The Digital Silk Road to Success

Transcription

1 Whitepaper The Digital Silk Road to Success How Manufacturers and Retailers in China, Hong Kong and Singapore Accelerate Growth with IT Survey conducted by IDG Connect on behalf of NTT Communications

2 Contents 09 2

3 1. Summary of Research Most Significant Business Challenges Rising wage costs, price pressure, and intense competition from rivals are seen as the most significant challenges. Yet three quarters of organizations expect to see new business and revenue growth in the next 12 months. Top 3 Barriers for Technology Innovation Stringent security and compliance regulations are cited as the single most important barrier to technology transformation and ICT upgrade projects. Talent shortage and rising wages 23% Price pressure and increasing costs 19% Competition from rivals 17% Slowdown of Chinese economy 14% 1st 2nd Lack of organizational efficiency Slowdown of Asian economy 13% 11% Stringent security and compliance regulations Legacy IT infrastructure Need to speed up time to market 4% 3rd Complexity in selection and procurement Technology Adoption IoT and big data analytics have been widely deployed whilst large numbers of organizations in all three sectors plan to roll out 3D printing, AI, smart robotics, virtual reality and digital immersion platforms in the future. IoT Big data analytics Virtual reality/ Digital immersion AI/ Smart robotics 3D printing Omnichannel mobile online to offline (O2O) commerce Manufacturing 68% 50% 43% 31% 25% 49% 55% 62% 46% 33% 35% 48% Retail Wholesale 57% 61% 38% 21% 36% 29% 3

4 2. Foreword Fuelling Economic Growth Engines through Technology Innovation China, Hong Kong and Singapore are powerhouses of the Asian economy, with retail, manufacturing and wholesale sectors traditionally representing some of the strongest sources of revenue. However, the challenges of the highly volatile economic landscape means that growth is for those who can successfully transform business models to enable faster product and service innovation. IDG Connect and NTT Communications interviewed 307 senior staff working for global manufacturing, wholesale and retail companies across China, Hong Kong and Singapore to learn more about the economic challenges they currently face and gauge to what extent they are deploying new IT infrastructure and disruptive technology platforms to help them address those challenges. We have good growth prospects in Asia, but strong competition. Also the high value of the dollar is a serious issue for our sales over the next couple of months and we have raised our prices by a notch to limit the damage. Senior IT Manager, International Food Manufacturing Company, Hong Kong The cost of running a business in Asia has sky rocketed and retailers are finding it difficult to adapt. Consumers today check for the best price online and come to stores with the same price expectation. Technology Director, Food Retailer, Hong Kong Companies in all three territories are working out how best to invest in their business and find new growth models to prepare for future expansion. Digital transformation can play a crucial role in that preparation, with the adoption of new technologies and IT service delivery models helping to streamline business operations by enabling greater automation, getting new products and services to market faster, opening up new revenue streams and trimming operational expenditure, including staff as well as IT costs. 4

5 3. Asia Business Outlook and Challenges Three quarters of organizations expect new business and revenue growth despite rising wage costs, price pressure and economic slowdown Our company saw a modest 1.2% increase in sales volume last year and we forecast that to grow by a further 3% by Director, Store Operations, Department Store, Singapore IDG Connect found that an overwhelming majority of organizations across China, Hong Kong and Singapore maintain a positive business outlook in 2016, with 78% expecting new business and revenue growth a finding that is consistent across all three territories. Slightly more of those in China expect growth to be flat or static compared to companies in Hong Kong or Singapore, but a larger number of businesses in Hong Kong expect to encounter shrinking demand and revenue. When asked to identify the challenges expected to impact their organization in the next 12 months, around 20% of companies rated a talent shortage and rising wage costs as the single most important issue they face. Price pressure and increasing costs (the most important challenge for 19%) and intense competition from market rivals (17%) also present testing economic conditions, indicating that businesses in the region expect to fight hard for market share whilst simultaneously handling customer demand for lower pricing and growing operational costs (including staff wages) that threaten to erode their profit. Labor shortages, increasing rents and wages, and limited space are all challenges to the growth of the retail sector. Technology Director, Food Retailer, Hong Kong 5

