Thai Software Industry Expands as Mobile Computing Soars With digital content now touching all corners of Thai society, the software industry is a critical driver of the country’s technological, economic and social development. Dynamic achievements in software tools are facilitating progress in everything from manufacturing and agricultural efficiency to the quality of education. The market value of the Thai software industry is approaching US$2.3 billion and annual exports top US$150 million. Enterprise software remains the dominate sector, accounting for 88% of value, followed by animation, embedded and mobile application software. That last sector, however, is making its move. “It’s exciting. The industry is really rushing along,” said Thanachart Numnonda, director of Software Park Thailand. He is referring to the explosion of mobile computing in Thailand, which is opening up opportunities in related R&D, manufacture and marketing. Mobile computing and online consumerism together are skyrocketing as the Thai software industry’s fastest growing sector. As a happy result, the popularity of mobile devices such as the iPod and tablet PCs is creating the need for more applications, clearly a blessing for investors. According to the Thailand Development Research Institute (TDRI), production of mobile application software in the country surged 36% during 2011. The National Electronics and Computer Technology Center (NECTEC) further projects that 2.5 million tablets will be sold in Thailand this year, a tremendous leap past 480,000 units in 2011. Local society is undoubtedly going digital. The e-commerce usage rate among the Thai population is estimated at 67% for 2012. There are nearly 69 million mobile phone users, or virtually the entire population. The top mobile application sectors break down as 34% for finance, 19% in energy, 16% involving public utilities, 11% for food, 10% for telecom and 6% for education.
Operational Advantages Beckon Thailand offers software entrepreneurs many operational advantages. Foremost is the country’s rapidly expanding infrastructure for information and communications technology (ICT). Local resources vital to software products development include reliable Internet, network security, low incidence of power outages, and outstanding R&D and production facilities. In fact, Thai companies are steadily constructing a physical infrastructure that will position the capital Bangkok at the center of a regional network of digital connectivity and data dissemination. Robust software clusters in the country create an environment for both innovation and cost-efficiency. Among these are Software Park Thailand, ESaan Software Park, Korat Software Park and Software Park Phuket. Investors are also immersed in a vibrant market. Thailand’s ICT market is the largest in Southeast Asia and its CDAR growth is projected at 12% for 20102014. The country’s value of spending on all ICT products and services is estimated to reach US$8.7 billion in 2014. Currently, there are more than 24 million Internet users in Thailand. The nation’s 3G network is also taking shape to enhance connectivity further. Software investors in Thailand enjoy strong support of the industry. The Thai government’s regularly updated master plan provides the framework for continued stable progress. Targeted policies foster the infrastructure expansion, ongoing training of information technology professionals, financial incentives, and effective commercialization of R&D breakthroughs necessary to ensure the competitiveness of software businesses. There is a plethora of projects aimed at transforming Thailand into the region’s digital media hub. One program exciting everyone from engineers to entrepreneurs to common households is the government’s “Smart Thailand” strategy. This involves investing US$2.6 billion in a digital platform to boost nationwide Internet penetration from 33% today to 95% by 2020. Many public and private bodies are working to quicken the industry’s pace. Firm government commitment to push Thailand up the technology value chain is complemented by organizations such as the Board of Investment (BOI), Software Park Thailand, TDRI, NECTEC, Software Industry Promotion Agency (SIPA), Ministry of Information and Communication Technology (MICT), Thailand Software Process Improvement Network, Association of Thai Software Industry, Thai Software Export Promotion Association, Thai Animation and Computer Graphics Association and Thai Game Software Industry Association.
