically, enterprise data management will grow in line with the development of critical software applications for customer relations management, enterprise resource planning, supply chain management, human resource management, and financial and accounting management for enterprises, as digitalisation is increasingly encouraged by the Government of Malaysia. Singapore The Singapore Government has proactively implemented IT strategies since the 1980s in order to develop Singapore as a leading global digital distribution and trading centre to further boost and enhance the competitiveness of its economy. In line with this vision, the Government of Singapore has established Infocomm Development Authority of Singapore (IDA) specifically to develop the IT sector. Initiatives taken through IDA spread across various sectors including education, financial services, healthcare, trade and logistics, hospitality and tourism as well as the public sector. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
In light of positioning Singapore as a trusted gateway to the emerging Asian market and innovative hub for financial services, IDA has implemented several programmes including the Corporate Financial Information Exchange which leverages IT solutions in enterprise financial reporting and i-Wealth Management which encourages the IT sector to enable online collaboration and data aggregation to increase the efficiency and enhance delivery of wealth management systems. Furthermore, IDA has also transitioned its Government-wide system into the digital space to reduce waste, achieve efficiency and reduce costs. To fast-track adoption, the Government of Singapore has established portals dedicated to public sector agencies with a common database. The digitalisation of information increases the volume of digital data and this bodes well for the enterprise data management industry. In addition, the Government of Singapore has also extended the Productivity and Innovation Credit (PIC) scheme under the Singapore Budget 2014. Under this scheme, businesses can enjoy up to 400.0% tax deductions and/or 60.0% cash payout for investment in innovation and productivity improvements till 2018. Among the six (6) qualifying activities under PIC is the acquisition and leasing of PIC IT and automation equipment which includes equipment for inventory management, record management and knowledge management. Such incentives will directly grow demand for storage technology which would give rise to the enterprise data management industry. Philippines The Government of Philippines, through the Information and Communications Technology Office, intends to further enhance the development of IT in the country, using the Philippine Digital Strategy 2011-2016 (PDS). The PDS focuses on the nation as a whole, with four (4) strategic thrusts aimed at the Government, its citizens and enterprises. As the Philippines moves towards the era of e-Government and e-Governance, the Government of Philippines will promote and increase the use of ICT in their administration, allowing a more innovative, transparent and efficient Government, thereby improving the country’s competitiveness. In 2012, Philippines ranked 88th5 in its e-Government services as compared to other global markets, and the Government of Philippines targets for Philippines to be among the top 50 countries in terms of its e­Government services by 2016. Furthermore, among the strategic thrusts of the PDS are the IT industry and business innovation for national development. As the Philippines’ awareness of the importance of IT in many industries and companies increases, the Government of Philippines will start to assist smaller companies without the resources to integrate IT into their workplace. As both the Government of Philippines and enterprises begin to incorporate the use of IT in their workplace, more information, consisting of private and confidential data, are being stored electronically, leading to the need for enterprise data management to cater for the growth in the volume of electronic data. Thailand The Government of Thailand introduced “Smart Thailand 2020” which is aimed at increasing its citizen’s standard of living towards Information and Communication Technology (ICT) for sustainable growth of the nation. The four (4) “Smart” strategies encompass smart network, smart government, smart business and smart people. These strategies are supported by the “ICT SHIFT the Future of Thailand” strategies which benefits six (6) aspects of the country, I.e. quality of life, education, industry and business, energy and environment, Thai entrepreneurship as well as the creative industry. Strategies under the quality of life aspect for “ICT SHIFT the Future of Thailand” include the development of e-Government services to provide the pUblic with easy access to Government services and the development of telecommunications and communications for the public. The education aspect includes the development of a knowledge management database for the public, while the industry and business aspect include the digitalisation of supply chain networks to encourage product effectiveness. The energy and environment aspect includes the adjusting and adapting of ICT to improve current Government working procedures through the adoption 5 Based on United Nations e-Government survey 10 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
of teleconference service systems, paperless business solutions, and data storage and backup solutions. Meanwhile, the Thai entrepreneurship aspect includes building channels to create international and local opportunities for trading and supporting the use of ICT technology to connect raw material resources, labour, and knowledge and technology resources, while the creative industry aspect includes building channels to connect innovative Thai entrepreneurs. By increasing and upgrading the IT infrastructure and educating its citizens about IT, both its citizens and the Government will be able to incorporate ICT into their daily life, businesses and Government administration, whilst encouraging the ICT sector to boost their international competitiveness. As the country adapts to the use of ICT in more applications, there will be an increase in demand for enterprise data management to keep up with the volume of digital data being transmitted in order to ensure data recovery in the case of data loss. Vietnam The Socialist Republic of Vietnam plans to restructure its economy in view of achieving the status of an industrialised country by 2020. The Strategy for Science and Technology Development for the period between 2011 and 2020 intends to develop science and technology to an advanced and modern level when compared to SEA standards. Some of its tasks are to continue promoting ICT so that its contribution to GOP will reach 8-10% before 2020, in order to encourage researchers to master various IT fields, encourage businesses to invest in technological activities, to develop a new e-government system, and to provide online services in Vietnam. The Government of Vietnam aims to ensure that science and technology contributes to a significant part of the economic growth of the economy, thus targeting transaction value of the science and technology market to increase by about 15-17% annually. As the nation increases the incorporation of ICT in more applications, there will be an increase in demand for enterprise data management to keep up with the volume of digital data being produced. Indonesia Indonesia’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development, better known by its abbreviation MP3EI, was adopted with a vision of Indonesia becoming amongst the top ten (10) largest economies in the world from a GOP per capita of USD3,OOO to US15,OOO by 2025. In 2013, the ICT spending in Indonesia reached USD32.8 billion, and this is expected to grow in line with the economic development of the country. Although infrastructure and industrial investments have taken most of the limelight, one of the key strategies of this plan is to strengthen national and international connectivity by improving ICT networks to facilitate all economic and Government activities. This strategy is supported through some of the plans including the development of national internet exchange at growth centres and the utilisation of ICT to facilitate trading activities at regional ports. As Indonesia begins to facilitate the use of ICT, enterprise data management will grow in line to provide for the increased volumes of digital information. Myanmar The Government of Myanmar has developed an ICT Master Plan under the Framework for Economic and Social Reform to grow the ICT industry in the country and strengthen its competitiveness by promoting ICT and knowledge management. Among some of the efforts under this ICT Master Plan include the development of an e-Government national portal, in which the Government of Myanmar has formed a steering committee to undertake and oversee its development and implementation. With the increasing use of ICT in the country, an increasing amount of digital data is expected to be created and thus, this would lead to a greater need for enterprise data management solutions. Furthermore, the Government of Myanmar is also in the midst of liberalising its telecommunications sector in light of growing the industry. The Government intends to privatise the state owned Myanmar Post and Telecommunications and foreign 11 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
investors have also been invited to bid for national telecommunications licenses in order to increase the competitiveness of the industry. As the ICT industry develops in the Myanmar, it is expected that the enterprise data management industry will follow suit. Emergence of Internet-enabled Applications The emergence of virtualisation or internet-enabled computing has given rise to increased demand for enterprise data management solutions, particularly for enterprise data management managed services, as internet-enabled computing shifts the storage of data from the clients or end-users, in this case mostly smaller or mid-sized companies, to the managed service providers. With internet technology, all computing resources such as software, platforms, infrastructure, data and processing capacity can be obtained whenever required from service providers. Applications such as Google Docs, Google AppEngine, Dropbox, Windows Azure and Office365 are some of the popular services today which enterprises utilise to share software applications such as word processing, spreadsheets and presentations on an internet platform. These applications are typically hosted by a managed service provider and thus, the onus now falls on the service providers to ensure data protection and business continuity of their clients or end-users. As internet-enabled computing is presently a rapidly growing market in SEA and has a wide target reach which includes smaller or mid-sized companies, this would consequently lead to increased demand for enterprise data management solutions to support the services they offer, boosting industry growth.

