The tide of COVID-19 has finally receded. As Asia’s economies repopulate the global economic shoreline, they find the beach littered with new opportunities and new threats. Not even half a year in, 2023 already feels like a pivotal year between two eras of digitization. As 2023 progresses, the Asia Pacific technology market is a cauldron of opportunities set against an equally challenging backdrop, a tussle between the old and the new.

I relocated to Singapore earlier this year to focus on helping tech executives and strategists across Southeast Asia navigate these changes, and I have been traveling furiously across the region since. This April, I had a chance to spend some extended time in Indonesia as part of my client engagements. I find the city of Jakarta an apt and fascinating metaphor for much of developing Asia: The city harbors a vibrant startup and venture capital ecosystem and has recently seen a strong push from the government toward new initiatives that support digitization and data privacy — all this, but even its citizens and city planners fight back against the gradual sinking of the city into the Java Sea due to uncontrolled ground water extraction and global warming. Other individual markets such as India, Indonesia, Thailand, the Philippines, Vietnam, and Malaysia are evolving furiously out of their legacy, under the forward surge of a new generation of digital natives. Meanwhile, more established economies deal with aging workforces, rising inflation, and/or a scarcity of tech talent.

Forrester’s latest research report uncovers key insights into the ebbs and flows of the region’s tech economy. In 2023, APAC’s technology spend is forecasted to accelerate by 5.8%, reaching USD$732 billion. This surge is fueled by several compelling forces:

  • Software expansion. With a projected growth of 9.4%, software is emerging as the digital backbone of APAC’s technological transformation. This sector is expected to grow at a compound annual growth rate of 10.3% by 2027, eventually becoming the largest tech category in the region. This growth is significant because, as our study shows, there is a direct correlation between domestic software spend and levels of national innovation.
  • IT services evolution. Despite a slight slowdown to 7.0% growth in 2023, tech consulting and systems integration services continue to play a critical role. Cost optimization efforts amid recession fears are giving tailwinds to tech outsourcing, projected to grow faster at 8.3% in 2023.
  • Communications equipment adaptation. The growth in this sector is predicted to fall below pre-pandemic levels, but new 5G markets such as India offer some solace. As Chinese enterprise spending on cloud infrastructure remains high, this sector will see 3.0% growth.
  • Computer equipment resilience. Although global PC shipments are experiencing a downturn, the APAC market defies the trend, with commercial demand for PCs in China driving growth. This sector will see a modest 3.5% growth in 2023.

Let’s delve a little deeper into the major trends and dynamics that continue to shape the region’s technology markets:

  1. Rising cybersecurity risks and resilience focus. With APAC maintaining its unenviable position as the highest-attacked region globally, cybersecurity takes center stage. Governments are responding with expanded legal frameworks on cybersecurity and data protection. Alongside, operational resilience is emerging as a top priority for businesses, with a significant 72% of professionals considering it their organization’s primary focus.
  2. The tech-talent roller coaster. The tech sector witnessed significant volatility in 2022. Despite widespread tech layoffs, the demand for tech talent in non-tech sectors ironically rose.
  3. Digital evolution versus digital nationalism. APAC’s digital growth is surging ahead of the world, but it’s also witnessing the rise of digital nationalism. This hyperlocalization-globalization dichotomy will shape the future of tech in the region.
  4. Geopolitical intricacies. While Europe still grapples with the war in Ukraine, APAC’s economy still feels the squeeze from a contracting supply from China, its closer neighbor. Shifting global geopolitics add to the region’s longer-term risks.
  5. The rise and rise of AI. We are at the cusp of a new era in technology. It’s been a few months since ChatGPT stormed its way into the world, and not a day goes by when its disruptive effects are not heavily discussed. That said, Asian AI maturity varies widely, with countries such as Singapore and China already far ahead of the rest of the region in research into, as well as in application of, AI. The race has only begun, however.

Navigating these tumultuous waters requires organizations to stay attuned to these shifting market dynamics, preparing for a future that is as unpredictable as it is exciting. Forrester clients can find more details, including growth forecasts by major APAC countries, in the report here. This is a dense and detailed report with a lot of interesting facts. We enjoyed putting it together, and I hope you will enjoy reading it.

Please connect with me if you’d like to discuss any aspect of this report further.