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IDC: Recession to force Apac firms to move back to basics

With the global recession hanging over economies in Asia, IDC expects overall IT services growth in the region to slow down, forcing organizations to move back to basics with an increased focus on cost management and less so on business transformation projects.

In its annual Top 10 Predictions of the IT services market in Asia/Pacific excluding Japan (APEJ), IDC also predicts that the economic slowdown will sustain demand for outsourcing services. The research firm believes that outsourcing and managed services will be more resilient to any curtailment in ICT spending than adjacent ICT areas since they tend to be longer term in nature and are largely driven by cost savings.

IDC also predicts that energy consumption and space constraints will continue to drive investments in transforming the data center, with virtualization and consolidation of the server environment being the initial focus. Despite vendors' attempts to brand these initiatives under the banner of 'Green IT,' the underlying objective for most organizations is around infrastructure optimization to reduce electricity costs--not just environmental sustainability.

Other predictions of IDC include: the resurrection of SaaS and the increasing adoption of Platform-as-a-Service (Paas); remote infrastructure management; increased competition in the hosting and managed services space; and innovative and creative business models to reduce operations expenditure and to ensure that vendors are more accountable for the business outcomes of an engagement.


Meanwhile, IDC expects the "war" for the SMB market to continue in 2009. This sector is expected to adopt the the PaaS models of delivering services via "the Cloud" in an attempt to drive down costs in the current economic environment. In addition, vendors are also moving towards standardizing their support service offerings, which will become even more appealing to the SMB market as they are price sensitive and looking for quick and expedient ways to scale up their business. IDC believes that vendors that are able to offer remote, host-based, automated delivery of services will gain favorable traction in this market segment.

"The impact of the global economic crisis on the services market has to be viewed from a number of perspectives and these are changing constantly," said Philip Carter, associate research director, IDC Asia/Pacific Services research. "The recent Satyam saga is a very good example. The implication in terms of IT governance for clients dealing with services vendors, the offshore players in particular highlights how clients have to maintain a constant balance between cost and value."

As a result of the current global economic crisis and its impact on the region, IDC has lowered its growth rate forecast for the APEJ IT services market for 2009 to a 'post-crisis' forecast of 9.6% from the previous forecast of 11.2%. 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 $2 billion is expected in 2008 and 2009 alone (using a 2007 constant currencies exchange rate). Despite this, the APEJ IT services market is still expected to grow to $49.4 billion in 2009, driven primarily by continued demand for managed services and outsourcing, as cost management becomes a key focus for organizations in the region.