APAC 2022: setting the stage for opportunity and competition with the West

The pandemic accelerated digitalisation around the world, but particularly in APAC. As new tech hubs emerge across the region, what will 2022 bring for tech in APAC?

Nate Hovee / Shutterstock.com | IDG

APAC is a region of unparalleled diversity on the planet. That means many countries have had different experiences of the pandemic. But one thing they have in common is an impressive push to digital and cloud technologies. New regions are emerging as low-cost outsourcing hubs as local organisations double down on education and internet infrastructure. And the shadow of China continues to loom large—as a standard-setter and early adopter, but also a major rival.

How well western organisations navigate these challenges and opportunities in APAC may define their global success over the coming year.

Leap-frogging the West on digital and cloud

COVID-19 had a stunning impact on digitalisation across the globe, as consumers flooded online and governments and brands scrambled to offer new online services and experiences to engage them. But in South East Asia the trend was particularly acute. Since the beginning of the pandemic, 70 million individuals became digital consumers, according to Facebook. IDC predicts that at least two-thirds (65%) of APAC’s GDP will be fully digitalised by 2022. By the year after, a third of companies will generate more than 30% of their revenues from digital products and services, it adds.

This fast-growing digital economy is being built on rapid cloud adoption. APAC firms are skipping managed services and leaping straight to public cloud infrastructure, to drive such plans forward with increasingly impressive momentum. Spending on cloud services reached 85% of the region’s tech and business services market in Q1 2021, for example. Expect more of the same in 2022. Forrester reckons 30% of APAC firms with cloud-first strategies will transition to cloud native next year.

China remains the elephant in the room, and will increasingly use its statist model to force through substantial technology advances, such as plans for a single stack IPv6 network by 2023. This could provide a huge spur for 5G and IoT innovation in the country—perhaps giving it an unassailable lead.

Unsung heroes become global players

Elsewhere, countries are undergoing their own significant tech-centric transformations. Vietnam’s continued investment in education is paying dividends as the country becomes a major low-cost outsourcing destination for western firms. It’s already stealing business from the UK and Eastern Europe as a result. By 2025, the country’s internet economy is predicted to reach $57bn after recording double-digit growth.

India, which started off life as a tech outsourcing hub, is itself maturing into a serious software start-up destination. SaaS start-ups in the country are projected to capture up to 9% of the global market by 2022. Part of this growth will come from the country’s burgeoning ecosystem of entrepreneurial firms outside the main metropolitan hubs—such as in Bhopal and Tenkasi, where Zoho has a major base.

Security looms large

APAC will also remain a major threat to the West in other ways, notably because of the actions of its state-sponsored cyber-operatives. North Korea is an increasingly prolific actor on the world stage, unusual for a nation state in that it sponsors both espionage and sabotage alongside financially motivated attacks. These are estimated to cost the global economy as much as $1bn annually. With few repercussions to its actions, it’s unlikely this strategy will change over the coming year.

China will also continue to cause the US and its allies security headaches thanks to its huge army of state-backed hackers. But the country is also catching up with the West in terms of its legal frameworks regarding cybersecurity. Following 2017’s Cyber Security Law (CSL) came the remaining two “pillars” of this strategy in late 2021: the Data Security Law (DSL) and the Personal Information Protection Law (PIPL).

Legal experts have warned organisations doing business inside the country to take urgent action to ensure compliance with these laws. The DSL will require organisations processing sensitive “core” data to comply with strict localisation rules and will be prohibited from providing access to China-based data to any foreign law enforcers, for example. The PIPL has been likened to China’s “GDPR” and will apply extra-territorially. There could be some big fines on the way for western firms.

As if this increasingly complex regulatory environment wasn’t enough, foreign firms operating in the region will also need to enhance their risk management strategies. Forrester predicts that 60% of security incidents will involve third parties in 2022, as smaller suppliers in particular are targeted.

However, such investments will increasingly become a no-brainer these firms embrace the tremendous opportunities afforded by this dynamic region over the coming year.