Market Growth, Outlook and Prospects The enterprise data management industry in SEA is still in its early growth stage and thus, has significant room for growth as compared to the global landscape which is a mature industry. In 2013, the SEA enterprise data management industry comprised approximately 2.0% of the global enterprise data management industry. The industry size for enterprise data management can be measured in terms of revenues from major industry players in the SEA landscape which mostly comprise local franchisees representing major global companies which manufactures and develops enterprise data management solutions, such as EMC Corporation, IBM Corporation, Hewlett-Packard Company, Symantec Corporation, Quantum Corporation and Oracle Corporation. The enterprise data management industry in SEA illustrated a healthy CAGR of 7.1% between 2009 and 2013, growing from USD577.9 million (RM2.0 billion) in 2009 to approximately USD759.6 million (RM2.4 billion) in 2013. As the number of newly incorporated enterprises continue to grow in line with the growing population and economies in the SEA market coupled with favorable Government IT initiatives, the enterprise data management industry in SEA is expected to continue to illustrate healthy growth rates in the future. The enterprise data management industry in SEA is forecast to grow from USD814.7 million (RM2.6 billion) in 2014 to USD937.3 million (RM3.0 billion) in 2016 at a CAGR of 7.3%. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Enterprise Data Management Industry (SEA), 2009 -2016 (f) 2009 2010 2011 2012 2013 2014 (f) 2015 (f) 2016 (f)

Source: Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Singapore and Malaysia are the major contributors to the industry size as they collectively comprise approximately 56.0% of the total enterprise data management industry in SEA. Nevertheless, other SEA countries, namely Indonesia and Vietnam experienced strong CAGRs of about 7.0% to 9.0% between 2009 and 2013 though they were smaller in size relative to Singapore and Malaysia. Between 2009 and 2013, Singapore grew at a healthy CAGR of 8.5% from USD204.7 million (RM721.3 million6) in 2009 to USD283.6 million (RM899.0 million?) in 2013. Malaysia, Indonesia and Vietnam also illustrated strong CAGRs of 7.0%, 8.8% and 7.0% respectively between the years 2009 and 2013. Malaysia grew from USD108.5 million (RM382.3 million6) in 2009 to USD142.3 million (RM451.1 million?) in 2013 while Indonesia grew from USD87.9 million (RM309.7 million6) in 2009 to USD123.0 million (RM389.9 million?) in 2013. Vietnam grew from USD37.1 million (RM130.7 million6) in 2009 to USD48.7 million (RM154.4 million?) in 2013. Meanwhile, Thailand and Philippines also grew at a CAGR of 3.7% and 3.8%, respectively, though at a slower pace as compared to the other SEA countries. Thailand’s enterprise data management industry grew from USD96.1 million (RM338.6 million6) in 2009 to USD111.2 million (RM352.5 million?) in 2013. Philippines, on the other hand, had a smaller industry size of USD43.6 million (RM153.6 million6) in 2009, which grew to USD50.7 million (RM160.7 million?) in 2013. Geographical Breakdown of the Enterprise Data Management Industry (SEA), 2009-2013 CAGR Singapore (2009-2013): 8.5% CAGR Malaysia (2009-2013): 7.0% CAGR Thailand (2009-2013): 3.7% CAGR Indonesia (2009-2013): 8.8% CAGR Philippines (2009-2013): 3.8% 800.0 CAGR Vietnam (2009-2013): 7.0%
2009 2010 2011 2012 2013 • Singapore • Malaysia I!II Thailand [~Indonesia Philippines Vietnam Source’ Extracted from the Independent Market Research Report by SMITH ZANDER 6 Exchange rates for 2009 was converted based on annual average exchange rates extracted from Bank Negara Malaysia at USD1 = RM3.5236 7 Exchange rates for 2013 was converted based on annual average exchange rates extracted from Bank Negara Malaysia at USD 1 =RM3.1700 14 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Key Supply Conditions and Dependencies Alliances and Partnerships with Enterprise Data Management Principals and Vendors One of the success factors for enterprise data management companies in SEA is in their partnerships, either by way of joint ventures, collaborations, franchise agreements or equity partnerships, with principals and vendors for the purchase and use of third party data management products. These data management products, comprising both hardware and software, are used by the enterprise data management players where they couple their proprietary value-added solutions with these third party products. Enterprise data management companies in SEA that have more established partnerships with principals and vendors are typically more sustainable in the market, as they have greater control over the reliability of supply of data management products. Availability of Hardware and Software The hardware and basic operating software required for enterprise data management in SEA, such as servers, computers and other physical storage equipment are available through data management principals and vendors. In the enterprise data management industry, principals and vendors are typically global data management companies, and includes the likes of EMC Corporation, IBM Corporation, Hewlett­Packard Company, Symantec Corporation, Quantum Corporation and Oracle Corporation. Hence, data management hardware and basic operating software used in SEA is generally imported from these principals and vendors. However, the value-added software and solutions required for this industry, which is required to customise, configure, implement and maintain solutions and services provided to a customer, are usually developed in-house by the enterprise data management companies, or local franchisees of the principals and vendors, in SEA. The locally developed value-added software and solutions are considered the technology value­add provided by the local players in SEA. Human Capital In the enterprise data management industry, it is necessary to hire a team comprising IT personnel with the required technical skills and capabilities to develop and implement the solutions. Generally, the SEA market, such as in Malaysia, Singapore and the Philippines has not seen a shortage of supply of skilled personnel with backgrounds in IT. Number of IT Graduates (SEA), 2010-2012 Number of IT Graduates Countries  2010  2011  2012  Malaysia  22,280  17,856  26,527 1  Singapore  4,984  5,059  5,104  Philippines  45,830  49,913  54,113
Note: Data is as at 2012 in order to be consistent with the latest publicly available information for the countries above.
