Gartner: Asia IT spending to reach almost US$523 billion

Gartner: Asia IT spending to reach almost US$523 billion

Gartner said Tuesday that IT spending in Asia Pacific is expected to reach almost US$523 billion in 2008.

The research firm also estimated that IT spending in the region will grow at a CAGR of 9.3 percent from 2007 to 2012, compared with 4.5 percent for the U.S. and Western Europe.

Despite current economic concerns, worldwide IT spending will exceed US$3.4 trillion in 2008, an increase of 8 percent from 2007, according to Gartner. Analysts said much of this growth is based on the decline in the U.S. dollar. The estimated worldwide IT spending growth expressed in constant currency is forecast to be approximately 4.5 percent.

"The US-led economic downturn shows no sign of causing a recession in IT spending," said Jim Tully, vice president and distinguished analyst at Gartner. "In subsequent years we will see reduced growth, but the fundamentals remain strong. Emerging regions, replacement of obsolete systems and some technology shifts are driving growth."

Besides the U.S., the situation in China becomes a key macroeconomic indicator for the world economy, he added. Indicators of a "hard landing" in China would cause our outlook on IT to deteriorate, because those conditions would precede a more serious global economic slowdown, Tully noted

Strategic issues

Gartner analysts also said there are important strategic issues facing the IT industry.

"Enterprises are switching from company-owned hardware and software assets to per-use service-based models. This will impact the industry in various ways," Tully said. "The projected shift to cloud computing, for example, will result in dramatic growth in IT products in some areas and in significant reductions in other areas. He added that assets in general will be utilized with greater efficiency, and the overall effect on market growth will be neutral.

Software spend to grow more than 10 percent

Worldwide software spending is on pace for the strongest growth rate in 2008 at more than 10 percent, with IT services spending being a close second with more than 9.4 percent growth, Gartner predicted. Analysts said the IT services sector benefits from the continued innovation in software technology.

"Most companies updated their software systems during the period 1997 through 2001, so we are in the middle of an upgrade cycle that should extend past the end of this decade," said Joanne Correia, managing vice president at Gartner. "However, the replacement of systems doesn't automatically equate to new software market growth."

Software as a Service (SaaS)/cloud computing, SOA/Web 2.0, and open source software are causing huge changes to the software market, said Correia, adding that many of these factors are impacting market growth as enterprises replace assets with per-use services.

IT spending is dominated by services rather than products, with IT services and telecom services accounting for 70 percent of total IT market spending, Gartner noted. Analysts at the company said the telecom sector has a major effect on overall IT market performance, accounting for almost US$2 trillion in 2008.

"Legacy telecom services have a dampening effect on sector growth, and therefore on the overall IT market," said William Hahn, principal research analyst at Gartner. "The dominant size of the telecom services market guarantees that even with the forecast for relatively slow growth, it will still comprise over 44 percent of the IT market in five years' time."

The outlook for IT services market growth has improved despite macroeconomic uncertainty. Kathryn Hale, research vice president at Gartner said that IT services spend is being supported by two main factors. "Businesses are investing in improvements to internal processes aimed at reducing costs, while often maintaining some of the prior interest in innovation," said Hale. "The second factor is that globalization allows IT services providers to mitigate the risk of weakening demand by operating in more markets."

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