IDC Predicts Current Economic Crisis Still Provides For Pockets Of Opportunities Within The Asia/Pacific (Excluding Japan) Region in 2009

Kuala Lumpur, December 12, 2008 – Despite the global economic slow down, IDC believes that in 2009 the Asia/Pacific excluding Japan (APEJ) region still presents great opportunities as both emerging economies and emerging technologies continue to chart advancements. While it is expected that most businesses will rethink their growth strategies, there will still be pockets of opportunities as APEJ bounces back.

Graeme Muller, Head of IDC’s Asia/Pacific Predictions Committee, said, "Even while overall IT spending slows, IDC believes that the negative economic force will actually intensify the focus on emerging markets and emerging technologies, as businesses look to cut costs, improve business models, and reach their customers more effectively. IT companies looking for growth in 2009 will need to accelerate their pace of change and align their offerings with the pockets of opportunity that these new marketplaces provide".

The following are the top 10 key predictions that IDC believe will shape the ICT industry in APEJ in 2009:

1. Asia/Pacific IT Spending Growth Will Be Down But Not Out In 2009
Compared to the US and the rest of the world APEJ is still viewed as the bright spot with IT spending expected to reach US$196 billion by year-end 2009. IDC predicts that in 2009, the APEJ IT market growth will slow from the previous forecast of 9.5% to a ‘post-crisis’[1] forecast of 5.8%. While a decline in IT spending is expected with some areas of spending pulled back further than others, there will be pockets of opportunities which will remain as the economic pressures accelerates growth in emerging technologies and in emerging markets. The PC and peripherals markets are expect to be hit the hardest, with consumer spending declining and businesses stretching existing product shelf-lives, whereas the services market, operating on longer contract cycles, should have a better ongoing revenue streams. Public sector spending will increase to offset weakening economies and essential services such as utilities and telecommunications will witness less change to IT expenditure. While projections for economic growth in virtually all countries have been lowered for 2009 and 2010, many APEJ countries boast GDP growth well above the worldwide average of 1.8% for 2009 (e.g., India with 6.8%, China with 8.0%, and Vietnam with 5.3%). IDC therefore expects that many APEJ countries' IT markets will continue to grow at greater rates than expected worldwide.

2. Government Spending Will Drive It Value Optimization And Infrastructure Development
Traditionally, governments are expected to boost spending in order to stimulate demand during economic downturns. In this current financial crisis, IDC expects to see governments coming up with various stimulus packages. While not all measures announced include ICT related expenditure, their net effect is likely to strongly impact on the ICT industry within the respective economies. IDC expects some key government projects to be brought forward as part of the stimulus exercise, in particular, those that involve greater infrastructure components. While the business community expects governments to be the key driver for expenditure, their responsibilities to citizen constituents remain and they are expected to maintain good governance, striving for both cost and value in their projects moving forward.

3. The Cloud Will Grow Despite, And Because, Of The Economy
The current economic meltdown coincides with the availability of rapidly maturing cloud-based services that are offered by a wide range of vendors. New mode of acquiring and delivering services promises the valuable benefit of low up-front costs combined with usage-based pricing are now available. These benefits alone will ensure that this new model will be considered as a viable alternative to traditional delivery models and as a result, IDC forecasts that the use of cloud-based services will increase in 2009 despite, and because of, the economic conditions. IDC also predicts rationalization and consolidation among the cloud vendors, with struggling vendors having strong vertical offerings being acquired by larger, more diversified players.

4. Economic Pressures To Keep Customers Will Accelerate The Emergence Of Next-Generation Customer Care
IDC predicts a further acceleration of the use of web 2.0 technologies in the enterprise segment in 2009 as businesses look for not just more, but also efficient, ways to connect with customers. Next Generation Customer Contact tools will provide smart organizations with the ability to access the new spending generation that has grown up in the Internet age. While most markets decline during tight economic times, IDC predicts that IP contact center revenue across APEJ will increase from US$278 million in 2008 to US$518 million in 2012 at 17% compound annual growth rate (CAGR), accelerated by the economic pressure to keep customers. These new disruptive technologies will dramatically transform contact centers and create the next generation of customer contact in 2009.

5. Major Players Will Look To Asia/Pacific For Acquisition As The Enterprise Search Market Accelerates
The significance of controlling the costs of information search within organization has increased during these cost conscious times and, as a result, the Enterprise Search market has grown in strategic importance. Aligned to this is the growth of cloud computing which also accelerates the importance of Enterprise Search. IDC predicts that a slowing economy, and the increasing strategic importance of search, will drive further consolidation among enterprise search vendors in 2009, opening the way for Internet search companies such as Google and Yahoo! to enter the market traditionally dominated by companies such as Autonomy, Microsoft and IBM. The attraction for Asian developed search algorithms and non-English based search engines will result in Asian companies and developers being targeted by global Enterprise Search vendors as they try to maintain growth in 2009.