6 4. Technology Innovation IoT and big data analytics are well embedded with virtual reality, digital immersion, AI and robotics Most organizations in mainland China, Hong Kong and Singapore have already invested in multiple technologies to redefine their growth models. Across the sectors, IoT and big data analytics are the most widely adopted, accounting for close to 50-60% of companies surveyed. Manufacturing Almost 70% of manufacturers are quick to jump on IoT, while nearly half of the companies have deployed online-to-offline (O2O) commerce and big data analytics. The popularity of industrial IoT platforms among manufacturers can be explained by particular advantages it offer. Collecting information from sensors and monitors embedded in machinery provides a wealth of information that can be filtered using big data analytics platforms and used to improve staff and device utilization, increase capacity and speed up production for example. Retail For retailers, they are particularly keen to adopt big data analytics (62%), IoT (55%) and O2O commerce (48%). It s also worth noting that almost half of retail organizations have already utilized virtual reality/digital immersion to build innovative online shopping experiences or augment in-store navigation. Wholesale While wholesale sector witnesses a similar adoption pattern for IoT (57%) and big data (61%), in general they are less keen than other industries on the utilization of O2O commerce, VR and digital immersion. We are currently investigating how to modernize our electronic product codes using RFID which will enable us to track and trace goods down to serial level along the supply chain and enable end-to-end visibility in real time. Technology Director, Food Retailer, Hong Kong Across all three sectors, artificial intelligence, smart robotics and 3D printing are relatively less explored, but over 60% of companies indicated that they are planning to deploy in the next 12 months. 6

7 Whilst most organizations appreciate the benefits that an innovative IT transformation strategy can deliver to the business, they also recognize a number of significant barriers that may hamper their ability to complete ICT upgrade projects. Almost 50% of all organizations on aggregate rated stringent data security and compliance regulations, legacy IT, and complexity in sourcing suitable technologies as the top three most important barriers. Increasingly stringent regulations suggests lingering concerns over where data can be stored, how it is processed, managed and deleted which may prevent them from hosting their applications and workloads in third party data centers and/or on mobile devices vulnerable to cyberattacks and theft. The respondents also identified legacy IT infrastructure as another top hurdle, suggesting that many feel themselves constrained by the inability of the current technology estate to support their upgrade ambitions. It is slightly less a barrier for those in mainland China than those in Hong Kong and Singapore. For every task I can see numerous solutions available, so deciding upon the best one as per the requirement is tricky. We need to consider several aspects like the benefits versus cost, ease of adaptation, integration compatibility with the existing system, time it takes to deploy and above all do we have the capacity. Technology Director, Food Retailer, Hong Kong 7

8 In many cases, IT departments will have to depend on a number of key factors to push digital transformation projects through to successful completion. When asked to identify the three most important factors in driving technological innovation in their organization, 61% cited the compatibility of internal systems and infrastructure as one of those top three factors (and the single most important factor by 20%). This suggests that the ability to integrate new systems and applications with existing architecture dictates the nature of additional implementations in many cases. Other factors involved are management strategy (put in the top three by 50%) and financial support (49%), and almost as many on aggregate (48%) also depend on the expertize of third party vendors. Market readiness and acceptance is a more important factor driving technological innovation for companies involved in manufacturing, whilst more of those in retail see an innovative corporate culture as crucial. Wholesale companies are particularly attuned to the benefits of an effective top down management strategy to drive their digital transformation projects. Drivers for Technology Innovation (on aggregate) (% rating in top three categories of importance) 40% 1 61% 1. Internal skills/expertize 48% 49% 50% Compatibility of internal IT systems/infrastructure 3. Expertize of third party vendors/suppliers 4. Financial support/available budget 5. Effective top down management strategy 8