Source: Extracted from the Independent Market Research Report by SMITH ZANDER 15 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Barriers to Entry Globally, the enterprise data management industry is an oligopoly, where the industry is specialised and consolidated, consisting of a handful of large, global multinational players, including major players such as EMC Corporation, IBM Corporation, Hewlett-Packard Company, Symantec Corporation, Quantum Corporation and Oracle Corporation. In the various regions across the world, including in SEA, the landscape is mirrored, with most of the same large, global multinational players present in most regions either through their operating subsidiaries or in strategic partnerships with local companies. The oligopolistic nature of the enterprise data management industry is a result of a number of factors. Firstly, the specialised nature of enterprise data management, where it is a subset of the overall IT industry, has resulted in the development of specialised policies, procedures and technologies which only the incumbent players, and their subsidiaries and partners, have access to and are able to deploy efficiently. These specialised policies, procedures and technologies are unique to the enterprise data management industry players and cannot be used interchangeably between companies, which sets apart the enterprise data management industry players, including their subsidiaries and local partners, from other generic IT companies. Secondly, due to it being a niche industry, industry consolidation has taken place, where the smaller players have either merged or have been acquired by the larger players, primarily to achieve greater economies of scale. This oligopolistic nature of the industry has created high barriers to entry for any potential newcomers and these barriers to entry are described below: Access to Technology The enterprise data management industry is a niche, specialised industry, where the incumbent players, who are mostly large, multinational companies, have developed policies, procedures and technologies for effective and successful deployment of enterprise data management solutions to their customers. Policies and procedures are important in enterprise data management as it defines in detail the processes and protocols for comprehensive and effective management of enterprise data. Technologies are critical as it enables the proper backup, storage and recovery of enterprise data, especially with the exponential growth in digital data today. These include data compression and data deduplication technologies, where specific techniques and algorithms are used to optimise data storage space and speed up data recovery processes. Over the years, the incumbent industry players have developed, upgraded and improved on their proprietary technologies. In regions and/or countries where these players have operating subsidiaries and/or local partners, these companies will have access to these policies, procedures and technologies as well. Any potential entrants to the industry must have, or must have access to, equivalent policies, procedures and technologies to be able to compete in the industry. As these policies, procedures and technologies have been developed and improved over a substantial period of time, it will prove difficult for any new entrant to immediately have these prerequisites for successful penetration into the industry. Established Distribution Channels and Access to End-user Customers In the enterprise data management industry, incumbent players, including their subsidiaries and local partners, have through many years of operations, built up strong distribution networks comprising distributors and channel partners, which provide these industry players with reach and access to end-user customers. Many of these distribution networks have been established over years of relationship building, based on foundations of trust and commitment. The distributors and channel partners are usually large, reputable companies with their respective established network of resellers. Through these networks and relationships, the incumbent industry players, including their subsidiaries and local partners, have developed strong market presence. 16

6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
A potential newcomer in the industry will not have existing distributor and channel partner relationships to leverage on, and building and developing these relationships takes many years as experienced by the incumbent players. Without these relationships and network of distributors and channel partners, a new entrant will have minimal market presence and limited access to end-user customers. Proven Track Record and Industry Reputation The current success and sustainability of incumbent industry players are built on their proven track record and reputation among distributors, channel partners and end-user customers. As mentioned above, it is imperative for industry players to have strong, established distribution channels in the enterprise data management industry, and equally important for these players to continuously grow their distribution channels. The growth of these channels is thus driven by the track record and reputation of the industry players, where the chances of signing up partnerships with new reputable distributors or channel partners increases for industry players with proven success. In addition, as the enterprise data management industry is a niche and specialised industry, the incumbent industry players and their subsidiaries and local partners, will likely have recognisable brands in the market, for example, EMC, Quantum, IBM and HP. This brand equity will similarly enhance the industry reputation of the incumbent players including their subsidiaries and local partners. Any potential new entrant is unlikely to have proven credentials in the enterprise data management industry, thus making it more difficult to establish distribution channels and market presence. In addition, without the backing of a strong global brand in enterprise data management, new entrants will find it particularly challenging to win new customers. Product I Service Substitution Enterprise data management is essential to enterprises as it secures critical information for business and operational continuity through the implementation of a set of policies, procedures and technology(s) for data backup and protection, and as such there is no available product substitute for enterprise data management. It is therefore a matter of a business decision whether an enterprise chooses to implement enterprise data management. Without the implementation of enterprise data management, enterprises still have the option to backup their digital data through storing hard copies, or storing data in storage devices such as external hard drives and removable discs. Nevertheless, these methods do not ensure that lost data can be easily recovered and restored, and are also not effective when managing large volumes of data. Enterprise data management managed services presents enterprises with an effective cost-saving option to utilise computing resources as a service, as opposed to purchasing hardware and software to be installed on-premise. Enterprise data management managed services is viewed as a technological revolution that has led to a shift in the way IT solutions are managed and implemented today. As such, managed IT services effectively serves as an alternative to the existing practice of owning enterprise data management infrastructure technology. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cant’d)
Reliance and Vulnerability to Imports The enterprise data management industry in SEA is largely dependent on foreign markets, particularly in the United States and other more developed Asia Pacific countries such as Japan, as it procures most of its data management hardware and basic operating software from large manufacturers and developers from these countries. Nevertheless, while enterprise data management hardware and basic operating software are imported, its value-added solutions which include customisation, configuration, implementation, maintenance and monitoring are mostly performed by local franchisees or companies representing the major global companies in the SEA countries. Relevant Laws and Regulations Save for the laws and regulations generally applicable to all companies carrying out business activities in SEA countries, there are no special or industry-specific laws and regulations governing the enterprise data management industry. Competitive Landscape The global enterprise data management industry is a niche, specialised and consolidated segment within the broader IT industry, and hence is largely dominated by a handful of large global industry players. A majority of these industry players originated from, and are based, in the United States, and these include general IT vendors such as IBM Corporation and Hewlett Packard Company, or specialised storage players such as EMC Corporation and Quantum Corporation. Others among these small group of competitors include Oracle Corporation and Symantec Corporation. Fujitsu Limited is among the major enterprise data management players in Asia. The competitive landscape in SEA is likewise dominated by the major global industry players, who typically establish operating companies in individual countries within SEA or develop partnerships with local companies. The operating companies in the individual SEA countries are, in most cases, carried out in partnership with local shareholders. These operating companies and/or local companies are typically bound by some form of marketing, franchise or licensing agreement. Based on the above, the enterprise data management industry is regarded to be oligopolistic in nature, which among other factors, is defined as an industry where there are only a handful of incumbent players, the barriers to entry are high and industry players tend to compete on terms other than price. Key Industry Players Global Competitive Landscape The global enterprise data management industry is largely dominated by a handful of large global industry players which comprise specialized enterprise data management industry players, global IT vendors as well as other specialised IT industry players which offer enterprise data management solutions. Details of some of these global industry players are as follows:
