IT sector to ride out inflation storm

The IT sector is tipped to escape high inflation rates which are squeezing many other business sectors.

The International Data Company has just adjusted its IT spending forecast in Vietnam this year with a 2 per cent decrease worth $2.2 billion.
“We predict private IT sector spending will drive the market overall as foreign investments are still expected to flow into the country and domestic companies still need to improve their IT infrastructure to remain competitive and cost effective,” said Lam Nguyen, IDG Vietnam country director.
Disposable income in major cities such as Ho Chi Minh City and Hanoi is driving domestic demand upward, which is set to offset any detrimental affects from weakening global demand. Hardware consumption is the most vulnerable sector. In 2007, hardware captured over 88 per cent of IT spending in Vietnam.
FPT Distribution, the largest information and communication technology (ICT) products and solutions outfit in Vietnam, reported a high year-on-year growth rate in the first quarter this year. IT revenue was over 10 per cent against its planned target and mobile device business jumped by 6 per cent. IT sales growth was up by 93 per cent and mobile device sales up by 43 per cent against the same period last year.
“IT market value will be reduced by 10-20 per cent in the second quarter against the first quarter. However, FPT Distribution still has a chance to rise above last year’s accumulated revenue which was more than $300 million in the second quarter,” said Tran Quoc Binh, general director of FPT Distribution. Packaged software and services may witness inflation impacts from next year as software and services companies implement deals they signed last year.
“The current revenue results from deals last year and the impact of expenditure cuts as a measure of inflation will be o­nly clearer later this year or next year,” said Nguyen Kim Cuong, CMC Software vice president.
Ho Chi Minh City Post and Telematics Department also asked the city’s people’s committee to cut VND29.9 billion ($1.8 million) in funding for ICT projects this year, accounting for 31.5 per cent of the industry’s total funding. The department proposed to halt 15 slow projects with total investment capital of VND67 billion ($4.1 million), which ought to be executed within 2006-2007.