Bangkok--17 Feb--IDC
IDC Predicts A Move Back To Basics In 2009 As Organizations Look To Balance Cost Savings And Corporate Governance In A Challenging Market
In its annual Top 10 Predictions of the IT services market in Asia/Pacific excluding Japan (APEJ), IDC predicts a 'Back to Basics' move in 2009 as organizations look to balance cost savings and corporate governance in a challenging market. 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 US$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 US$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.
"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 for 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."
The following are the top 10 key predictions that IDC believes will shape the IT services industry in APEJ in 2009:
1. Back to Basics: A Fine Balance Between Cost Savings and Corporate Governance
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. However, the Satyam scandal has shown that low cost delivery of services needs to be complemented by impeccable corporate governance and financial transparency and this is the balance that customers will be assessing intensely in the challenging year ahead.
2. The Economic Slowdown will Sustain Demand for Outsourcing Services
IDC 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.
3. Resurrection of SaaS : The Phoenix Returns
Software as a Service (SaaS) suffers from false starts from the day it was first made popular by Salesforces.com. This is due to several factors such as data security issues, bandwidth availability for enterprise intensive applications, and the lack of "big name" service providers pushing this concept in the region. The global economic slowdown resulted in industry players intensifying their cost management agenda, leading to a paradigm shift from CAPEX to OPEX. This creates opportunity for a SaaS "resurrection". The low upfront capital outlay and the simplicity of scaling up and down in typical SaaS offerings have attracted a lot of attention. Furthermore, many of "the big hitters" such as Cisco, HP and IBM, have jumped onto the bandwagon and have been actively promoting the concept to their customers.
4. Looking for a Platform for Growth? Think PaaS
Platform-as-a-Service (PaaS) is part of a fundamental change in the application platform market. It is part of the larger SaaS and cloud-computing phenomenon, all pointing to one major market change — the transition from IT solutions that are designed, deployed and managed by an enterprise IT department, to IT solutions that are applied and composed by the enterprise but executed and managed by expert third-party providers. IDC sees this as a step toward greater industrialization of IT into predictable, dependable, professionally managed, plentiful and agile information resources that can be delivered in a more cost-effective way. The cost efficiency factor is what will increase the adoption of PaaS during the recessionary period.
5. Rejuvenating the Data Center: Transform to Survive
IDC 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.
6. The New Face of Global Delivery. Read RIM ( Remote Infrastructure Management)
The global economic crisis is increasing the pressure on organizations to cut their budgets and improve operational efficiency, particularly in the area of datacenter and infrastructure management. In this bleak outlook of the financial and economic environment, one service opportunity shines with promise — Remote Infrastructure Management (RIM); an area that IDC sees as the new face of global delivery.
7. Pricing Innovation Business Models — Is this Innovation Sustainable in the 'New Economy'?
In 2009, IDC predicts a significant shift in the way that clients are looking to structure services contracts to ensure that they pay only for what they use, or ,where possible, to ensure that vendors are more accountable for the business outcomes of the engagement. As a result, IDC expects pricing innovation to become a key driver shaping the services market in Asia/Pacific in 2009.
8. Vendors Create Juicy Business Models by Squeezing Costs
In the wake of the global financial crisis, end users are increasing their efforts to reduce their IT operations expenditure. As the management and support of IT infrastructure and applications, as well as their associated staff, constitute a significant proportion of IT spending, new options for management and support services are being brought to market by vendors. This will be increasingly sought after by their customers.
9. The ‘War’ for the SMB Market Continues
IDC expects increased adoption of the PaaS models of delivering services via "the Cloud" in an attempt to drive down costs in the current economic environment. This will be particularly relevant for the small and medium size businesses (SMBs). 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.
10. Competition in the Hosting and Managed Services Space Heats Up
The hosting market has always been defined by a broad range of players from the traditional IT service providers (ITSPs) such as CSC and IBM, telecom carriers, and pure hosting providers like Equnix. However, the competitive landscape is heating up dramatically as all these players try to move up the value chain to become hosting solutions providers by broadening their service offerings and including a whole spectrum of managed services. Another major "disrupter" to the hosting competitive landscape is the emergence of "new age" players like Amazon, Google and the ISV, that threatens to completely transform and change the dynamics of the industry.
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.
For more information about purchasing the report, "Asia/Pacific (Excluding Japan) Services Top 10 Predictions 2009”, Doc# AP227124Q, please contact Thannwalai Sae-chua at +662-651-5585 ext.111 or [email protected].
Notes to Editor
Webcast on IDC's Asia/Pacific Services Top 10 Predictions 2009
To find out more about IDC's Asia/Pacific Services Top 10 Predictions for 2009, please register at IDC’s Webcast Portal to listen to the Webcast presented by Philip Carter, Associate Research Director of IDC’s Asia/Pacific Services research, which will be available from Jan 22, 2009 till 01 March, 2009.
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