Industry Player Headquarters Principal Activities Specialised Enterprise Data Management Industry Players Specialises in enterprise data management solutions, inEMC Corporation United States primary and secondary data storage Specialises in enterprise data management solutions, Quantum Corporation United States with a focus on secondary data storage 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Source: Extracted from the Independent Market Research Report by SMITH ZANDER SEA Competitive Landscape The competitive landscape in SEA is dominated by local operating companies of the major global industry players. The table below illustrates the presence of selected key global industry players in SEA: Industry Player  Local Presence  Local Representative  I Malaysia  EMC Computer Systems (Malaysia) Sdn Bhd  Singapore  EMC Computer Systems (South Asia) Pte Ltd  Indonesia  PT EMC Information Systems  EMC Corporation  Philippines  EI\i1C Computer Systems Philippines, Incorporated  Thailand  EMC Information Systems (Thailand) Ltd  Vietnam  Represented by EMC Computer Systems (South Asia) Pte Ltd  Malaysia  Fujitsu (Malaysia) Sdn Bhd  Singapore  Fujitsu Asia Pte Ltd  Indonesia  Pt Fujitsu Indonesia  Fujitsu Limited  Vietnam  Fujitsu Computer Products of Vietnam Incorporated  Philippines  Fujitsu Philippines Incorporated  Thailand  Fujitsu System Business (Thailand) Ltd  Malaysia  Hewlett-Packard (M) Sdn Bhd  Singapore  Hewlett-Packard Asia Pacific Pte Ltd  Hewlett-Packard  Indonesia  PT Hewlett-Packard Indonesia  Company  Vietnam  Hewlett-Packard Vietnam Ltd  Philippines  Hewlett-Packard Philippines Corporation  I  Thailand  Hewlett-Packard (Thailand) Ltd
6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Industry Player I Local Presence  Local Representative  IBM Corporation  Malaysia  IBM Malaysia Sdn Bhd  Singapore  IBM Singapore Pte Ltd  Indonesia  PT IBM Indonesia  Vietnam  IBM Vietnam Co Ltd  Philippines  IBM Philippines Ltd  Thailand  IBM Thailand Co Ltd  Oracle Corporation  Malaysia  Oracle Corporation Malaysia Sdn Bhd  Singapore  Oracle Corporation Singapore Pte Ltd  Indonesia  PT Oracle Indonesia  Vietnam  Oracle Vietnam Pte Ltd  Philippines  Oracle (Philippines) Corporation  Thailand  Oracle Corporation (Thailand) Co Ltd  Quantum Corporation  Malaysia  Quantum Storage (South Asia) Sdn Bhd  Singapore  Quantum Storage (South Asia) Pte Ltd  Indonesia  Represented by Quantum Storage (South Asia) Pte Ltd  Philippines  Represented by Quantum Storage (South Asia) Pte Ltd  Thailand  Represented by Quantum Storage (South Asia) Pte Ltd  Symantec Corporation  Malaysia  Symantec (Malaysia) Corporation Sdn Bhd  Singapore  Symantec Asia Pacific Pte Ltd  Indonesia  PT Symantec Indonesia  Vietnam  Symantec Corporation (representative office)  Philippines  Symantec Corporation (representative office)  Thailand  Symantec (Thailand) Limited
Source: Extracted from the Independent Market Research Report by SMITH ZANDER For instance, EMC Corporation is present in Singapore, Malaysia, Indonesia, Thailand, and Philippines through EMC Computer Systems (South Asia) Pte Ltd, EMC Computer Systems (Malaysia) Sdn Bhd, PT EMC Information Systems, EMC Information Systems (Thailand) Ltd, EMC Computer Systems Philippines, Incorporated respectively, while Vietnam is represented by the Singapore-based EMC Computer Systems (South Asia) Pte Ltd. Meanwhile, Fujitsu Limited is also present in all of these countries through its local representatives, namely Fujitsu (Malaysia) Sdn Bhd, Fujitsu Asia Pte Ltd, PT FUjitsu Indonesia, Fujitsu Computer Products of Vietnam Incorporated, Fujitsu Philippines Incorporated and Fujitsu System Business (Thailand) Ltd. This is also evident in Hewlett-Packard Company where it is present in SEA through Hewlett -Packard (M) Sdn Bhd, Hewlett-Packard Asia Pacific Pte Ltd, PT Hewlett-Packard Indonesia, Hewlett-Packard Vietnam Ltd, Hewlett-Packard Philippines Corporation and Hewlett-Packard (Thailand) Ltd. IBM Corporation is also present in Malaysia, Singapore, Indonesia, Thailand and Philippines through IBM Malaysia Sdn Bhd, IBM Singapore Pte Ltd, PT IBM Indonesia, IBM Vietnam Co Ltd, IBM Philippines Ltd and IBM Thailand Co Ltd. Similarly, Oracle Corporation is present in the SEA countries through Oracle Corporation Malaysia Sdn Bhd, Oracle Corporation Singapore Pte Ltd, PT Oracle Indonesia, Oracle Vietnam Pte Ltd, Oracle (Philippines) Corporation and Oracle Corporation (Thailand) Co Ltd. 20 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Quantum Corporation also has local presence in Malaysia and Singapore through Quantum Storage (South Asia) Sdn Bhd and Quantum Storage (South Asia) Pte Ltd, while Indonesia. Philippines and Thailand are represented by the Singapore-based Quantum Storage (South Asia) Pte Ltd. Symantec Corporation. on the other hand, has local presence in Malaysia, Singapore, Indonesia and Thailand through Symantec (Malaysia) Sdn Bhd, Symantec Asia Pacific Pte Ltd, PT Symantec Indonesia and Symantec (Thailand) Limited. However, in Vietnam and Philippines, it is represented by its parent company, Symantec Corporation. The specialised and consolidated nature of the enterprise data management industry, where only a small group of large multinational players dominate the global industry, has created high barriers to entry into the industry. All incumbent industry players, including their operating companies and local partners in SEA, are established companies with decades of experience and track record behind them. These are companies who have proven technologies in backup, storage and recovery solutions, and through their operating companies, have developed strong market presence in the countries in which they operate, including having built long term relationships with their distributors and end-user customers. Hence, it is an industry that will prove difficult to penetrate for any new potential entrants. Additionally, the individual operating companies and local partners in the SEA countries remain in relatively strong bargaining positions in the industry due to their invaluable market presence through their relationships with the distributors and end-user customers. Market Share in the SEA Market The enterprise data management industry in SEA was approximately USD759.6 million (RM2.4 billion) in 2013. Based on this industry size, Kronologi Asia Berhad is estimated to have registered a market share of 1.8% in SEA based on its revenues of RM42.6 million from enterprise data management solutions in the financial year end (FYE) 31 December 2013. Kronologi Asia Berhad’s market share in Singapore, where it is based, was 3.0% computed from its segmental revenue of RM26.5 million from enterprise data management solutions in Singapore in the FYE 31 December 2013 and an enterprise data management market size of USD283.6 million (RM899.0 million) in Singapore in 2013. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
4 INTRODUCTION AND BACKGROUND TO MANAGED IT SERVICES Managed IT services refers to the service of managing IT solutions on behalf of a client or end-user by a third party service provider. Managed IT services are typically carried out by specialists utilising a combination of in-house best practice solutions and technical know-how with third party IT solutions. Managed IT service providers generally work with third party hardware and software application developers who provide readily-available products and/or solutions. These off-the-shelf hardware and software solutions are integrated with the value-added services provided by managed IT service providers to become a comprehensive IT solution for the client or end-user. A key setup for a managed service provider is an operations centre where the central engine for monitoring, analysing and managing of clients or end­users’ IT infrastructure is located. Managed IT services is an alternative avenue for clients or end-users to procure IT solutions. The option of accessing IT solutions through managed IT service providers allows clients or end-users to have the flexibility in creating and distributing computing resources on an “as-needed” basis or subscription fee model where the usage pricing is based on a subscription fee model. In other words, the concept of managed IT services allows clients or end-users to increase capacity for IT solutions almost immediately without needing to invest in additional hardware infrastructure, training IT personnel or licensing new software. Key aspects of managed IT services are: • Productivity improvement -As functions relating to the respective IT solutions are outsourced to the relevant managed IT service provider, clients and end-users can focus on operating its core functions or core business activities and this enables productivity to increase.
• Access to expertise and advanced technology: Managed IT service providers are typically specialists for the respective IT solutions and thus, they are able to leverage on their expertise in developing best practices procedures and policies to monitor and manage the procedures in a systematic manner. Apart from that, most managed IT service providers will also utilise advanced third party hardware and software technologies in order to enhance total operational performance.
• Subscription fee model -Rather than investing heavily in IT resources such as servers or licensing software, clients and users are able to use the resources they need on an “as-needed” basis. Many managed service providers charge based on usage capacity, with varied plans or subscription fee model according to the different types of IT services. Managed IT service providers may also choose to follow a consumer model and charge a fixed per-user fee.
• Flexibility and scalability -Freed from the need to install IT resources such as servers, power and test appliances, clients and users can start up, increase or downsize their IT operations almost immediately by leveraging on the IT resources available with managed IT service providers. This makes managed IT services particularly well-suited to businesses which are growing and have dynamic computing needs, such as short-term product test environments, seasonal businesses, business continuity plans, or intentions for mergers or acquisitions.

