Recovering from the economic downturn that triggered a series of retrenchments last year, Singapore’s IT sector has shown stop-start growth in 2024. On the one hand, there is increased investment into the adoption of AI, machine learning, cloud, 5G, and IoT technologies – a major driving force behind the IT market’s projected growth from 62.17 billion SGD in 2024 to 99.56 billion SGD in 2029. On the other hand, macroeconomic volatility, demand-supply mismatch in skills and talent, and ever-changing market dynamics have prompted businesses to be pragmatic and focus on workforce optimisation.
In these times of change and uncertainty, the onus is on both employers and employees to show greater adaptability to capitalise on underlying opportunities and bolster their future-readiness. Old-school approaches need to give way to new-age, technology-enabled ones that power business transformation at scale and speed. With the shifting dynamics of local and expatriate IT talent acquisition and retention, most companies are looking to build more manpower-lean, productive, and resilient workforces that enable them to do more with less.
Amidst the ever-changing market dynamics, businesses in Singapore face a difficult proposition of boosting next-gen technology adoption while coping with acute skills gaps and talent shortages. The ability to develop and upskill their existing IT workforce to be future-ready is all the more mission-critical.
Looking ahead, here are some of the key trends that are impacting Singapore’s IT labour market.
1. Public Sector Investment Remains a Major Driving Force Behind Large-Scale Technology Adoption.
The Singapore Government has launched several flagship digital transformations and IT infrastructure uplift initiatives including the likes of Smart Nation Singapore, Digital Economy Framework, Digital Government Blueprint, and Industry Transformation Map. With a combined spend in excess of 12.6 billion SGD over the past four years, their continued investment into driving large-scale digitalisation is propelling the growth of the IT sector. Over 2 billion SGD has been invested into AI, machine learning, big data analytics, and IoT adoption this year – more than double the equivalent amount last year. Modernising legacy applications and deploying them on cloud continue to be strong focuses, with an additional investment of 1 billion SGD allocated to the expansion of cloud computing capabilities.
On top of these initiatives, the Singapore Government has allocated funding of 25 billion SGD until 2025 to support several R&D initiatives. This is a vital cog in their strategic roadmap of positioning Singapore as a leading technology and innovation hub within Asia Pacific. However, delivering these complex transformations requires extensive knowledge and a multitude of technical skills and competencies – the supply of which is limited within the existing digital talent pool. Consequently, the demand for technical and functional SMEs who can accelerate next-gen technology adoption at scale is greater than ever.
2. While AI is Making Disruptive Headways Across Sectors, Ethical Concerns Cannot be Ignored
The refreshed National AI Strategy (NAIS 2.0) aims to catapult Singapore as a market-leading force within the field of AI. Under this strategic roadmap, the Singaporean Government will invest upwards of 1 billion SGD to accelerate AI adoption, upgrade computing and infrastructure, and nurture AI research talent through scholarships and internships. In addition to the increased government investment, several organisations in the private sector are tapping into the use cases of different conversational and generative AI tools to automate manual tasks and labour-intensive operations.
While there is excitement towards the potential that AI holds, there are growing concerns regarding its credibility, data integrity, and output accuracy. Security, privacy, and ethical challenges have come to the fore along with several instances of unwanted biases and data discrepancies which adulterate the results produced by AI tools. Once these critical issues are ironed out, AI adoption rates are likely to increase particularly in more risk-averse sectors where compliance and governance are non-negotiables.
While some employees fear that increased AI adoption could lead to several low-skill jobs becoming redundant, the vast majority are upskilling themselves to effectively leverage AI tools at work. With AI expertise becoming an in-demand skill, the onus is on employees to capitalise on the underlying opportunities and boost their individual productivity and job competitiveness for the future.
3. Job Stability and Flexibility Continue to be Top Priorities for Singaporean IT Talent.
Massive layoffs within FAANG and the wider IT sector created major doom and gloom within the labour market over the past two years. Although retrenchments and the overall resident unemployment rate have comparatively lowered this year, most employees are worried about their job stability and long-term employment prospects amidst a highly competitive labour market. With organisations looking to drive cost efficiencies and boost automation across the board, these concerns have amplified. The increasing shift from permanent to contingent hiring has prompted several IT employees to take on contract-based roles, despite inherent reservations particularly among experienced talent.
Apart from job stability, flexibility has emerged as an important point of consideration with over 68% of employees preferring a hybrid or fully remote work arrangement post the pandemic. Taking these evolving preferences into account, employers need to incorporate greater flexibility and work-life balance for employees – key to boosting their overall job satisfaction, productivity, and retention.
4. Striking the Right Balance Between Hiring Local Singaporean and Foreign Talent is Proving to be Tricky.
Singapore’s Ministry of Manpower (MOM) has implemented a points-based Complementarity Assessment Framework (COMPASS) to evaluate Employment Pass (EP) applications from foreign talent. This includes benchmarking foreign talent on their educational qualifications, skills and competencies, salary and other foundational criteria against their local Singaporean counterparts, with the eligibility cutoff set at 40 points. With this new framework in place, companies have been prompted to prioritise hiring and developing local Singaporean talent and need to provide strong justifications as to why they need to hire foreign talent ahead of local talent for a particular vacancy.
Despite the introduction of the Overseas Networks & Expertise Pass and initiatives to optimise the cost of hiring for S Pass holders, it is becoming increasingly apparent that opportunities for foreign talent will gradually diminish and give way to skilled local talent. Rising cost of living and complexities in EP applications and renewals have culminated in many foreign IT professionals thinking twice before relocating to Singapore for work.
With restrictions on the intake of foreign IT talent, organisations may find it difficult to fill critical senior or executive-level positions (e.g. IT programme management, technical management, and delivery leadership), where there is an acute shortage of experienced Singaporean talent. How companies balance the push towards local hiring while still bridging their skills gaps by integrating experienced foreign talent will play a defining role in their workforce diversification and long-term growth.
5. Cost Optimisation Remains on top of the Agenda as Businesses Keep One Eye on the Future.
Amidst the volatile macroeconomic landscape, cost reduction and workforce optimisation continue to be significant priorities for businesses in Singapore. As part of their risk mitigation efforts, companies are increasingly exploring options to outsource project delivery and transition towards contingent hiring, wherein they can flexibly ramp up and down their IT teams based on evolving requirements. Growing at a CAGR of 8.60%, the IT outsourcing market revenue is projected to reach 9.12 billion SGD by 2029.
To optimise resourcing costs, several enterprises, particularly within the technology sector, are setting up offshore IT delivery hubs in countries like India, Vietnam, and Mainland China or looking to engage strategic partners with strong offshore capabilities in low-cost locations across Asia. Furthermore, Singapore-based MNCs are tapping into international trade and investment opportunities in emerging economies within the Middle East – transcending beyond their existing presence within ASEAN.
On top of driving cost savings and reducing administrative overheads, energy efficiency and sustainable finance are emerging as key focus areas within Singapore’s business landscape. Powered by the latest technological advancements, the early adoption and mainstreaming of green solutions will play an integral role in the country’s ongoing transition towards a net-zero economy.