Lim May-Ann, Managing Director of TRPC, presented the findings of the 2016 CA Technologies Asia Pacific & Japan Application Economy Index.

Singapore currently holds the top spot in the Asia Pacific and Japan region regarding the application economy. However, it faces a potential decline to fourth place in future potential, according to the inaugural Asia Pacific & Japan (APJ) Application Economy Index (AEI) 2016. This index assesses the readiness of 10 APJ markets to thrive in the digital age. The top five positions are held by Singapore, followed by Australia, South Korea, Japan, and Hong Kong. Malaysia, mainland China, Thailand, India, and Indonesia complete the rankings.

Presented at the CA Technologies APJ Media & Analysts Summit 2016, the study was developed and commissioned by CA Technologies and conducted by research consulting firm TRPC. It offers a snapshot of the current state of Asian economies in terms of their conduciveness to application development and market entry.

“The Application Economy Index categorizes markets based on their capacity to integrate, develop, and benefit from application usage,” explained Lim May-Ann. “Our findings placed Singapore, Australia, South Korea, Japan, and Hong Kong in the ‘Disruptors’ group, demonstrating their preparedness to capitalize on opportunities presented by the application economy. China and Malaysia constitute the ‘Challengers’ group in the middle, while Thailand, India, and Indonesia form the ‘Mainstream’ group, necessitating a focus on fostering conditions for business prosperity within the application economy.”

However, when the study shifted focus to future leaders in the application economy using ‘market potential accelerators’ (MPA), a different landscape emerged. MPA is an index that analyzes factors that can influence and accelerate market potential in the evolving application economy.

CA Technologies emphasized that in our increasingly interconnected world, every business is essentially a software business and must embrace digital transformation. The index evaluates three fundamental pillars crucial for a thriving application economy:

Pillar 1, Government use and support of technology and innovation: Governments must embrace software and applications to develop effective technology policies and foster innovation.

Pillar 2, Internet and mobile infrastructure: A robust application economy requires adequate infrastructure and access to technology. Essential connectivity, network backbones, and an environment that supports business growth and transformation are crucial.

Pillar 3, Business agility: This refers to the ability to adapt swiftly and capitalize on market disruptions. This requires an environment that encourages entrepreneurship and new business models.

Source: CA Technologies infographic. Singapore, Australia and Korea lead rankings, while China, India and Indonesia could well overtake if they capitalise on opportunities.

TRPC examined factors like the number of smartphone and mobile internet users, engagement with virtual social networks, daily mobile application usage, and the size of the youth demographic to re-rank the countries. TRPC’s Lim highlighted that apps, rather than URLs, have become the primary gateway to the internet for many Asian users, emphasizing their importance for success in the application economy. She shared anecdotes of consumers claiming to not use the internet while actively using the Facebook app on their phones.

The study revealed that China, India, and Indonesia have the potential to ascend to the top three positions by capitalizing on their opportunities. Conversely, current leaders—Singapore, Hong Kong, South Korea, Australia, and Japan—risk falling behind if they don’t address existing gaps in their markets.

CA Technologies pointed out that Singapore’s potential decline in the MPA ranking underscores the need for innovation to keep pace with the rapid disruption in today’s application economy. Enterprises must act swiftly to secure market share, and governments should implement policies that promote infrastructural development ahead of demand.

“The emergence of the application economy has disrupted the status quo,” said Kenneth Arredondo, President & GM, Asia Pacific & Japan, CA Technologies. “Innovation must match the pace of disruption, requiring forward-thinking, proactive strategies for risk management and opportunity capitalization for businesses to succeed in this new landscape.”

“Enterprises should prioritize swift action to capture market share, while governments need to enhance the supporting infrastructure, allowing businesses to evolve and adapt rapidly to changing market conditions,” he added.

TRPC’s Lim concurred, stating, “Swift action is crucial for capitalizing on the opportunities presented by the application economy. Risks and opportunities are abundant. Early movers have a significant advantage. Overcoming the challenges identified by CA Technologies and us, minimizing risks, and maximizing opportunities will render these rankings irrelevant next year.”

Singapore’s top rankings in government technology adoption, intellectual property protection, and innovation bolstered its overall position. Its strong performance in business agility, particularly in areas like business setup time, debit card penetration, and mobile payment readiness, also contributed to its high ranking. However, its sixth-place ranking in cybersecurity suggests a need for greater attention in this domain.

“Singapore’s leadership is not surprising, given its consistently high scores across categories, especially in government use and support of technology,” commented Nick Lim, VP, Asia South, CA Technologies. “While Singapore is well-positioned to flourish in the application economy, unique opportunities will arise from the dynamic socioeconomic conditions in emerging markets. Harnessing software to remain competitive and relevant in this rapidly evolving landscape will be paramount for businesses.”

Despite its strengths, Singapore risks dropping to fourth place if it fails to address existing market gaps. Some challenges include a mature mobile market with limited room for new applications, an aging population, and a relatively small smartphone user base. However, opportunities lie in its high daily mobile internet usage, daily application usage, and virtual social network engagement.

