Budget cuts ahead as enterprise swings tech axe in Malaysia

CIOs preparing for spending declines of more than 10 per cent

More than half of businesses across Malaysia are forecasting sizeable cuts to technology budgets during the remainder of 2020, as the realities of Covid-19 start to hammer home.

According to new GlobalData findings, 31.3 per cent of enterprise-level decision makers in Malaysia expect technology investment to decline by at least 10 per cent within the space of the next six months, with 28.1 per cent preparing for a drop in excess of 20 per cent.

“This trend is in line with the general weakness in business sentiment seen among enterprises in the country amidst the Covid-19 crisis, with about 75 per cent of respondents claiming that their enterprise revenues would decrease in 2020 compared to previous year,” observed Nidhi Gupta, technology analyst at GlobalData.

“While Malaysia has been relatively successful in tackling the Covid-19 pandemic, the general disruption in business operations, slowdown in supply and demand, and drop in exports due to global uncertainty will impact enterprise ICT budgets in Malaysia in 2020.”

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

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

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

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

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

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

“Against this backdrop, enterprise organisations across the country must adopt new digital technologies and re-evaluate business models to regain the lost ground in the post pandemic world,” advised Shamim Khan, senior technology analyst at GlobalData.