Singapore and Hong Kong, December 4, 2008 – The Asia/Pacific excluding Japan (APEJ) IT services market is expected to remain healthy and grow to US$49.4 billion in 2009 despite IDC’s recent downward adjustment inof the region's IT spending forecast for the region. The optimistic outlook in the IT services market is driven primarily by continued demand for managed services and outsourcing as cost management becomes a key focus for organizations in the region. In addition, the relatively stronger resistance to the global economic meltdown in the APEJ IT services market is being helped by continued double-digit growth for IT services in the developing markets of India and China, as well as contribution from emerging countries such as the Philippines, Thailand, and Vietnam.
According to IDC's newly published report, Effects of the Global Economic Slowdown on Asia/Pacific (Excluding Japan) IT Services: Market Analysis and Forecast Study for 2008-12 (Doc #AP221108Q), the overall growth rate of IT services for 2009 in Asia/Pacific excluding Japan (APEJ), has been lowered to 9.6% as compared to the earlier forecast of 11.2% made in 2007. This revised forecast implies a downside of US$6.5 billion for the IT services market between 2008 and 2012 in APEJ; of which, approximately US$2 billion is expected in 2008 and 2009 alone (using a 2007 constant currencies exchange rate).
Philip Carter, Associate Research Director for IDC’s Asia/Pacific IT Services Research maintains that the APEJ IT services market will withstand the challenging economic conditions. "The impact on the services market has to be viewed from a number of perspectives – and these are changing constantly – but the point is that opportunities will be created. For example, according to IDC’s Asia/Pacific Economic Impact Poll conducted post-crisis in October, more than 12% of 400 organizations surveyed indicated they would increase spend on managed or outsourcing services in 2009. This is the only category in which there are double-digit percentages across the spectrum of hardware, software and services. It does highlight that opportunities will exist in the services space in 2009, and vendors need to be proactive in pursuing them."
This 'post-crisis' poll of CIOs and IT Managers was conducted across the region to ascertain the impact the economic downturn had on business and to assess, if and where, budget reduction may take place. IDC found a significant proportion of survey respondents indicating that they would invest in cloud-based services as well as outsourced and managed services and were looking to allocate higher budgets for such services.
Asia/Pacific (Excluding Japan) IT Services Market Forecast Comparison — 1H07, 2H07, and 1H08
Note: These numbers are shown using 2007 constant currency exchange rates.Source : Effects of Global Economic Slowdown on Asia/Pacific (Excluding Japan) IT Services: 2008-2012 Market Analysis and Forecast, Study for 2008-12 (Doc #AP221108Q) , November 2008
Mayur Sahni, Senior Market Analyst for IDC’s Asia/Pacific IT Services Opportunities, adds, "The IT service providers that will come out strongest in this economic turmoil will be those with the lowest-cost delivery of services aligned to strong business understanding, deep CxO relationships, strong balance sheets, good financing schemes, willingness to accept some risk, and who can position themselves credibly as long-term strategic partners to their customers. We will see a “flight to quality” - but quality that’s backed by low-cost delivery of services."
IDC expects the impact of the crisis on IT services to vary across the different service lines, countries and verticals. For example, project-based services (such as systems integration) are likely to suffer the most. IDC expects organizations to scrutinize portfolios of strategic versus non-strategic projects with a view to putting certain initiatives on hold, if not canceling them altogether. Organizations with exposure to the US and Europe consumer markets will be most affected. IDC expects opportunities to arise in the managed services space as organizations move assets off their books and scrutinize their operating expenses more closely. New support contracts in conjunction with new hardware sales are likely to decrease, but part of this will be compensated by the fact that organizations will look to lengthen the lifecycle of existing infrastructure, and therefore delay refresh cycles, and will therefore look to procure extended support services as warranties expire.
From a vertical perspective, the public sector is expected to be a potential bright spot, as spend in this industry tends to be anti-cyclical in nature. Markets with good potential for government spend in IT services between 2009 and 2010 include Australia Singapore, China, India & Hong Kong. Given the prevailing financial crisis and liquidity crunch, the banking and financial services institutions (BFSI) vertical is expected to sharply pull back on IT services spend for 2009. Simultaneously, manufacturing, telecommunications, and retail businesses are expected to significantly lower capital expenditure (CAPEX) spend and turn toward discrete outsourcing engagements as a result.
Mayur Sahni, Senior Market Analyst for IDC’s Asia/Pacific IT Services Opportunities, adds, "The IT service providers that will come out strongest in this economic turmoil will be those with the lowest-cost delivery of services aligned to strong business understanding, deep CxO relationships, strong balance sheets, good financing schemes, willingness to accept some risk, and who can position themselves credibly as long-term strategic partners to their customers. We will see a “flight to quality” - but quality that’s backed by low-cost delivery of services."
Note: Post crisis is post Sep 15, 2008 following the collapse of Lehman Brothers and Merrill Lynch.
For more information about purchasing the research, please contact Elizabeth Shunmugam at +603-2169 7536 or eshunmugam@idc.com or Barry Lim at +603-2169 7532 or blim@idc.com.
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