Country Studies

Singapore

Singapore demonstrates consistent strength across all categories, particularly in pillar 1, securing top rankings in IP protection, innovation parameters, and government use of technology.

Despite its strengths, challenges remain, including a mature mobile market and a relatively small smartphone user base (4.8 million). However, opportunities are abundant:

• High statistics for daily mobile internet use, app use, and engagement with virtual social networks.
• Proactive government policies like the Next Generation Nationwide Broadband Network.
• Personal Data Privacy Protection Act 2012 and the Infocomm Media Masterplan 2025.

Australia

Australia exhibits consistent strength across categories, particularly in pillar 2. It ranks second in internet penetration, third in average mobile connection speeds, and third in smartphone penetration.

Challenges include a fourth-place ranking in IP protection, fifth in mobile payments readiness, and eighth in the youth population ratio to the overall population. Opportunities include leveraging the widespread use of virtual social networks like Facebook.

Mainland China

China predominantly secured mid-level scores for pillar 1: seventh in government use of technology, fifth in IP protection, and sixth in innovation.

Challenges lie in pillar 3, where China received its weakest scores. It ranked ninth in terms of time taken to set up a business, ninth in cybersecurity strength, and fourth in mobile payments readiness. However, opportunities are present in the government’s “Internet Plus” strategy to stimulate economic growth through new technologies and services, and a massive user base of over 1 billion smartphone users, with 93% accessing the mobile internet daily, according to TRPC’s Lim.

Hong Kong

Hong Kong’s strong scores are driven by forward-looking government policies. It ranks second in government support for technology and innovation, second in innovation, and third in IP protection.

Challenges include a relatively small smartphone user base, ranking ninth, and a small youth demographic, also ranking ninth.

India

India received consistently low scores across all parameters except for cybersecurity, where it ranked third.

Challenges include a unique mobile phone usage pattern due to infrastructural limitations and a complex mobile tariff regime. Despite these challenges, opportunities exist. India is projected to have 236 million mobile internet users by 2016 and a market of 427 million smartphone users. With nearly 18.1% of its population aged between 15 and 24, there is a significant youth demographic.

Indonesia

Indonesia has the potential to rise from tenth to third place by directly transitioning into the mobile economy. For many Indonesians, their first computer will be a mobile phone. The country received low scores in most parameters, including tenth in innovation, average mobile connection speeds, time taken to set up a business, and mobile payments.

Challenges include the need for stronger protection for innovation and ideas, higher debit/credit card penetration, and improved mobile payments readiness to promote e-commerce. However, Indonesia has above-average scores in daily mobile internet and app usage, as well as social network usage.

Japan

Japan benefits from robust IP protection, ranking second, but requires improvements in pillar 1. It performs well in pillar 2, ranking first in internet penetration and second in average mobile connection speeds.

Challenges include low smartphone penetration (eighth), low app usage (ninth), low social network engagement (eighth), and the smallest youth demographic in the region. However, opportunities exist in its excellent internet connectivity, faster-than-average business setup time, and strong business agility scores.

Malaysia

Malaysia scored in the mid-range across parameters but secured the top spot in cybersecurity strength.

Challenges include a relatively small smartphone user base (21 million) and the lowest number of daily mobile internet users. However, its above-average youth population percentage (15-24 years) presents an opportunity in the age of digital natives.

South Korea

South Korea demonstrates strong performance in pillar 2, ranking first in average mobile connection speed and smartphone penetration, and third in internet penetration.

Challenges include below-average daily mobile internet usage (eighth) and social network usage (seventh). However, the government’s proactive approach to adjusting regulations to enhance the application economy’s prospects, with initiatives like the Cloud Computing Promotion Act, presents opportunities. The country also boasts a substantial smartphone user base of 42 million.

Thailand

Thailand received low scores for pillar 1, ranking eighth in government use of technology and innovation, and tenth in IP protection. It also performed poorly in pillar 2, ranking eighth in internet penetration, ninth in average mobile connection speeds, and seventh in smartphone penetration.

Challenges include the need to improve IP protection and cybersecurity. However, Thailand has tabled ten Digital Economy Bills, according to TRPC’s Lim, addressing areas like personal data protection, cybersecurity, electronic transactions, and digital development. The country also ranks fourth in daily app usage and social network engagement.

TRPC’s Lim concluded, “The winners and losers are yet to be decided. Those who act swiftly and capture market share will emerge victorious. The key is to penetrate the market with the largest user base rapidly.”

Interested?

• Read more about CA’s APJ Application Economy Index 2016 (PDF)

• View the infographic

• Read the TechTrade Asia blog post about how to win in an application economy

Hashtag: #CAAPJSummit

*Methodology: The ten parameters of the CA Technologies APJ Application Economy Index (AEI2016) and five MPAs are sourced from publicly available indices. As indicators used had different units and scales, any indicator that did not use a 10-point scale was normalized to ensure comparability of indicator values and to construct aggregate scores for each economy.