Managed IT service providers are typically specialists in a particular IT field, offering specialised managed services and solutions. Among some of the types of IT solutions which are offered and managed through managed IT service providers are listed as follows: 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Managed IT services -typical solution offerings IT Solution i Description : Role of Managed IT Service Providers ,, Enterprise data IT solutions for data backup, Best practices/process for managing and management
storage, restoration and monitoring data backup, storage, recovery and recovery restoration. Clients or end-users may choose to purchase their own infrastructure such as servers and other backup storage devices, or “rent” or use these resources on a subscription fee model. 1-IT resources and -1′ IT hardware and infrastruc-t-u-re–+-M-a-n-ag-ln-g-IT-reso-ur-c-es-a-n-d’ infrastructure-on a-I infrastructure utilised for day-to-day scheduled basis to ensure smooth day-to-day management operations in an organisation operations and to minimise hardware failure. such as desktop computers and
~servers ‘Network-and——–I NetworkS-olutions and·—·—-ManagingamTiTlOnitoringlT’;:esources-u-sed’·’–­! communication IT Iinfrastructure systems which for connectivity to ensure continuous solutions allow connectivity to the accessibility to the Internet and Internet and telecommunication telecommunications with minimal disruptions. services I .Clients or end-users may choose to procure Itheir own IT infrastructure or “rent” or use briiY8rid—-,LIT soTujfOnsaridap~ications-i~~~::.;;~~:~~=;:~securftY: I protection solutions I which prevent and protects systems and monitoring of any security I[I I critical data from cyber and breaches. I Ii I malware attacks I I L,_..”..,..”……,….,..,…._,.._,_……,__._..,_,.. ,.L. “..,_._,..,…..,.. “, ,,_. ,_,l__,_.__.,..__, ,, …._. …_,__.. “_……,….,__”,,__,_..__,…,…,_._,._,.._.,.,,,__…..,,1 Source: Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
5 OVERVIEW OF THE GLOBAL MANAGED IT SERVICES INDUSTRY Market Growth, Outlook and Prospects The managed IT services industry can be quantified by all of the managed IT services procured including IT resources and infrastructure management services, network and communication IT solutions, security and protection solutions as well as enterprise data management managed services. The industry size for managed IT services is measured in terms of revenues derived from industry players. Overall, the global managed IT services industry is stable, being sustained by the growth in developing economies from the Asia Pacific region, in particular. The managed IT services industry was estimated to be about USD121.6 billion (RM371.8 billion) in 2011 and USD119.5 billion (RM378.8 billion) in 2013. Between 2014 and 2016, the managed IT services industry is forecast to continue to sustain from USD121.3 billion (RM384.5 billion) in 2014 to USD124.6 billion (RM395.0 billion) in 2016, at a CAGR of 1.4%. Managed IT Services (Global), 2011 -2016 (f) 140.0 CAGR (2014(f) -2016(f»: 1.4% CAGR (2011-2013): -0.9% 120.0 III 100.0 m 0 ~2 m 0 (J)= 80.0 1-:0:;;0m(J) 01:;:) 1Il~ 60.0c: III ::a 40.0 20.0

 

2011 2012 2013 2014 (f) 2015 (f) 2016 (f) Industry Size Year USD billion RM billion 2012
120.9 372.2 2013 119.5 378.8 2014 (f) 121.3 384.5 2015 (f) 123.1
390.2 2016 (f) 124.6
395.0 CAGR (0.9)%(2011-2013) CAGR 1.4%(2014-2016

6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Notes: 1. Exchange rates from USD to RM between 2011 and 2013 were converted based on average annual exchange rates
extracted from pUblished information from Bank Negara Malaysia: 2011 : USD1 == RM3.0572 2012 : USD1 == RM3.0785 2013 : USD1 == RM3.1700

2. Exchange rates from USD to RM between 2014 and 2016 were converted based on average annual exchange rates extracted from published information from Bank Negara Malaysia for 2013 at USD1 =RM3.1700

Source: Extracted from the Independent Market Research Report by SMITH ZANDER [The rest of this page is intentionally left blank] 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
6 ANALYSIS OF MANAGED IT SERVICES IN SEA Introduction The managed IT services industry in SEA has developed in tandem with the global managed IT services industry, whereby the development and growth of the SEA economies has spurred the advancement of the local managed IT services industry. The managed IT services industry in SEA on the whole, is fairly well established, especially in relation to IT resource and infrastructure management. Other managed IT services such as enterprise data management and security and protection solutions are relatively new in SEA, with companies only having recently begun entering this space approximately in the lastfive (5) years. Nevertheless, many companies have acknowledged the potential of managed IT services, especially with the large number of smaller enterprises and SMEs in the region. As managed IT services is a growing market in SEA, particularly in the areas of enterprise data management and security and protection solutions, there is significant untapped opportunities in the region. Key Demand Conditions: Growth Drivers Reduction of High Upfront Capital Investments Adoption of managed IT services allows clients and end-users to shift from capital to operational expenditure, thereby helping these organisations to be more competitive through sUbstantially lower upfront capital costs. Managed IT services eliminates the need for heavy upfront investments as organisations are able to procure new IT infrastructure and solutions and add computing capabilities without incurring risky large capital expenditures. This then provides significant benefits to clients or end­users, and consequently drives the demand for managed IT services. Promotion of Operational Efficiency Managed IT services allows clients and end-users to focus on their core functions or core business activities. It eliminates the time and resources dedicated to the maintenance and management of IT solutions, or additional time and resources spent on these activities by personnel not dedicated to the tasks. As a result, clients and end-users are able to streamline their operations and focus on the operating of their core business activities in the most effective and efficient manner possible. In addition, enterprises can also reduce their operational costs as resources spent on these tasks are paid on a subscription fee model and thus, eliminating the need to invest more than required to provision for future expansion. Furthermore, as managed IT service providers are specialists in the management and maintenance of the relevant IT solution, the tasks of managing and monitoring IT solutions are performed based on best practices and systematic policies and provisions. As more and more enterprises understand and realise the benefits of managed IT services, the uptake of managed IT services is expected to drive industry growth. Growing Number of Businesses and Enterprises The number of newly registered businesses in the SEA market has displayed positive trends, albeit at a moderate pace. In particular, SEA countries with growth potential, such as Indonesia, Malaysia and Singapore have generally seen a steady rate of newly registered businesses from 2007 to 2012, with an average increase of 6.9% each year. For example, according to latest available data by World Bank, in selected major SEA countries, comprising Indonesia, Malaysia, Philippines, Thailand, Singapore, and Republic of Korea, a total of 182,878 new 26 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
businesses were registered in 2007, and the registered number of new businesses grew by 39.9% to 255,847 in 2012. Most enterprises in the present will integrate their critical business operations with IT solutions to promote operational efficiency. As such, the large number of businesses being registered each year provides opportunities for increased demand for managed IT services in the SEA market. Favourable Government Initiatives for the IT Sector Many countries in the SEA market have recognised the importance of IT in spurring the development of a nation by driving efficiency and reducing excessive costs. As such, many Governments have launched national initiatives to encourage improvement in IT infrastructure and provide subsidies to enterprises in relation to IT solutions. In driving the integration of IT in Government and enterprises’ operations, the managed IT services industry would benefit from these initiatives taken in the IT sector. As demand for IT solutions increase, managed IT service providers need only work on shifting the mindset of enterprises from investing heavily on hardware and software to be installed on-premise, to procuring computing resources as a service. Below are some of the initiatives taken by selected SEA countries: Malaysia The Government of Malaysia has embraced the IT sector as a key driver for socio-economic growth. As such, the Government has identified several plans and programmes in driving the industry forward and paving the way for adoption and integration of IT solutions by enterprises across the nation. In the 10th Malaysia Plan (10MP), the Government has identified the IT sector as a National Key Economic Area (NKEA) which will receive much focus during the Plan period, targeting the contribution of IT to increase to 10.2% of GDP in 2015. The IT sector is expected to gain greater momentum, driven by the convergence of industries due to digitalisation. Among the key strategies to be adopted to propel the sector is to aggressively promote the use of IT in all industries in parallel with the development of the IT sector. Under this NKEA, the “Get Malaysian Business Online” (GMBO) drive was launched with the aim to assist enterprises (particularly SMEs) to have internet access, and under Budget 2013 the GMBO included an incentive grant of RM1,OOO per successful applicant. Apart from that, the EPP also aims to support Government and healthcare sectors in the improving delivery of public services and information sharing. In 2013, about 70.3% of Government services are available online and the EPP targets to ensure the utilisaton of My Government portal through 150,000 logins by end of 2014. Meanwhile, the “1 Gov*Net” project under this NKEA was launched to upgrade internet connectivity at more than 4,000 health facilities in order to encourage information sharing. Specifically, managed IT services will grow in line with the development of critical software applications for customer relations management, enterprise resource planning, supply-chain management, human resource management, and financial and accounting management for enterprises, as digitalisation is increasingly encouraged by the Government of Malaysia. Singapore The Singapore Government has proactively implemented IT strategies since the 1980s in order to develop Singapore as a leading global digital distribution and trading centre to further boost and enhance the competitiveness of its economy. In line with this vision, the Government of Singapore has established Infocomm Development Authority of Singapore (IDA) specifically to develop the IT sector. Its initiatives taken through IDA spread across various sectors including education, financial services, healthcare, trade and logistics, hospitality and tourism as well as the public sector. In light of positioning Singapore as a trusted gateway to the emerging Asian market and innovative hub for financial services, IDA has implemented several programmes including the Corporate Financial Information 27 6. INDUSTRY OVERVIEW AND OUTLOOK (Cant’d)
