|Lim May-Ann, MD, TRPC, presents the results of the CA Technologies Asia Pacific & Japan Application Economy Index 2016.|
Singapore may be No. 1 in the Asia Pacific and Japan when it comes to the application economy today, but it could well fall to fourth in terms of future potential, according to the inaugural edition of its Asia Pacific & Japan (APJ) Application Economy Index (AEI) 2016, which identifies the readiness of 10 APJ markets to thrive in today's digital world. Singapore led the top half followed by Australia, South Korea, Japan and Hong Kong respectively, while Malaysia, mainland China, Thailand, India and Indonesia made up the rest of the ranks.
The results of the study - developed and commissioned by CA Technologies and carried out by research consulting firm TRPC, and unveiled at last month's CA Technologies APJ Media & Analysts Summit 2016 - give a snapshot of where Asia's economies are today in terms of how conducive their market environments are for application development and market entry.
“The Application Economy Index segments markets based on their ability to integrate, develop and benefit from application usage,” explained Lim May-Ann, MD, TRPC. “We found Singapore, Australia, South Korea, Japan and Hong Kong most ready to maximise opportunities provided by the application economy, placing them in the 'Disruptors' group. China and Malaysia form the 'Challengers' group in the middle, while Thailand, India and Indonesia make up the 'Mainstream' group that needs to focus on developing conditions for businesses to thrive in the application economy.”
However, a different picture emerges when the study examined future leaders of the application economy through the use of what the survey terms 'market potential accelerators' (MPA), an index that evaluates factors which have the ability to impact and accelerate market potential in the new application economy.
In our increasingly connected world, every business is really in the software business and needs to embrace digital transformation, CA Technologies said. The index evaluates three main pillars that are critical for a vibrant application economy:
Pillar 1, also known as government use and support of technology and innovation: To develop sound technology policies and promote innovation, governments themselves should understand and use software and applications.
Internet and mobile infrastructure, pillar 2: Without the necessary infrastructure and enabled access to technology, an application economy cannot fully develop. Basic connectivity and network backbones must be in place, along with an environment which supports business growth and transformation.
Business agility is the third pillar: The ability to move nimbly and quickly in driving – and capturing – market disruption. For this to be possible, countries need to have an environment conducive for entrepreneurship and new forms of commerce to happen.
|Source: CA Technologies infographic. Singapore, Australia and Korea lead rankings, while China, India and Indonesia could well overtake if they capitalise on opportunities.|
TRPC studied the number of smartphone users in a market, the number of people who use mobile Internet on a daily basis, the use of virtual social networks, the daily use of mobile applications, and the size of the youth demographic in the market, re-ranking the countries studied accordingly. Lim of TRPC noted that apps are now the window to the Internet for many Asian users, and not the URL, making apps more critical to success in the application economy. She recounted that consumers would tell her they do not use the Internet, but that they are actively using the Facebook app on their phones.
China, India and Indonesia were found to have the potential to leapfrog to the top three places if they capitalise on the opportunities before them. On the other hand, the earlier leaders – Singapore, Hong Kong, South Korea, Australia and Japan, run the risk of falling behind if they do not act quickly to address the gaps in their markets.
According to CA Technologies Singapore’s drop in rankings in the MPA highlights how the pace of innovation must keep up with the rapid pace of disruption in today’s application economy. Enterprises must act fast to capture market share, and governments need to push ahead with policies to improve infrastructure ahead of demand.
“The arrival of the application economy has challenged the status quo,” said Kenneth Arredondo, President & GM, Asia Pacific & Japan, CA Technologies. “The pace of innovation must match the pace of disruption, and forward-looking, pro-active strategies for managing risks and capitalising on opportunities must be put in place if businesses are to succeed in the application economy.”
“In anticipation of the future marketplace, the best bet is still for enterprises to act fast to capture market share, and governments to improve the enabling infrastructure for businesses to develop and adapt quickly to changing market environments.”
TRPC's Lim agreed. "People are going to need to move very quickly, to capitalise on the opportunities that the application economy brings to them," she said. "The risks are there, the opportunities are there. The early mover advantage is very important. If you can overcome some of these indicators which we and CA Technologies have identified, if you can minimise the risks and capitalise on the opportunities then (the rankings) won't make sense next year."
Singapore’s ranking was boosted with its top placings for government use of technology, strength of intellectual property protection and innovation. The country’s ranking was also lifted by strong numbers for business agility, with lead scores in the time taken to set up a business, debit card penetration and mobile payments readiness. However, Singapore’s cybersecurity strength was an outlier where it ranked 6th, suggesting that this area requires more attention.
“Singapore’s leadership position is unsurprising, given its consistently high scores across all categories, especially in the government use and support of technology is especially strong,” said Nick Lim, VP, Asia South, CA Technologies. “While Singapore is in good stead to thrive in the application economy, dynamic socioeconomic conditions in the region will create unique opportunities in emerging markets, so businesses will find it more critical than ever to harness software to stay competitive and relevant in a fast changing world.”
