Asia primed to benefit from global shift towards a consumption economy
One of the biggest scare stories in economics right now is the slowing Chinese economy. This masks a potentially more significant development - China’s share of services has risen by a fifth over the last three decades and last year, it reached 48.2% of the economy.
Like the Asian tigers (Singapore, Korea, Hong Kong and Taiwan) before it, with rising urbanisation, a burgeoning middle class and the proliferation of technology in business and everyday life, China is slowly and clearly shifting towards a consumption economy. Further down south, Indonesia’s economic growth has also been marked by a rapid growth of the service sector, which is responsible for 54% of GDP and nearly half of the country’s employment in 2014.
According to the Asian Development Bank (ADB), Asia’s urban population will nearly double from 1.6 billion to 3.1 billion by 2050. A large part of the urban expansion will go beyond the developed Tier 1 cities in Asia, away from cities such as Jakarta, Beijing and Bangalore, further fueling services growth.
Much like the Asian Tiger economies before, rising urbanisation is likely to lead to better education and income for workers and their families in the larger developing markets in Asia, raising the demand for more services.
At the same time, rising incomes and increased expectations on work-life balance are also challenging the traditional company-employee contract. Knowledge workers in Asia are increasingly finding that the best return (both in terms of income and work-life balance) is to sell their skillsets as contract knowledge workers. Companies like Elance-oDesk and Mums@work, for example, are reinventing global hiring through finding freelancers via apps, with Asia providing fertile employment opportunities.
In short, Asia is transitioning from the world’s factory into an economy driven by services. It will also have the most dynamic and biggest markets ready to take advantage of the global tilt towards services.
This tilt towards services will result in a tectonic shift in technology demands. A number of converging trends – the rise of social media, the move to mobility, the emergence of cloud technology as a low-cost platform, the arrival of a new generation of tech-educated employees and the bring-your-own-device (BYOD) phenomenon is changing how companies decide and spend on IT.
As tech savviness rises and complexity eases, decision making on technology purchases is moving toward business-function executives like the CFO, CMO and COO, putting traditional backroom IT operations and the CIO’s role in the spotlight. This raises questions concerning the CIO’s ability to respond to the demands of new agile business models.
The Asian IT professional needs to think differently and acquire new skillsets if he wants to lead the region’s drive towards a service economy. A Logicalis Optimal Services global study that was conducted with 177 CIOs and IT directors in December 2015 found that many were striving to re-invent their IT departments as internal service providers. When recruiting IT staff, only a third of CIOs cited ‘technical skills’ as the top priority. The remaining two thirds, on the other hand, prioritised business skills like communication, service management and business analysis over technical skills.
The study also revealed that many CIOs planned to make software-defined solutions as part of their wider IT strategies. This would make it easier for the new ‘internal service provider’ to respond to demands for IT to be more responsive to the business, whilst reducing the overheads and costs of managing complex environments.
To survive the landscape of compressed supply chains and less predictable environments, the Asian CIO has to reinvent and transform his role from technology management - such as running complicated mainframes and tightly planned enterprise resource planning systems - to one that focuses on building and driving services to business users.
There are significant opportunities for the Asian IT professional to play a key role. Compared to their global counterparts, Asian CIOs are less burdened by legacy IT implementation, have less processes to undo and are in better stead to make the transformation. They can better replace outdated skills with people who can bring the services needed to operate in a world where the business is driving technology changes.
Just like the matured Western economies before it, Asia can benefit from the wave of creative destruction in the global IT industry to thrive on innovative services and become competitive. Asian countries have tremendous opportunities to leverage the changes that are taking place and be integrated into global markets.
The region already has an emerging and fast-expanding educated tech workforce, ranging from the large pool of coders in India and Vietnam to young start-ups in the highly-wired and savvy societies of Korea, Japan, Singapore, China and Taiwan. These people have the potential to experiment with new models and breakthroughs. At the same time, Asia’s e-commerce industry is booming, buoyed by rising young populations, and the influx of local online business entrepreneurs, start-ups and international players.
The shift to the service economy is one of the most important and profound changes reshaping the global economy. Asia’s future economic growth will be driven by competitiveness in services rather than in manufacturing, and moving forward, services will be the growth propeller for many countries in the next decade. The Asian IT professional can play a huge part in this transformation by partnering business users and integrating IT into the organisation.
The future is bright, and this is the time for the region and the Asian IT professional to shine.