Exchange which leverages IT solutions in enterprise financial reporting and i-Wealth Management which encourages the IT sector to enable online collaboration and data aggregation to increase the efficiency and enhance delivery of wealth management systems. In addition, the Government of Singapore has also extended the Productivity and Innovation Credit (PIC) scheme under the Singapore Budget 2014. Under this scheme, businesses can enjoy up to 400% tax deductions and/or 60% cash payout for investment in innovation and productivity improvements till 2018. Among the six (6) qualifying activities under PIC is the acquisition and leasing of PIC IT and automation equipment which includes equipment for the deployment of cloud-based services, namely networking infrastructure as well as for record management, knowledge management and inventory management. As these equipment are crucial equipment in the managed IT services industry, this incentive is expected to lead to a growth in the managed IT services industry. Philippines The Philippines Government, through the Information and Communications Technology Office intends to further enhance the development of IT in the country, using the Philippine Digital Strategy 2011-2016 (PDS). The PDS focuses on the nation as a whole, with four (4) strategic thrusts aiming at the Government, its citizens and enterprises. As the Philippines move towards the era of e-Government and e-Governance, the Government of Philippines will promote and increase the use of ICT in their administration, allowing a more innovative, transparent and efficient Government, thereby improving the country’s competitiveness. In 2012, Philippines ranked 88thS in its e-Government services as compared to other global markets, and the Government of Philippines targets for Philippines to be among the top 50 countries in terms of its e­Government services by 2016. Furthermore, among the strategic thrusts of the PDS are the IT industry and business innovation for national development. As the Philippines’ awareness of the importance of IT in many industries and companies increases, the Government of Philippines will start to assist smaller companies without the resources to integrate IT into their workplace. As both the Government of Philippines and enterprises begin to incorporate the use of IT in their workplace, this will lead to the need for managed IT services to cater for the growth in the industry. Thailand The Government of Thailand introduced “Smart Thailand 2020” which is aimed at increasing its citizen’s standard of living towards ICT for sustainable growth of the nation. The four (4) “Smart” strategies encompass smart network, smart government, smart business and smart people. These strategies are supported by the “ICT SHIFT the Future of Thailand” policy. This policy will support the realisation of the “Smart” strategies by implementing procedures. These strategies are supported by the “ICT SHIFT the Future of Thailand” strategies which benefits six (6) aspects of the country, i.e. quality of life, education, industry and business, energy and environment, Thai entrepreneurship as well as the creative industry. Strategies under the quality of life aspect for “ICT SHIFT the Future of Thailand” include the development of e-Government services to provide the public with easy access to Government services and the development of telecommunications and communications for the public. The education aspect includes the development of a knowledge management database for the public, while the industry and business aspect include the digitalisation of supply chain networks to encourage product effectiveness. The energy and environment aspect includes the adjusting and adapting of ICT to improve current Government working procedures through the adoption of teleconference service systems, paperless business solutions, and data storage and backup solutions. Meanwhile, the Thai entrepreneurship aspect includes building channels to create international and local opportunities for trading and supporting the use of ICT technology to connect raw material resources, labour, and knowledge and technology resources, while the creative industry aspect includes building channels to connect innovative Thai entrepreneurs. 8 Based on United Nations e-Government survey 28 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
By increasing and upgrading the IT infrastructure and educating its citizens about IT, both its citizens and the Government will be able to incorporate ICT into their daily life, businesses and Government administration, whilst encouraging the ICT sector to boost their international competitiveness. As the country adapts to the use of ICT in more applications, there will be an increase in demand for managed IT services. Vietnam The Socialist Republic of Vietnam plans to restructure its economy in view of achieving the status of an industrialised country by 2020. The Strategy for Science and Technology Development for the period between 2011 and 2020 was constructed to develop science and technology to an advanced and modern level when compared to SEA standards. Some of its tasks are to continue promoting ICT so that its contribution to GDP will reach 8-10%. in order to encourage researchers to master various IT fields, to encourage businesses to invest in technological activities. to develop a new e-government system, and to provide online services in Vietnam. The Government of Vietnam aims to ensure that science and technology contributes to a significant part of the economic growth of the economy, thus targeting transaction value of the science and technology market to increase by about 15-17% annually. As the nation increases the incorporation of ICT in more applications. there will be an increase in demand for managed IT services. Indonesia Indonesia’s Master Plan for the Acceleration and Expansion of Indonesia’s Economic Development, better known by its abbreviation MP3E/, was adopted with a vision of Indonesia becoming amongst the top ten (10) largest economies in the world from a GDP per capita of USD3,OOO to US15,000 by 2025. In 2013, the ICT spending in Indonesia reached USD32.8 billion, and this is expected to grow in line with the economic development of the country. Although infrastructure and industrial investments have taken most of the limelight, one of the key strategies of this plan is to strengthen national and international connectivity by improving ICT networks to facilitate all economic and Government activities. This strategy is supported through some of the plans including the development of national internet exchange at growth centers and the utilisation of ICT to facilitate trading activities at regional ports. As Indonesia begins to facilitate the use of ICT, managed IT services will grow in line. Myanmar The Government of Myanmar has developed an ICT Master Plan under the Framework for Economic and Social Reform to grow the ICT industry in the country and strengthen its competitiveness by promoting ICT and knowledge management. Among some of the efforts under this ICT Master Plan include the development of an e-Government national portal, in which the Government of Myanmar has formed a steering committee to undertake and oversee its development and implementation. Furthermore, the Government of Myanmar is also in the midst of liberalising its telecommunications sector in light of growing the industry. The Government intends to privatise the state owned Myanmar Post and Telecommunications and foreign investors have also been invited to bid for national telecommunications licenses in order to increase the competitiveness of the industry. As the ICT industry develops in the Myanmar, it is expected that this the managed IT services industry will follow suit. 29 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Emergence of Internet-enabled Computing and Virtualisation Technology The evolution of internet-enabled computing and virtualisation technology has also transpired growth for the managed IT services industry. This technology enables remote monitoring and management of IT solutions, allowing managed IT services to provide its services to clients or end-users in a more efficient and shorter time period. Apart from that, the flexibility and scalability of IT resources which internet-enabled computing and virtualisation technology enables today is another driving factor for end-users to procure managed IT services. It is expected that with the managed IT service providers will be able to leverage on the ever evolving advancement of the internet-enabled computing and virtualisation technology to offer its end-users with value-added advantages. Market Growth, Outlook and Prospects Similar to the global managed IT services industry, the managed IT services industry in SEA comprises, among others, IT resources and infrastructure management services, network and communication IT solutions, security and protection solutions as well as enterprise data management managed services. The managed IT services industry in SEA illustrated healthy growth rates over the period 2011 to 2013, growing from USD16.7 billion (RM51.1 billion) in 2011 to approximately USD20.0 billion (RM63.4 billion) in 2013 at a CAGR of 9.4%. With the growth in the number of established enterprises and in line with the growing population and economies in the SEA market and favorable Government IT initiatives, managed IT services will continue to attract the attention of businesses, including both smaller enterprises and SMEs. In addition, managed IT services is expected to continue to gain traction with the increase in awareness on the advantages of managed IT services such as the reduction of high upfront capital investments and higher operational efficiency. As such, the managed IT services industry in SEA is forecast to grow at a CAGR of 10.2% from USD21.9 billion (RM69.4 billion) in 2014 to USD26.6 billion (RM84.3 billion) in 2016. Managed IT Services (SEA), 2011 -2016 (f) 30.0 25.0 f/) Q)