The BOI classifies software development as a priority activity important to the country’s prosperity. As such, it offers maximum investment incentives to software ventures regardless of location. These include exemption of import duties on machinery, corporate income tax exemption for eight years, and 100% ownership of projects for foreigners. SIPA, which is under the MICT, endeavors to enhance the Thai software industry especially through human resources and product quality improvement. Software Park Thailand, operating under the National Science and Technology Development Agency, also strengthens entrepreneurs by assisting on human resources procurement, securing of technology, quality improvement and marketing. Thailand is also an attractive software investment location for its skilled and affordable workforce, with programmers as a strong suit. Of the half million individuals working in the country’s ICT industry as a whole, nearly 100,000 are employed in software and computer services. The lively sector offers investors youthful enthusiasm, as most professionals at Thailand’s estimated 1,400 to 1,900 software businesses are under the age of 30. Over 100 universities produce more than 4,000 skilled professional workers annually. As more fresh graduates pour in each year, this sufficiency of creators and innovative thinkers ensures the industry’s competitiveness amid the continuous technological changes, such as the big push currently for mobile applications. Creativity and design skills are indeed among Thailand’s biggest strengths. This can be seen in the country’s world- renowned animation sector. Combining a knack for innovation with low prices, Thai software animation enterprises excel both as subcontractors and original creators. With more than 70 animation firms, 60 game companies and scores of freelancers, annual revenue in Thailand’s digital animation and games sector tops US$750 million. Moreover, foreign investors benefit from local wages being half of those in the United States and the European Union, making Thailand very cost-competitive as an operations center. For example, the average monthly salary of software programmers, administrators and engineers in Thailand is US$1,056. Thailand’s worker skills are a big factor behind the country’s impressive seventh-place ranking on the A.T. Kearney Global Services Location Index 2011.
The character of the local business environment is also a plus for investors. “The ethics of the Thai people is that we are not going to steal your coat,” Thanachart said.
Investment Opportunities Everywhere Thailand’s geographic position at the center of Southeast Asia serves as a launchpad to regional markets where consumer buying power for ICT products is growing. The location of Thailand is becoming even more advantageous as the 10 member countries of the Association of Southeast Asian Nations (ASEAN) approach the 2015 launch of the ASEAN Economic Community (AEC). The AEC is to be a single market and production base with zero tariffs and liberalized investment sectors. This will enable investors in Thailand to enjoy the free flow of goods, services and capital with the regional bloc’s other members, namely Singapore, Malaysia, Indonesia, Vietnam, Cambodia, Laos, Myanmar, Brunei and the Philippines. Attracted by its operational advantages and unlimited potential, many prominent software firms have facilities in Thailand. Frontrunners include DST, Thomson Reuters with 1,200 software engineers, Ventura, Microsoft Thailand, CDG, Wealth Management, the large Thai firm Soft Square with 300 employees, and the Thai mobile company MFEC with 100 programmers. Intel and AlcatelLucent are among the major international IT players to recently announce plans to expand in Thailand. Escalating demand makes Thailand’s software industry ripe with investment opportunity. Fertile areas include software for scientific research, localization, communication, logistics, finance, entertainment, social networking, Web-based applications such as e-learning and e-government services, and cloud computing. In 2010, the BOI added data centers to its list of activities eligible for investment incentives to encourage expansion of the country’s information technology infrastructure. With enterprises worldwide seeking to cut costs, business process outsourcing (BPO) and information technology outsourcing (ITO) have emerged as two hot investment sectors in Thailand. In fact, the Gartner research and advisory company ranks Thailand among the world’s top 30 locations for BPO and ITO.
To promote the sectors, the BOI recently expanded the activities eligible for investment promotion to cover a wide range of BPO services. These are accounting, administration, sales and marketing, human resources support, data processing, legal services, call centers and customer services, among others. But rapid growth also creates challenges. To maintain competitiveness, Thailand will need to continue producing a sufficient number of information technology graduates as digital demand soars. The industry also needs to make sure that broadband penetration succeeds in going completely nationwide. Currently, quality broadband is said to reach about 4 million households. A milestone yet to be achieved is the 3G platform for mobile broadband. With the country’s 2.1 gigahertz 3G auction scheduled for Q4 2012, service provision could become a reality next year. Another challenge is that the Thai software industry must capitalize on trade and investment opportunities presented by the AEC and its barrier-free access to 600 million consumers.