When MPAs are taken into account, Singapore risks slipping to 4th place if it fails to address gaps in its market. Some of the challenges faced by Singapore include a mature mobile market with limited share for new applications, an ageing population and a small total size of smartphone users. However, opportunities exist for the country in the form of strong daily mobile Internet use, daily use of applications and use of virtual social networks.
Singapore is consistently strong across all categories, especially in pillar 1, top in IP protection, top in innovation parameters, and top in government use of technology.
Challenges include the mature state of mobile market, and relatively small population of smartphone users (4.8 million), but there are opportunities as reflected by:
- High statistics for daily mobile Internet use, app use, and use of virtual social networks
- Proactive government policies such as the Next Generation Nationwide Broadband Network
- Personal data privacy protection act 2012, and the Infocomm Media Masterplan 2025
Australia is consistently strong across all categories, especially in pillar 2. It is second in Internet penetration, third in average mobile connection speeds, and third in smartphone penetration.
Challenges include being 4th in IP protection, 5th in mobile payments readiness, and 8th in the ratio of youth population to overall population. Opportunities include leveraging on virtual social networks as the use of networks like Facebook is wide.
China had mostly mid-level scores for pillar 1: 7th in government use of technology, 5th in IP protection, 6th in innovation
Challenges include pillar 3, where China had the weakest scores. China scored 9th in terms of time taken to set up a business, 9th in strength of cybersecurity, and 4th in mobile payments readiness. Opportunities identified include the government 'Internet plus' strategy to drive economic growth through new technologies and services, and the more than 1 billion smartphone users in China; 93% of them access the mobile Internet daily, Lim of TRPC said.
Hong Kong's forward-looking government policies drove strong scores. Hong Kong is second for government and the support of technology and innovation, 2nd in innovation and 3rd in IP protection.
The city's challenges include a relatively small population of smartphone users - scoring 9th, as well as a small youth demographic, where Hong Kong is also ranked 9th.
India had consistently low scores across all parameters with the exception of cybersecurity, where it scored third.
Its challenges include a unique mobile phone usage pattern due to infrastructural challenges and a complicated mobile tariff regime. For opportunities the country will have an estimated 236 million mobile Internet users by 2016. It will also have 427 million smartphone users in its marketplace. There is a sizeable proportion of youth in its market, as nearly two in 10 (18.1%) of its population is aged between 15 and 24.
Indonesia could leapfrog from No. 10 to No. 3 by leapfrogging straight into the mobile economy. For many Indonesians their first computer is going to be a mobile phone. The country had poor scores in most of the parameters, such as 10th in innovation, 10th in average mobile connection speeds, 10th in time taken to set up a business and 10th for mobile payments.
Challenges include more protection needed for innovation and ideas, higher debit/credit penetration and mobile payments readiness will be needed to encourage e-commerce. For opportunities Indonesia has an above-average score for the number of people who use mobile Internet and apps daily, as well as social network usage.
Japan enjoys strong IP protection (No. 2), but pillar 1 generally needs improvement. It has high pillar 2 scores, coming in 1st in Internet penetration, and second in average mobile connection speeds.
Challenges include low smartphone penetration at 8th, and not being well-versed in the use of apps (9th) nor social networking (8th). It also has the smallest youth demographic population in the region. Opportunities include excellent Internet connectivity, and the time taken to start a business is shorter than the regional average. Japan also has good business agility scores.
Malaysia scored in the midrange across parameters, but is first in strength of cybersecurity.
Challenges include the relatively small market of smartphone users (21 million) and the lowest number of people who use mobile Internet daily. Opportunities include an above average percentage of youth population between age of 15 and 24, standing it in good stead in the age of digital natives.
South Korea had strong scores for pillar 2 - it is first in average mobile connection speed, first smartphone penetration, and third in Internet penetration.
Challenges include a below-average number of people who use mobile Internet on a daily basis (8th) and who use social networks (7th). Opportunities-wise, the government has been proactive in adjusting regulations which improve economic prospects of the application economy with initiatives such as the Cloud Computing Promotion act. It also has a fairly large user base of smartphone users at 42 million.
Thailand had low scores for pillar 1, where it is 8th in terms of government use of technology, 8th in innovation, and 10th in IP protection. The country also had low scores for pillar 2, being 8th in Internet penetration, ninth for average mobile connection speeds, and 7th for smartphone penetration.
Challenges include work needed to improve IP protection and strength of cybersecurity. Opportunities, on the other hand, are plentiful. Thailand tabled 10 Digital Economy Bills, TRPC's Lim said, ranging from personal data protection and cybersecurity to electronic transactions and digital development. Thailand is also ranked 4th in daily use of apps and the degree of use of social networks.
"Winners and losers have yet to be determined," said Lim of TRPC. "Those who move quickly into the market, who can capture marketshare (will win). You want to move quickly into the market with the most number of users."
Read more about CA’s APJ Application Economy Index 2016 (PDF)
View the infographic
Read the TechTrade Asia blog post about how to win in an application economy
*Methodology: The 10 parameters of the CA Technologies APJ Application Economy Index (AEI2016) and five MPAs are sourced from publicly-available indices. As indicators used had different units and scales, any indicator that did not use a 10-point scale was normalised to make the indicator values comparable, as well as to construct aggregate scores for each economy.