IDC lowers 2009 Asia IT spend growth to 5.8 percent

IDC lowers 2009 Asia IT spend growth to 5.8 percent

IDC lowers its 2009 IT spending growth forecast for Asia Pacific to 5.8 percent from its original 9.5 percent.

Despite the revision, the research house said that Asia Pacific compared to the US and the rest of the world is still in a good position. IDC expects IT spending in the region to reach US$195.6 billion, down from an earlier projection of US$201.4 billion.

IDC also estimated that Hong Kong's IT market value to be down by US$212 million to reach US$5.6 billion and growth reduced from 6.7 percent to 2.9 percent.

The firm said the Hong Kong economy reacted relatively strongly to global economic conditions, leading to strong decline in business demand, property prices and consumer spend. The FSI and MNC sectors are expected feel the brunt of the economic meltdown globally, resulting in smaller budgets for IT spend.

According to Gary Koch, associate vice president of IDC's Asia/Pacific IT Spending Research, strategic investments in IT will remain critical in achieving further efficiency and productivity gains and driving longer term growth of businesses. "In a poll of nearly 400 enterprises in Asia Pacific conducted during the last week of October, 80 percent of the respondents said that deploying products, services and solutions in an innovative way to save cost was the preferred option than buying low-priced equivalents."

This 'post-crisis' poll 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, said IDC.

IDC found that 43 percent of the respondents had been asked by their headquarters to improve profit margin in 2009. This directive came with the leading assumption that Asia Pacific will fare better (if not much better) than its US, Europe and Japan counterparts.

Many of the Asian business leaders IDC surveyed had indicated that cost savings alone will not be sufficient to achieve the higher budgeted profit level. In this slowing marketplace, in addition to cost management, businesses will target their competitors' installed base to acquire new customers for incremental revenue streams. Customer engagement and enhancement tools that leverage technology will help businesses to respond effectively to customer needs and improve efficiency/productivity of their client facing personnel and activities.

While over 50% expected Asia to contract at similar levels to US and Europe, more than one-third expected Asia to fare better. Belt tightening is expected to drive migration to technologies and solution that will support utility or consumption-based pricing. To this end, based on the same survey, some businesses had indicated that the spend on managed and cloud service would increase in 2009.

The three largest tech spenders

"FSI, government, and telco will remain the three largest tech spenders in 2009, while manufacturing, retail and logistics/shipping with their intensifying focus on cost management agenda, will mean a major shift from CAPEX to OPEX as well as the heightened need to streamline business processes," said Koch.

In the next six to nine months, opportunities from the FSI vertical industry will come from institutions undergoing M&A, infrastructure optimization, and various tactical initiatives to retain existing customer bases. There will be great interest in solutions supporting risk management and compliance, as well as counter-cyclical solution areas such as collections and recovery, credit scoring, and portfolio and exposure analytics.

Islamic banking is another segment that may continue to do relatively well with liquidity flowing in from the Middle-East. This will benefit the FSI sector in Malaysia, Indonesia and Singapore (to a lesser extent). Asian central banks will infuse local money markets with cash, as well as push (regulate) banks to release credit to avoid a further liquidity crunch in the region.

Stimulus packages, if executed effectively, will mean aggressive public spending to stimulate demand and employment. IDC hence expects increased IT spending from the government, healthcare and education sectors.

IDC sees opportunity from the telco sector to come from 2 broad categories of players - in the longer term, CAPEX investments from cash rich or financially supported service providers to gain a competitive edge and, in the short term, non-CAPEX intensive investments from those who need to generate top line growth via new service offerings. These offerings will include SaaS, value-added services and managed services across all markets, and fixed and wireless in developing markets.

"Despite the new realities of IT budgeting that Asia/Pacific organizations face in light of the current economic backdrop, IDC has noted historically that when a turnaround begins, these organizations traditionally are quick to ramp up IT expenditure to alleviate pent up technology requirements," Kock noted.

Follow Us

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.



Show Comments