"Cybersecurity needs to be an integral part of digital innovation. As our technological landscape evolves and new cyber attacks emerge, it’s never been more important for organizations to detect threats quickly. Cisco has dramatically reduced the time to detect threats to hours, compared to the industry average of more than 100 days. We’re able to do this because our integrated architectural approach to security, harnesses the power of automation, which helps our customers to secure their organizations more effectively from the network, to the endpoint, to the cloud." – Stephen Dane
Stephen Dane - Managing Director, Security, Cisco Asia-Pacific, Japan and China
Financial services take cybersecurity very seriously - 80% said it was a technology that was, or would, shape their industry, compared to, say, 55% in retail. (See Figure 1)
Figure 1
This in itself isn't surprising: The World Bank estimated that customers of financial services suffered 65% more cyberattacks in 2016 than customers of any other industry, itself a 29% increase from the previous year.1 Digging deeper into the data, however, reveals a worrying picture: while 80% of IT executives in the industry rated it as a technology that would shape their industry, only 69% said they had started to adopt it. (See Figure 2) And that number fell to 62% when those adopters were asked whether the technology had been fully installed (that's still the best of all sectors). Another 30% of those financial services IT managers adopting the technology said they were half way there.
Figure 2
Given how cyberattacks and cyber theft have ravaged the industry for at least a decade, the numbers reflect how slow some organizations are to adopt robust defenses. The Cisco 2018 Asia Pacific Security Capabilities Benchmark Study concurs, highlighting that while 42% of executives consider cybersecurity a high priority, as many as 9% of respondents indicated they do not have any dedicated cybersecurity professionals at their organizations, and 13% do not have executives who have direct responsibility and accountability for the cybersecurity of their organizations. Perhaps unsurprisingly, only half of the cybersecurity alerts that are received are investigated – even when 51% of those alerts are actual incidents.2 Accenture uncovered similar mismatches between executives acknowledging the problem and doing enough to protect their organizations. While a worldwide survey of over 900 executives conducted by Accenture Strategy found that over two-thirds of respondents believe the likelihood of a cyberattack to be "very" or "extremely" high, only 9% run inward-directed attacks and intentional failures to test their systems on a regular basis. "There is a significant disconnect," the report concluded, "between cyber threat awareness and preparedness in most organizations." These threats can come from anywhere: Henry Shek, Head of Cyber Security Services KPMG in China, wrote in a recent KPMG paper3 that one of the region's biggest problems was on the cyber risks arising from third-party service providers and connections. Banks are taking action, he said, to not only check their own preparedness but also to evaluate the security controls of third-party providers, scrutinizing what data is being shared with outsiders, and even beginning to conduct cyber security simulations that involve testing third-party connections and personnel. This is a start, but it's only that - especially with the rise of open banking, where customers can use their banking data on other platforms. According to a survey by the Economist Intelligence Unit and Temenos of digital banking, while 71% of respondents are focusing their digital investment on cyber security (the biggest focus), only 17% are concerned about those third-party relationships.
1 Cybersecurity, Cyber Risk and Financial Sector Regulation and Supervision, Feb 24 2018 2 Cyber Security: Confronting the Threat, Accenture, 2015 3 Global perspectives on cyber security in banking, KMPG, May 2018
For decision makers about which technology to focus on, the landscape can be confusing. The Cisco survey highlighted the divides between how some countries and industries are adopting technologies, where the divide isn't easy to explain. Take the retail industry and the internet of things, or IoT, as an example. While consumer IoT is already taking off, the retail industry itself is still responding unevenly. Developing countries like Thailand, the Philippines and Indonesia rank it very low as a shaping technology (lowest of all technologies in all those cases), (See Figure 3) while India, Australia, China, Japan and Malaysia rate it higher (all but Japan rating it as the most influential technology on the list).