9 Singapore, Hong Kong and Shanghai are identified as the top three cities as ideal IT hubs in Asia. Current location has a huge bearing on where organizations in China, Hong Kong and Singapore would like to see an ideal location. We see that 86% of those in Singapore chose Singapore and 56% of those in Hong Kong chose Hong Kong (though another 20% opted for Shanghai). Those based in mainland China split their preference across Shanghai (34%), Beijing (22%), Shenzhen (15%). Differences in data privacy regulations, compliance and governance rules across all three territories may play a part in that situation, with companies concerned about both the integrity of the sensitive information they store beyond their own borders and the complexities involved in negotiating hosting agreements and SLAs in other countries. Who Drives Technology Strategy and Selection Decisions? CEOs, CIOS and CTOs (70%) and IT directors and managers (69%) take responsibility in most cases, whilst line of business managers making selection and procurement decisions in roughly one out of three organizations (36%) on aggregate. Regional variations in those findings see organizations in mainland China putting slightly more reliance on CEOs, CIOs and CTOs (83%), line of business managers (42%) and end users (21%) whilst IT directors/managers are marginally more likely to take responsibility for technology decisions in Hong Kong (77%). Those in Singapore rely less on CEOs, CIOs and CTOs (51%), however. 70% 69% 36% 14% CEOs, CIOs, CTOs etc. IT directors/managers Line of business managers End users 9

10 We need a partner who can offer us the right mix of solutions and has an exceptional track record in deploying them. They should go the extra mile and be flexible in their approach to our business problems. Senior IT Manager, International Food Manufacturing Company, Hong Kong Choosing the right business partner to work alongside in-house staff to implement IT transformation projects is fundamental to their success. Those taking part in the IDG Connect survey attach roughly equal importance to multiple selection criteria but slightly more see cross-platform technology and support expertize as most critical. In terms of the main drivers, over 60% are looking to third party suppliers to help reduce the cost of the infrastructure being supplied and shorten the deployment time. We would prefer a service provider that can build and develop our technology with a quick turnaround time. The service provider must be able to provide functionality across various platforms and provide cross-geographic operability and should not be restricted to one particular domain. Head of Marketing, Fashion Retailer, Singapore Many (56%) also feel that external suppliers have more knowledge and expertize and almost half (48%) recognize the need to manage risks and liability more effectively. The latter finding reflects a growing sense that more organizations now consider that third party service providers have more knowledge of regional data protection legislation and are better able to ensure compliance with corporate governance rules than their own internal IT departments. 10

11 9. Conclusion The macro-economic challenges that manufacturing, retail and wholesale companies in China, Hong Kong and Singapore currently face may be formidable but they are not insurmountable. The effect of labor shortages, falling prices and intense competition can be mitigated to a certain extent by judicious deployment of new technology and IT infrastructure delivery models to help streamline current operations and open up new revenue streams through the delivery of innovative applications and services to customers and business partners alike. That digital transformation has to be comprehensive but not disruptive, integrate back end networking connectivity and application/service hosting to improvements in the customer experience and sales/distribution channels. Superior supplier experience of supporting and managing multiple, cross platform technologies from the desktop to the smartphone and every application and cloud service between will be a key factor in winning trust. After all, a successful technology transformation requires not just infrastructure readiness, but also the ability to make optimum use of growing volumes of data to enable smart commercial decisions to be built on actionable business intelligence. I think technology has become a major rescuer for many challenges faced by retail companies. The business use of IT, covering a broad spectrum of services, including service desk, end user support services, network services, distributed computing services and data center management services have helped to face the challenges. Head of Marketing, Manufacturing and Retail Company, Singapore and Malaysia 11

12 NTT Com Asia Limited Tel: (852) Fax: (852) Website: NTT Communications provides consultancy, architecture, security and cloud services to optimize the information and communications technology (ICT) environments of enterprises. These offerings are backed by the company s worldwide infrastructure, including leading global tier-1 IP network, Arcstar Universal One VPN network reaching 196 countries/regions, and 140 secure data centers worldwide. nttca NTT Com Asia Limited Copyright NTT Com Asia Limited. Nov All rights reserved.