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SE Asia: Tech Should Be Looking to Politics in 2014

December is the most wonderful time of the year if you’re an IT pundit. Even in Asia, where commentators are often – frustratingly for us hacks – reluctant to make any bold predictions for the next 12 months, there’s always something to talk about. So what are the key stories and trends to watch out for in 2014?

One big elephant in the room is Windows XP, for which support ends in April. According to StatCounter figures, the archaic OS had a market share just over 50% in the PRC as of November, which is more than a little worrying for Beijing. In fact, it’s probably why the Chinese government has already been leaning on Redmond to continue support for XP. Yan Xiaohong, deputy director of China’s National Copyright Administration, met Microsoft representatives recently to warn that China faces a potentially huge security risk post-April, according to a local report on Techweb.

He’s got a point, according to SC Leung, senior consultant at the Hong Kong CERT, a group which coordinates responses to security threats.

“If Microsoft doesn’t provide patches for WinXP, some security researchers may volunteer to provide unofficial patches/fixes which do not have as extensive testing as those from Microsoft,” he told me. “Some hackers might even provide ‘unofficial patches’ but include backdoors in those fake patches.”

Although government and enterprises really should have got the message about migrating to newer versions of Windows by now, SMEs which are typically less well-resourced may struggle, he added.

China is already one of the most malware-ridden nations on Earth. It was only supplanted in Q2 as the world’s number one source of attack traffic by a sudden surge from Indonesia, according to the most recent figures from Akamai. Their respective share of attack traffic stands at 38% and 33% now, with APAC as a whole accounting for a whopping 79%. The large number of extra machines which may become compromised after Microsoft ceases security updates is bad news for everyone, not just China, because it will give cyber gangs an even larger army of infected machines from which to stage global attacks.    

Sino-US stand-off continues

Next year is going to be an extremely tough one for US technology vendors in China. Whether due to the US government’s increasingly vocal accusations of state-sponsored cyber-espionage and its refusal to allow Chinese firms like ZTE and Huawei to tender for public-sector contracts, or continued revelations of NSA snooping, 2014 is bound to see some serious retaliation from Beijing. Already IBM and Cisco have complained of slowing business in the Middle Kingdom, with the latter’s CEO John Chambers even going so far as to state on a November earnings call: “China continued to decline as we and our peers worked through the challenging political dynamic in that country."  

In reality, the current revenue slump is more likely due to a general shrink in public spending, but when payback time does come; those US companies with serious Chinese rivals will obviously be most vulnerable. In this regard, Cisco will be particularly nervous, although other vendors may also find new barriers to trade. Qualcomm, for example, has just been hit by a potentially serious anti-monopoly probe  which could reduce the amount of royalties it can collect from its 4G chips. Even CEO Paul Jacobs admitted to the Wall Street Journal that the chip giant is “seeing increased pressure” in China.

So where does that leave China’s cyber espionage activities? Well, according to a US congressional report (PDF) out last month, nothing will change in 2014. In fact, it claims that outing the likes of APT1, a prolific hacking group linked to the People’s Liberation Army in a key report by security firm Mandiant, has only driven such groups deeper underground. “It is clear naming and attempting to shame will not be sufficient to deter entities in China from engaging in cyber espionage against US companies,” the report claimed. UK organisations too will need to stay on high alert.

Elsewhere in Asia, the past 12 months has been an unusually traumatic one for India’s outsourcers. First, a breakaway group of software companies formed iSpirit in a clear sign of dissatisfaction at NASSCOM’s focus; then the US proposed new immigration laws which could push costs up significantly for India’s IT services giants; and towards the end of the year the rupee dropped to record lows. The bad news for outsourcing providers, but perhaps not for their customers, is that the instability could continue well into 2014, with national elections to be held in April, according to Forrester’s India VP Manish Bahl.  

“The biggest threat to India’s economic growth is the political instability post-parliamentary elections,” he told me. “In case of a political instability, clients will be in a better situation to negotiate hard on contracts.” 

Taming the Asian tiger

Bahl’s colleagues at Forrester also pointed to huge opportunities in the coming year for Western companies operating through online channels in APAC. The analyst’s 2014 predictions document pointed out that the total number of online buyers in China alone will surpass the total population of the US next year, so developing effective online channels will be key.

It had this advice:

“Many multinational firms either offer shoddy localisations of their websites in AP markets or ignore the need altogether. CIOs must pay more heed to the global implications of their technology decisions and balance the need for consistent architectural frameworks with the need for local autonomy.”

Mobile growth will also continue apace in APAC especially at the low end, as users continue to ditch their feature phones for budget smartphones, so there are growing opportunities for mobile gaming developers and m-commerce players here. The hardware itself, however, is likely to come mainly from Asian manufacturers, which will frustrate Microsoft as it tries to expand its footprint in the region. Former Nokia employees have been busy too, with the creation of Singapore-based Newkia which aims to release Android handsets with that Finnish know-how, although it will struggle to make an impact beyond novelty value.

So how about up-and-coming Asian firms which could trouble Western rivals in their back yard next year? Well aside from Tencent’s WeChat app, most of the serious competition looks like coming in the hardware space. Flush with VC cash, little-known smartphone makers like Meizu, Xiaomi and Coolpad are ploughing money into R&D and looking to expand their footprints abroad, according to William Chou, head of Deloitte China’s TMT practice.

“There are a lot of these smartphone handset manufacturers but the winners will be those that can combine hardware, software and internet services successfully, like Xiaomi,” he told me.

 

John Anderson has been writing about technology and all things Asia for over a decade. From his perch in the Far East he keeps a keen eye on the global significance of emerging trends in the region.

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John Anderson

John Anderson has been writing about technology and all things Asia for over a decade, having started out on some of the UK's best known best-known IT trade titles. From his perch in the Far East he keeps a keen eye on the global significance of emerging trends in the region. 

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