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from published information from Bank Negara Malaysia: 2011 : USD1 =RM3.0572 2012 : USD1 = RM3.0785 2013 : USD1 =RM3.1700 2. Exchange rates from USD to RM between 2014 and 2016 were converted based on average annual exchange rates extracted from published information from Bank Negara Malaysia for 2013 at USD1 =RM3.1700 Source: Extracted from the Independent Market Research Report by SMITH ZANDER Key Supply Conditions and Dependencies Availability of Hardware and Software Applications The hardware and basic operating software required for managed IT services in SEA, such as servers, computers, storage devices and software solutions are readily available from IT vendors. In the enterprise data management industry, principals and vendors are typically global data management companies, and include the likes of EMC Corporation, Hewlett-Packard Company, IBM Corporation and Quantum Corporation. Hence, data management hardware and basic operating software used in SEA is generally imported from these principals and vendors. However, the value-added software and solutions required for this industry, which is required to customise, configure, implement and maintain solutions and services provided to a customer, are usually developed in-house by the enterprise data management companies, or local representatives of the principals and vendors, in SEA. The locally developed value-added software and solutions are considered the technology value-add provided by the local players in SEA. The hardware required for managed IT services in SEA, such as servers, computers and other physical equipment are easily available through local IT distributors and vendors. The software required for the industry is generally classified into two categories: generic third party software required as basic operating systems, and proprietary software solutions used to customise, configure, implement and maintain solutions and services provided to a customer. Third party software is readily available through the many existing IT vendors, while proprietary software solutions are typically developed in-house by the managed IT service providers. 31 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Human capital In the managed IT services industry, it is necessary to hire a team comprising personnel with the required technical skills and capabilities to develop and implement the technology. Generally, the SEA market, such as in Malaysia, Singapore and the Philippines has not seen a shortage of supply of skilled personnel with backgrounds in IT. Number of IT Graduates (SEA), 2010-2012 Number of IT Graduates Countries  I  I  ,  i Malaysia  ‘,”’. _., .”-.–~,,., —~ 22,280 1  , , 17,8561′  “26,5271  ,  ;  < ·,«·~<·_·w·,~_,W”·,y/,_~/! Singapore  4,984 i  5,0591″  _,”·’M”‘” 5,104  . Philippines  45,830 !  49,913 I  54,113  t  Note:
Data is as at 2012 in order to be consistent with the latest publicly available information for the countries above. Source: Extracted from the Independent Market Research Report by SMITH ZANDER Product I Service Substitution Managed IT services is viewed as a technological revolution that has led to a shift in the way IT solutions are implemented and managed today. By adopting managed IT services, end-users are presented with an effective cost-saving option to utilise computing resources as a service, as opposed to purchasing hardware and software to be installed on-premise. As such, managed IT services effectively serves as an alternative to the existing practice of owning IT resources and infrastructure. Reliance and Vulnerability to Imports The managed IT services industry in the SEA market is not reliant on imports, with most client and end­users procuring IT services from local service providers. The industry is a service-based industry and requires the necessary hardware, software and skilled personnel that enables industry players to develop and offer these services to local clients and end-users. Generally, the industry is not vulnerable to imports as the required third party hardware and software are readily available in SEA through local vendors and suppliers as well as technology partners. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Relevant Laws and Regulations Some of the laws and regulations which apply to industry players operating in the managed IT services industry in SEA include: Guidelines in Relation to Data Protection Although each country has separate laws and regulations pertaining to data protection, in general the objectives of such regulations are similar, with the aim to regulate the processing of personal data by data users in commercial transactions, and to safeguard the interests and rights of individuals or data subjects. As such, these such regulations apply to anyone who processes personal data of an individual in commercial transactions. The consequences of breaching such regulations are typically severe. Aside from the negative pUblicity, penalties for non-compliance with these regulations usually include fines for companies and/or fines and imprisonment for directors and officers of the company, though the extent to the penalties varies amongst countries. Such regulations are termed differently in different SEA countries. While in Malaysia and Singapore this regulation is referred to as the “Personal Data Protection Act”, Indonesia terms this regulation as “Data Protection Regulation”. Guidelines in Relation to the Management of IT Environment To strengthen and enhance the level of IT management in banking institutions, the national banks of Malaysia, Bank Negara Malaysia and the Monetary Authority of Singapore has issued guidelines for these purposes. These guidelines place the responsibility on the Board and senior management of enterprises for implementing good IT governance and risk management practices. The guidelines set the minimum requirements on system security, system development and operations in an IT environment to ensure appropriate controls are in place to safeguard the institution’s systems, data and information. To ensure timely resumption of critical IT operations in the event of a disaster, banking institutions are required to establish an appropriate business resumption and contingency plan. The implementation of the requirements and best practices would enable the institutions to minimise the risks associated with service interruptions, unauthorised access to customers’ information, fraud and loss of customers’ confidence. With these guidelines in place, the onus falls on the banking institutions to either ensure that the appropriate measures and controls are put in place or appoint a managed IT service provider capable of managing disaster recovery and ensuring business continuity. 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
7 ENTERPRISE DATA MANAGEMENT MANAGED SERVICES: OPPORTUNITY ANALYSIS IN SEA Data Storage, Protection and Recovery within a Managed IT Service Model Enterprise data management managed services is leading a shift in the way enterprise data management is performed today. Traditionally, in most enterprises, hardware and software such as servers and storage devices require high investments, periodic upgrading and dedicated IT personnel, but often suffer from excess capacity. Thus, existing data management solutions may be ridden with inefficiencies due to low utilisation rates of resources. Similar to any other managed IT service model, the introduction of the managed IT service model in enterprise data management allows clients or end-users to procure data management solutions in a flexible and scalable manner. Consumers and enterprises now have an option to access enterprise data management resources extensively through a subscription fee model. The concept allows users to almost immediately increase capacity and store data, as well as receive services to recover and restore data in the event of data corruption or disaster, without needing to invest in additional infrastructure or IT personnel. The enterprise data management service model also promotes the same benefits which the managed IT services model offers, which are operational efficiency and productivity improvement, access to expertise and advanced technology as well as flexibility and scalability. Typically, enterprise data management managed service providers replace enterprise data management solutions providers as well as distributors and resellers in providing clients or end-users with a comprehensive set of data management solutions. Most data management service providers procure their data management hardware devices from established third party manufacturers or developers and integrates these solutions with their in-house technical expertise to provide data storage, protection and recovery services to clients or end-users directly. As this is a relatively low cost option for enterprises to procure enterprise data management solutions, enterprise data management managed services is suited for all types of businesses, including smaller enterprises and SMEs. An Illustration of the Enterprise Data Management Managed Services Industry ENTERPRISE DATA MANAGEMENT MANAGED SERVICES
Comprising all businesses and enterprises, but particularly suitable smaller enterprises and larger SMEs. • Entelpnse data management managed se/vices which involves data backup, storage, recovery and restoration of enterprise data on behalf ofclients / end-users on a sUbscriplion fee basis. o Integration with third party tT supporting solutions from (Iistnbutors / resellers (optional). Source: Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Enterprise data management service providers may deliver services to clients in a number of service delivery models, among them include: • Managed monitoring
• Hosted monitoring