Figure 3
This may reflect the different pace and paths that markets within Asia are taking to adopt online retail. GM Insights, a consultancy, estimates $9 billion was spent on IoT in retail last year, and that the global market would grow by 19% CAGR by 2024.4 Most of this spending is on digital signage, but also on supply chain management, payment systems, and smart shelves/doors. IoT can also help minimize waste, control costs, and reduce the risks of delivery product shortages. This growth will spur demand for greater network capacity: A joint report by ESCAP and the ADB in June said that retail data created by IoT devices in 2020 would require 1,000 times the network capacity the 2016 level, with 4G networks incapable of handling this growth. Spending on retail IoT in the physical world is likely to be dwarfed as more and more consumers do their shopping online - a trend that is much more pronounced in Asia. A report by Zebra Technologies5 last year found that 70% of retailers worldwide were ready to adopt IoT to improve their consumers' experience. But while most of that spending was likely to focus on technologies such as locating customers in their stores and personalizing the customer's in-store experience, the emphasis in Asia-Pacific was different. There, retailers said, more shoppers would migrate from brick and mortar stores to online channels than their counterparts elsewhere: Nearly 80% of respondents in the region said they planned to support buying online for pick-up elsewhere. It's notable that this trend - already highly visible in China - is moving quickly through emerging Southeast Asia. Last year, Google estimated that the e-commerce market in the region had doubled over the last two years, reaching around $11 billion by the end of 20176. The GSM Association, or GSMA, pointed to marketplaces where small businesses sell to consumers on mobile-first platforms run by players like Lazada, Shopee and Tokopedia.7
4 IOT in Retail Market Share, Sept 2017 5 Reinventing Retail: 2017 Retail Vision Study 6 e-Conomy SEA Spotlight 2017 7 Mobile Economy, Asia Pacific 2018
"Manufacturing plays a critical role in Asia-Pacific’s economy and its overall competitiveness in the world. Governments are heavily investing in the sector to ensure this region stays ahead, and every country has an Industry 4.0 body with programs underway. This is leading to the emergence of new manufacturing hubs other than the already highly advanced manufacturing sectors in Japan and Korea. With the introduction of Industry 4.0 and new digital capabilities, we also see a shift from advance automation to real-time analytics and integration of connected systems, which manufacturers are already leveraging for intelligent operations, workforce safety, higher productivity, and faster go-to- market. In time, as products become servitized, data in manufacturing will eventually lead to a whole new level of customer experience - from the power plant to the customer – faster, better, and more personalized. For all of this to happen, a top performing digital ready infrastructure is critical. This includes a modern networking and cloud framework that is not only able to connect the entire value chain, but also able to store and process all of the data that lives within it – with speed and security. With the amount of data and connections in factories, data protection is indeed a top-of-mind concern for manufacturers. At Cisco, we promote an end-to-end approach, from the edge to the cloud, and help our customers leverage the network itself, their most pervasive asset, to be able to detect and remediate threats even before they happen." – Ruma Balasubramanian
Ruma Balasubramanian – Vice President of Enterprise and Digital, Cisco Asia-Pacific, Japan and China
In Asia, expect to see automation in manufacturing expanding beyond its heartlands of Japan, South Korea and China. Manufacturing companies see automation as a shaping technology - even in those countries where labor is cheap. As many executives in countries like India, China see it impacting their company's future as those in South Korea and Singapore, where automation is much more advanced. And then in countries like the Philippines, Thailand and Vietnam even more executives see it shaping their business. (See Figure 4)
Figure 4
Several factors are shaping this.
Exporting countries sometimes lumped together as 'the Mighty Five' - Malaysia, India, Thailand, Indonesia and Vietnam - recognize that they must adopt automation for their manufacturing industries to remain competitive. This is no distant threat: The Financial Times8 reported that shoemaker Nike has been working with Flex, the high-tech manufacturer, to automate the labor-intensive process of making sports shoes. This would drive down costs, but also allow the company to get new designs to market more quickly. Vietnam, the FT says, supplies 75% of Nike's shoes. Indeed, automation is as much driven by other factors as the labor costs that originally made the Mighty Five attractive outsourcing centers. Labor accounts for only a small percentage of a garment's cost - between 10 and 20%, according to the ADB's Asian Development Outlook, which says savings are derived more from reduced waste and higher volume, meaning companies enjoy a better return on fixed costs. Robots that sew a whole garment are some ways off, the ADB says, but within a decade companies may be able to 'restore' their manufacturing with the unit cost of, say, a shirt to 40 cents - less than what it costs in India. Complicating the picture is that the automation industry itself is evolving: prices of robots have fallen by roughly half between 2010 and 2016, according to economists at Barclays Capital. In the past, only large companies who could afford the high capital cost and the time and expertise required to program these robots to perform specific tasks, according to a paper published by the International Federation of Robotics in March. Both factors, it said, have resulted in a low adoption rate by smaller and medium-sized manufacturers, which account for almost 70% of manufacturers globally. This is starting to change, the IFR, said, as the cost of installing and running an industrial robot - including not just the robot hardware but the peripherals and systems integration - falls.
8 Nike’s focus on robotics threatens Asia’s low-cost workforce, FT, Oct 22 2017
