Singapore firms’ tech spending expected to rise as AI gains traction

There have been blockchain, crypto and the metaverse, but nothing does it like generative artificial intelligence (AI) when it comes to blowing up company tech budgets.

Technology spending in Singapore is expected to surge despite the Government cutting back its infocomm budget.

According to research firm Forrester, tech spending in Singapore in 2023 will reach $22.2 billion, 4.6 per cent more than the $21.2 billion in 2022 and higher than the $20.5 billion in the pandemic year of 2021.

Research house IDC expects Singapore’s spending on AI alone to cross US$3.5 billion (S$4.6 billion) by 2026, almost three times the US$1.2 billion in 2022.
 

Ms Yean Cheong, Executive Director of tech association SGTech, expects generative AI to bring sweeping change across industries, with companies having to spend on research and development, talent and implementation.

“Over the next two years, we anticipate that tech spending by the private sector will continue to grow,” she said.

In tandem, firms will put money into cloud computing and cyber security in areas such as security solutions, trust audits, certification and accreditation, and employee training, she added.

Tech professional Toh Keng Hoe believes the rise in private sector tech spending in the next two years will be significant.

AI, cyber security and cloud “not only offer businesses greater efficiency, cost savings and competitive advantage but are now also necessary and crucial in the survival of a business”, said Mr Toh, who is President of the AI and Robotics Chapter in the Singapore Computer Society.

Conversely, the Government will spend $3.3 billion on information and communications technology (ICT) in 2023, down from $3.8 billion in each of the last two fiscal years.

It said past efforts to tender in bulk and modernise its back-end ICT infrastructure through the cloud have resulted in cost savings.

The smaller budget is not surprising, said Mr Toh.

“It could signal a successful transition phase where initial investments in infrastructure in the earlier years are now giving way to optimisation and maintenance with significant savings. It could also be a correction due to large Covid-19 spending.”

IBM Singapore general manager Colin Tan said that while bigger expenditures may not necessarily translate to economic growth, spending projections signal the scale and scope of the ICT focus areas that companies and governments are investing in.

Singapore’s industry relied on trade, manufacturing and agriculture when IBM set up its foothold here in the 1950s, he said. “The early investments in technology and innovation paved the way for Singapore’s growth.”

Today, the Asia-Pacific region offers the smallest but fastest-growing market by revenue for many of the world’s biggest United States-based tech companies.

Forrester forecast analyst Himank Joshi said: “The Asia-Pacific’s... tech spending as a percentage of gross domestic product lags in comparison to Western countries, indicating substantial room for boosting tech investments in the region.”
 

Ms Deepika Giri, Regional Head of Research for Data, Analytics and AI at IDC, said it is plausible that the region could overtake the European, Middle Eastern, African and North American markets within the next two decades.

“Considering both the geopolitical scenario and Southeast Asia’s thriving startup ecosystem, the source of technology that the region buys could shift to Asia over the next five to 10 years,” she said.

Tech startup sectors in Southeast Asia including Singapore are blooming, said technology consultant Bensen Koh from Access Partnership, but it remains a challenge for a Google or Microsoft equivalent to emerge from the region.

“The large headstart that existing Big Tech players have is something that will be very difficult to close with talent alone,” he said. “But a lot can happen in a decade. With the right support and funding, we could very well see more local and Southeast Asia tech players enter the big league.”

Bloomberg Intelligence, which projects generative AI to grow to a US$1.3 trillion market by 2032, powered by a compound annual growth rate of 42 per cent, sees a looming shake-up in the tech industry.

Its senior technology analyst Mandeep Singh said: “There will be winners and losers. You will see some companies gain market share and some companies lose. It will not be as disruptive at the country level, but more so at the company level.”

The pockets of the man on the street will not be spared either, Bloomberg’s report suggests.

“Mainstream adoption (of AI) may speed up the refresh cycle for personal computers and smartphones since current versions of such devices aren’t well suited for the heavy processing, memory and storage requirements for AI’s large language models.”

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.