6. Green Will Become Sustainable In Line With Greater Cost Reduction
In 2009, with even greater economic pressures on businesses, IDC expects investments in green technologies will continue to increase, such as virtualization for cost savings. Environment sustainability will shift from the mature economies in the region to the developing nations, based on results of the latest iteration of IDC's Green Poll conducted in September 2008 focused on IT executives in China and India, where rising energy costs remained the most pressing reason impacting organizations adoption of Green IT. IDC believes that, with increased cost pressures, the adoption of sustainable IT technologies in 2009 will expand from a focus on the tactical reduction of energy consumption in the datacenter and the distributed environment to a broader leverage of Green IT to achieve business process optimization.

7. Market Slowdown Will Force Many Telecoms Operators To Rethink Strategies
IDC predicts that telecom incumbents with healthy balance sheets will continue to focus capex on enhancing core and backhaul networks, while consumer or enterprise tier 2 operators will delay new and large capex projects to focus on faster ROI investments. Broadband growth in developing Asia/Pacific economies will still provide the quickest ROI as subscriber access growth continues in these markets. A number of emerging technologies will feel the impact of the downturn, e.g. 3G in India, China and Vietnam; WiMAX, IPTV, carrier Ethernet, multimedia services, mobile Radio Access Network (RAN) and broadband wireless services. But the level of impact will depend on what benefits the technology can genuinely offer to service providers.

8. Enterprises Will Revisit Managed Datacenter Model To Help Drive Down Costs
While IT spending has taken a hit, IDC believes that the downturn in the economy will spur interest in datacenter initiatives and solutions that can dramatically bring down operating cost. Organizations will revisit the managed datacenter model and embrace it, starting with datacenter consolidation. Beside saving costs, engaging a managed datacenter service providers gives organizations access to many of the cutting-edge datacenter technologies, such as new forms of server and storage architecture, virtualization, WAN optimization, cloud computing, disaster recovery and others. Currently, IDC estimates that only 23% of organizations in the region use an external service provider for their datacenter needs. Hence, there is a large untapped market and opportunity for managed service providers, and having an end-to-end solution offering will be critical for success in this market.

9. Thin Clients Will Ride The Wave Of Cost Cutting And Desktop Virtualization
As the market matures, and better vendor collaboration results in software standards merging, virtualization to cut costs will extend beyond server virtualization in datacenters to virtualizing the desktop. In addition, deploying thin clients and a virtualized desktop environment will also reduce the carbon footprint. IDC is therefore optimistic and predicts that thin-client deployments on the back of desktop virtualization will gain traction in 2009, and further accelerate into 2010, as PC replacement cycles peak across the region. Full year 2009 thin-client shipments are expected to grow within the 12–15% range over 2008, to about 765,000 units.

10. The Economy And Mini-Notebooks Will Challenge The Way Computers Are Used And Sold In Asia/Pacific
IDC expects mini notebooks, a new product category created due to demand for devices that support mobility, to increase from around 5% of total notebooks shipped in the APEJ region in 2008 to more than 10% in 2009. The small cutesy form factor will be the primary selling point, but it will also change the way these devices are being used. With limited processing power and storage, users will be heavily dependent on being connected to the Internet, eventually running applications through the cloud. This demand for connectivity will further change the way mini notebooks are sold – instead of retail stores, partnerships with mobile operators are expected to proliferate with devices sold in service bundles like mobile phones, leveraging operators' cellular 3G infrastructures. With vendors already looking at ways to overcome the challenges associated with this product category, IDC believes that mini notebooks will change the way traditional notebooks are used and sold.

IDC’s annual Predictions for the ICT markets in APEJ draws upon latest IDC research and a worldwide brainstorming exercise among IDC’s 900+ analysts. This was followed by an extensive regional review to weigh in on key industry events, user trends, vendor strategies and economic measures, that promises to uniquely define the technology trends which would impact and drive the ICT market in APEJ for 2009. Across the globe, following the release of IDC’s global top ten, geographic and technology teams will be releasing their own specific predictions in the up coming months. Visit http://www.idc.com.sg/Predictions09/ often for updates.
[1] Post crisis is post Sep 15, 2008 following the collapse of Lehman Brothers and Merrill Lynch.