Software, services set to be growth sectors for IT
According to statistics from consultancy firms, the software and services market in Hong Kong is expected to double in the next two years.
A survey by market research company International Data Corp (IDC) shows that customer spending on software and services will grow from HK$6.1 billion in 1997 to HK$7.3 billion this year, a rise of 19 per cent.
While hardware sales continue to dominate the overall IT market, the highest growth will be in the software and services business, the survey shows.
A separate study commissioned by the Business Software Alliance (BSA) for Price Waterhouse shows the Hong Kong packaged software industry (PSI) is expected to grow from US$530 million in 1996 to US$1.4 billion in 2001.
This is expected to create about 6,950 direct and indirect jobs in the process and generating US$96.9 million in tax revenue.
Commenting on the findings, Hong Kong Software Industry Information Centre (SIIC) consultant Natalie Wan said Web-based applications, the multimedia and e-commerce were the most promising market segments for Hong Kong independent software vendors (ISVs), of which there were 663 last year.
Business opportunities for the SAR operators included adding Internet features to existing products and creating multimedia content for television programmes and for advertising presentations, Ms Wan said.
E-commerce especially, which requires heavy re-engineering and the development of new business models, can offer ISVs ways to diversify services.
'Instead of providing only software, ISVs could also act as total solutions consultants,' Ms Wan said.
At present, 25 per cent of the 1,789 packaged-software products available in Hong Kong are developed locally.
'There are many business opportunities in the mainland if local ISVs adapt their products to market requirements,' she said.
Hong Kong's small and medium-sized enterprises market also was largely untapped, a sector Ms Wan described as 'clearly under-served'.
To counterbalance this great potential there are challenges ahead.
The industry is plagued with extremely high staff turnover and tight cash flow aggravated by the uncertain regional economic climate. High levels of piracy also have slowed growth.
While admitting that the level of piracy of a given product often was a benchmark of success, BSA co-ordinator Chuan-Chuan Lai said piracy was having a serious effect on the industry.
According to BSA projections, if the piracy rate in Hong Kong was reduced from its 64 per cent rate in 1996 to the 27 per cent rate experienced in the US, it would double employment and tax revenues in the software industry.
Further weakening the industry is the lack of stringent quality standards.
However, this may improve over time, particularly when the Hong Kong Productivity Council releases its own standard in mid-1999.
Inspired by the ISO and CMM quality measurements, the Hong Kong SQA model is a form of elementary standard that will offer an intermediary step to international standards.
