Digital Opportunity In Asia-Pacific

Harvard Business Review (HBR) recently evaluated the digital readiness of 50 countries in an article "Where The Digital Economy Is Moving The Fastest," and countries in the Asia-Pacific region dominated the lists of both the current digital leaders as well as the fastest growing digital countries.  This is in line with the trend we are observing in our monthly deal flow, but surprisingly it is not on the radar screen of many regional service providers.

The HBR article divides the 50 countries into four groups based on their digital readiness. The two important groups are "Stand Out" and "Break Out." The "Stand Out" countries have shown high levels of digital development in the past and continue to remain on an upward trajectory. Asia-Pacific countries such as Singapore, Hong Kong, Korea and New Zealand dominate the “Stand Out” group. The "Break Out" countries have the potential to develop strong digital economies in future. Asia-Pacific countries such as India, China, Malaysia, Thailand, Vietnam, and Philippines dominate the “Break Out” group. 

We agree with the above analysis, and it corroborates findings from our monthly deal flow reporting. In our analysis of the Asia-Pacific deals announced in 2H 2014, we found out that 62% of the deals can be described as having a digital core. The global service providers such as IBM, Accenture and others won 90% of these digital deals.

Digital appears to be a significant opportunity in Asia-Pacific but surprisingly it is not on the radar screens of many Indian heritage service providers as over 90% of the digital deals in Asia Pacific in 2H 2014 were won by the global service providers.

There are two main drivers of digital opportunity in Asia-Pacific are the number of mobile users and the lack of a legacy analog infrastructure. According to Cisco VNI Global Mobile Data Traffic Forecast, 2014 – 2019, there were about 4.3 billion mobile users in 2014 and out of which 2.2 billion were in Asia-Pacific. There will be an additional of 0.9 billion mobile users globally by 2019, out of which 0.6 billion will be in Asia-Pacific.

The digital transformation in Asia-Pacific will not be as painful as in some western countries because there is no large-scale legacy analog infrastructure to be written off and replaced. For example in the banking industry, some European banks are closing down their branches because of digitization. By contrast, in Asia-Pacific, there is a vast population, which still doesn't have banking facilities.

The price points of digital deals in Asia-Pacific is challenging for many service providers when compared to the cost of clients doing these projects internally, but this constraint can be overcome by combining scale of experience with Design Thinking, intelligent automation and the other Ideals of "As-a-Service" economy. We hope Indian heritage service providers will wake up to this opportunity sooner rather than later.