Managed Monitoring Managed monitoring is a method of service delivery for real-time managed services whereby the network setup and equipment are built and owned by the client and resides on the client’s premise. The enterprise data management managed service provider is engaged to manage and monitor the client’s data protection and assurance services either remotely, or through assigning on-site personnel. This configuration is typical of high security requirements such as by Government organisations or financial institutions where sensitive data resides within the network. Hosted monitoring Hosted monitoring is defined as the shared or dedicated real-time enterprise data management managed services delivered on equipment housed on the service provider’s premises and are fully managed by the service provider. The client is not required to buy, install and/or maintain any storage equipment and is able to enjoy similar functions as those with storage equipment installed on its own premises. The advantages of a hosted solution is that an organisation is not required to invest in expensive equipment and incur high maintenance/upgrading costs, instead they may take advantage of a monthly subscription or usage fee imposed by the enterprise data management managed service provider for the services delivered remotely. Competitive Landscape The competitive landscape for the enterprise data management managed services industry is similar to that of the enterprise data management industry. The competitive landscape of the global enterprise data management managed services industry consists of the same global enterprise data management industry players such as EMC Corporation, IBM Corporation, Hewlett-Packard Company, Symantec Corporation, Quantum Corporation and Oracle Corporation. Many of these incumbent industry players have expanded from traditional enterprise data management services to enterprise data management managed services, driven largely by growth in internet bandwidth and in internet-enabled computing and virtualisation technology. These existing industry players have a competitive advantage in enterprise data management managed services as they have proven technologies, are able to leverage on their existing distribution channels and customer base, as well as have established branding in the enterprise data management industry. In SEA, the competitive landscape of the enterprise data management managed services industry consists mainly of local operating companies of these global industry players or local companies which have formed partnerships with these global enterprise data management industry players. These local operating companies and local partners are able to leverage on the established branding of the global industry players as well as receive product and technology support. While managed IT services is regarded as a competitive industry due to its mature market Iifecycle, the enterprise data management managed services industry remains a niche, specialised industry and thus, is considered to be an emerging industry with growth potential. 35 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Opportunities, Outlook and Prospects in the SEA Market Although the enterprise data management managed services industry is still a nascent industry, the enterprise data management industry itself is a relatively mature industry having been in existence since the 1950s. As an alternative avenue for end-users to procure comprehensive enterprise data management solutions, the enterprise data management managed services industry is expected to grow as the level of awareness on its advantages rises. Thus, in order to identify the growth opportunities for the enterprise data management managed services industry, it is important to understand the key factors that had led to the growth of the enterprise data management industry through assessing global trends. Based on global trends, the per capita expenditure on enterprise data management solutions is correlated with the economic development of a country. The growth of the enterprise data management industry and its correlation to economic development can be seen across developed countries that exhibit relatively high GOP per capita, as well as in developing economies with lower GOP per capita. This correlation suggests higher adoption of enterprise data management services as economies develop and per capita income of a country rises. Developed countries such as the United States, the United Kingdom, Canada, Finland, Switzerland, Singapore and Japan, among others, with GOP per capita in excess of USD30,000, recorded enterprise data management expenditures of between USD30 and USD50 per capita. On the other hand, developing countries including SEA countries such as Malaysia, Vietnam, Philippines and Thailand, with GOP per capita of USD10,000 and below, registered per capita expenditures on enterprise data management of apprOXimately USD1 0 or less. Relationship between Enterprise Data Management Expenditure per capita and GDP per capita (Selected Countries, Global) 80  0 (J)  70  +  Switzerland  ::>  2l “6..  ro ,~  60  ro  “‘­ f~  ‘” ~”,5i­w  50  jnitedStates … ++Finlani! Netherlands  53 E ‘0 0’ ro  40  +Hong Kong Singapore ++  + can~da/·+Sweden + .Unlted Kingdom  +. Ireland + Denmark  ~  2″ ro  Ja~an Gem1any :  + Belgium +Australia  “‘ 0  France  ~  30  ro  + Italy .~  t 1:’  •  Korea  + New Zealand  w  20  + Malaysia 10
Philippines  • Thailand  o .~ Indonesia  o Vlelnam  iO  20  30  40  50  60  70  80  GOP per capita (USD thousands.}
Source: Extracted from the Independent Market Research Report by SMITH ZANDER 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
Countries with higher GDP per capita have more developed economies, which stems from high levels of business activities. Corporations and enterprises in these countries are generally larger in size and consequently, would have higher budget allocations for IT expenditure. Coupled with more developed IT industries, this increases the ability for corporations and enterprises to procure enterprise data management solutions, leading to more established markets for these services. As the SEA economies develop, and drawing from the above correlation, the enterprise data management industry would inevitably grow in tandem. The key driver for growth in SEA, where enterprises and corporations may still have smaller IT budgets compared to their peers in the developed economies, is expected to be through enterprise data management managed services as the cost of entry is significantly lower, where substantial upfront investment cost is not required under a managed service delivery model. This will enable SEA countries such as Malaysia, Indonesia, Philippines, Thailand and Vietnam to narrow the gap between their expenditure on enterprise data management compared to that in the developed countries, subsequently promoting future growth in the enterprise data management industry in the SEA region. Enterprise data management managed services can offer clients or end-users the benefits of low upfront capital expenditure and promote higher operational efficiency. With continuous digitalisation occurring worldwide, the demand for enterprise data management solutions is no longer limited to large corporations and international organisations, but will also rise from smaller enterprises and SMEs. As a large majority of enterprises in the SEA market consist of smaller enterprises and SMEs, the benefits of enterprise data management managed services would appeal to clients and end-users in SEA. rrhe rest of this page is intentionally left blank] 6. INDUSTRY OVERVIEW AND OUTLOOK (Cont’d)
8 PROSPECTS AND OUTLOOK FOR KRONOLOGI ASIA BERHAD The global enterprise data management industry had an industry size of USD31.0 billion (RM109.2 billion) in 2009, and this grew to USD38.8 billion (RM123.0 billion) in 2013. The healthy CAGR of 5.8% illustrated by the global enterprise data management industry between 2009 and 2013 is driven by the increased volume of digital data, the importance of digital data to enterprises, growth in the number of enterprises, and the emergence of internet-enabled computing and virtualisation technology. The growth in the number of enterprises can be largely attributed to the developing economies from the Asia Pacific region in particular. Additionally, requirements for storage capacity is also increasing amongst enterprises due to the growing importance of IT in the business environment, an increase in usage of devices such as smartphones, tablets and computers as well as the decreasing cost for IT equipment and storage media. Supported by these key driving factors, the global enterprise data management industry is forecast to grow by a further CAGR of 5.8% between 2014 and 2016 to reach approximately USD46.0 billion (RM145.8 billion) by 2016. Compared to worldwide growth, the enterprise data management industry in SEA experienced higher growth with a CAGR of 7.1 % between 2009 and 2013, growing from USD577.9 million (RM2.0 billion) in 2009 to approximately USD759.6 million (RM2.4 billion) in 2013. The enterprise data management industry in SEA is still in its early growth stage and thus, has significant room for growth as compared to the global landscape which is a more mature industry. In 2013, the SEA enterprise data management industry consisted of approximately 2.0% of the global enterprise data management industry. Nevertheless, with the increasing number of enterprises established coupled with favorable Government IT initiatives in the SEA market, the enterprise data management industry is forecast to grow at a CAGR of 7.3% between 2014 and 2016 to reach USD937.3 million (RM3.0 billion) in 2016. This is supported by the correlation between GDP per capita and per capita expenditure on enterprise data management solutions, where countries with higher GDP per capita have greater per capita expenditure on enterprise data management, and vice-versa. Countries in SEA, while presently still experiencing relatively low GDP per capita have immense economic growth potential, thus suggesting a long term upward trend in expenditure on enterprise data management. Enterprise data management managed services is leading a shift in the way enterprise data management is performed today. As an alternative avenue for end-users to procure comprehensive enterprise data management solutions, enterprise data management managed services is expected to drive overall growth in the enterprise data management industry, as the level of awareness on its benefits and advantages rises with increased education and promotion by industry players. Enterprise data management managed services can offer clients or end-users the benefits of low upfront capital expenditure and promote higher operational efficiency. With continuous digitalisation occurring worldwide, the demand for enterprise data management solutions is no longer limited to large corporations and international organisations, but will also rise from smaller enterprises and SMEs. As a large majority of enterprises in the SEA market consist of smaller enterprises and SMEs, the benefits of enterprise data management managed services would appeal to the SEA market. Although the enterprise data management managed services industry is a nascent industry, particularly in SEA, the SEA market is already receptive to the managed IT services industry, witnessed by its CAGR of 9.4% over the period between 2011 (USD16.7 billion or RM51.1 billion) and 2013 (USD20.0 billion or RM63.4 billion). The managed IT services industry is forecast to continue to grow to USD26.6 billion (RM84.3 billion) in 2016 at a CAGR of 10.2% between 2014 and 2016, and part of this growth is expected to be attributed to the growth in enterprise data management managed services. Kronologi Asia Berhad. as one of the industry players in the enterprise data management industry, shows potential to reap the benefits of the growing industry. In 2013, Kronologi Asia Berhad’s market share in SEA was 1.8% based on Kronologi Asia Berhad’s proforma revenue in the FYE 31 December 2013. Meanwhile, Kronologi Asia Berhad’s obtained a market share of 3.0% in Singapore, where it is based, based on its segmental revenue from enterprise data management solutions in Singapore in the FYE 31 December 2013. As the company is well-positioned to benefit from the opportunities arising from the growing SEA market, Kronologi Asia Berhad’s future growth is expected to be positive. 38

 

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