Emerging economies set to lead global IT investments and outpace US

Updated: Jan 27 2014, 14:12pm hrs
Tremendous growth figures and IT-led opportunities in key sectors are boosting the emerging economies (E+ economies) of

India, China, Malaysia, Indonesia and Philippines to outpace the western riches and information technology (IT) is playing the role of a key facilitator. These growing economies with a large consumption market are therefore attracting high foreign investments especially in the time of a global economic slowdown. In the coming future, with the right investor sentiments, these economies can prove to lead the next wave of IT investments for a global competitive advantage.

Defying the effect of the global economic slowdown, the E+ economies are bolstering a rise in government spending aimed

at a technology-led inclusive growth with education and healthcare sector being the major focus areas. The share of IT investments of E+ economies against the US has risen from 14% in 2008 to 35% in 2020.

The IT investment growth in E+ economies is a consequence of strong internet and mobile infrastructure. The emerging countries will have a potential internet user base of 2,256 million by 2020. Smartphone users in E+ economies are growing at a strong pace and it is likely to achieve a number of 1,795 million by 2020. The E+ economies have a strong internet user base even though the penetration is much lower in comparison to US. Hence, theres a huge scope of growth in IT-led opportunities going forth.

The emerging economies of the world are today boasting a strong growth in enterprise-led opportunities. Large and mid-sized enterprises employing more than 200 employees are multiplying and the enterprise-led opportunity in E+ economies could potentially be 3 to 4 times of US. Market analysis based on deep economic insights further indicate the total numbers of Forbes 2,000 enterprises to grow by 300% in E+ economies by 2020, while the number of US enterprises could face a decline.

Small and medium businesses, which account for over 20% of GDP for E+ economies are starting to play a key role in economic growth of E+ markets. Today, India has the second largest base of SMBs among emerging economies that stands at 48 million. These are a great indicator which is why E+ markets are becoming a force in reshaping global industry across sectors. Among the top, brands such as Tata and Lenovo are already making it big in global markets.

The key verticals which will further boost the growth of IT

investments in E+ economies are telecom, healthcare, energy, retail, education and banking. These sectors constitute more than 60% of emerging markets GDP. Key IT trends such as big data, cloud and mobility are gaining strategic importance in these sectors which is likely to further strengthen the IT growth in the emerging economies.

E+ economies are increasingly gaining traction to become global hubs for healthcare industry. Pharmaceutical and medical equipment market in E+ is set to reach $300 billion by 2020. In the banking sector, a huge opportunity lies within the E+ economies with 1.4 billion unbanked population, hence banking assets in E+ economies is likely to double to $40.6 trillion by 2020. The E+ economies are also witnessing an exponential increase in smartphone usage and data consumption which is creating a fast paced growth and new opportunities in the telecom space.

High growth in e-commerce is resulting into increased local competition from these markets; Indian e-commerce market is growing at Y-o-Y of 31%. E+ economies set to have a 400 million strong mobile workforce with more than 70% of employees bringing their own device by 2020.

Collectively the E+ economies constitute 40% of worlds total population and are witnessing a sharp rise in the growth of youth population (15-45 years) with China growing at 16% followed by India at 14%. The growing youth workforce will serve as the biggest competitive advantage for the emerging superpowers in the coming years.

The global IT investments and spending patterns are suggesting a makeshift change in the dynamics of global investments with emerging economies set to lead the growth in IT investments across verticals. The numbers are indicating that the emerging economies will potentially outpace developed economies such as that of US.

Praveen Badhada

The writer is director, market expansion, Zinnov